S&P500 IHS Update

The previous post on the S&P500 identified an Inverse Head & Shoulders pattern with a target around 1430. Also suggested was the dangerously overbought condition short-term, and the possibility of a back-test. Since then, price has whip-sawed in a corrective downward pattern, and is poised crucially. Here's the updated hourly chart.

As you can see, price has managed to stay mostly above the neckline, and is now poised at the uptrendline connecting the prior lows. The indicators offer no help as to the direction at the moment, but if we are to keep with the trend in place, expect a sharp move up towards 1430, to validate the IHS. Alternatively, a breakdown below the neckline, invalidates the IHS & sets up a bearish picture.

All the best!

Shanghai Composite: Heck of a Ride!

Since my post on Jul-5, "Why I am BULLISH medium-term" calling for a rebound, it's been one heck of a ride. From a low around 2350 to the current 2680 - a sweet 330 points (14%) gain! Hope some of you cowboys took the ride like i did. In the past couple of sessions, price broke an important trendline too. Although due for a correction in the next week or so, i maintain that there is high probability of more upside into this year-end (based on the EW count). Here's the picture:

5 Waves
Price rebounded beautifully off the 61.8% fibo retrace, and the bottom channel line, as proposed in the earlier post. The move up seems to be completing 5 waves (if not completed already), implying more upside - in the process setting up an ugly sorta Inverted Head & Shoulders. We can bring it up for discussion if there is another decent correction to setup a proper right shoulder.

Stopped by the Blue - initially!
The beauty of trendlines! Case in point - the first time price hit the blue parallel channel line, it backed off violently in an a-b-c hop, sending nervous bulls scampering. But in the last few sessions, we broke above it nicely.

Sharply Rising Volume
The dipping volume on the move down was a constant topic of emphasis in my previous posts. And now, note the sharply rising volume - yet another confirmation!

Conclusion
 
The medium-term uptrend in the Shanghai Composite has probably begun, with a minimum target of 3470, before the long-term BEAR market sets in.
 
In the very short-term, upside towards 2750 is certainly possible before a correction, although i wouldn't bet on it. Supports are around 2590, followed by 2490. My strategy will be to position mostly on the long side, with a few profit taking trades in between. All the best, and remember - SSEC has mind of its own!

Hang Seng Index: Trendline Watch

Torn between the East & the West, and as the gateway to China, Hong Kong has had its own unique culture. This behaviour is often reflected in the Hang Seng Index. Leaning more and more towards Shanghai in the recent past, it has been trending sideways. Just like the SSEC, a short-term bounce may be in the offing.

Medium-term, the chart has the potential for a bullish Inverse Head & Shoulders, and looks decently setup for one more wave up. That scenario requires a break above the upper trendline in light blue within the next few months. In the very short-term, prices may exhibit more weakness towards 18800 level, and bounce up to test 19400.

Sustained weakness below lower crucial support of 17500, will change the picture to Bearish. Watch Shanghai & watch out for future updates.

All the best!

Shanghai Composite Short-Term: A beautiful breakout!

My last post, Shanghai Composite: Following the plan, suggested an Inverse Head & Shoulders in the making, based on volume patterns. Sure enough, a right shoulder was formed, and then... Bam! A beautiful breakout on high volume.  Ahh, the sheer beauty of technical analysis - don't you just love moments like this!

Target

Alright, the rough target of this move works out to be 3200 (already more than halfway there). Fits in very nicely with the wave D limit, based on the upper trendline of the Triangle that's forming over the medium term. See the previous posts on this topic for details.

All the best!

Shanghai Composite Short-Term: Following the plan

Little over a month ago, a medium-term bullish triangle scenario was identified (for targets see - World Markets Update). Progress has been slow, but that is the nature of a sideways symmetrical triangle! So far, price is following the plan diligently. Here's the medium-term picture:

We're currently in Wave D of the triangle with a short-term target around 3150, and if you remember every leg of a triangle is a 3-waver. The recent dip is the 'b' wave of the D. Note the declining volume, as uncertainty increases in the sideways motion - a feature of the Triangle.

As mentioned before, the projection lines drawn on the chart are compressed, and it may take longer for the whole scenario to unfold. The very short-term chart below explains how we might finish D:

Non-Asian readers - for the Chinese, red is good. Hence red candles go up!

In this chart, a small Inverse Head & Shoulders is in the making, with a target slightly above 3150. Note the general rise in red volume, and decline in green volume - augurs well for a subsequent rise. Prices should stabilise above 3000 for rest of this week, and head higher next.

Above medium-term triangle scenario will become unlikely with a sustained break below 2900. All the best folks!

Technical view
Short-Term: Neutral, Medium-Term: Bullish, Long-term: Bearish

Gold: Inverse Head & Shoulders, Target: 1300 EDITED

A recent comment from a reader prompted me to lookup the Gold chart. It is not a market of any interest to me, but what caught my attention was the Inverse Head & Shoulders pattern broken recently. Although, we have no volume info to help confirm the breakout, it may very well work out judging by recent price action!

Target

Prices hit a high of 1226 before retracing some. Based on the Inverse H&S, looking at a target of 1300. First resistance stop of course will be the recent high.

I have to end with a caution though. I'm no Gold expert, and believe it's an extremely difficult market to forecast. Price target is achievable, but time required to reach it, is highly uncertain. Trade at your own risk :)

EDIT A thousand apologies! Just realised my chart is in LOG scale, target should be around $1300 instead. Ignore the target on the image, post edited accordingly. A rookie error - told ya i suck at Gold analysis!

S&P500 Short-Term: Relentless!

Relentless upward action - this market's on a tear! Last update at 1153, called for consolidation before any move higher. We did dip to 1141 (breaking through the blue channel), and promptly resumed the climb higher, setting up even more overbought conditions. Once again, showing strength, keeping its distance from the uptrendlines. Running out of adjectives here - super dooper party pooper overbought!

5th wave up

Once again, not the place to go long this market. Why? From 1086, we seemed to have traced 5 waves up, so this uptrend(the 5th) should terminate soon, and at least a minimal reversal is due to correct the 5-wave uptrend. Not expecting any outright crash - lotsa support at the 1150 (prev high) and the orange uptrendline.

Target = 1180?

Roughly measured, the target of the Inverse Head & Shoulders identified in earlier posts is around 1180. Althought not immediately possible, looks like the market insists on getting there. Other correlated targets to watch are Dow 10730, Hang Seng 22000, Shanghai 3200 (see World Markets Update). The Russell 2000 (RUT) however, is lagging this latest climb up - a hint of momentum slowing for sure.

Summary

Although bearish on the short-term picture, careful trying to plug this rising volcano (akin to catching a falling knife). Patience pays - let them prices move laterally towards the orange uptrendline and setup a reversal candle, and more importantly - always place stops!

I'll be watching asian market action for the clues described above. In the very short-term, we might see prices struggle upwards with increasing frequency of pullbacks. Hard place to make money, unless you're an agile daytrader. Remember the equinox - this week or early next week could still be significant!

All the best!

S&P500 short-term: Expecting Consolidation

Hello folks! My last World Markets Update post during the weekend called for a short-term bullish breakout in asian and us markets - right on target!

For the SPX,  we broke out of a major downtrendline around 1105, and hit an impulse high of 1123. Expecting consolidation ahead, and remaining short-term bullish unless, we break below 1090. For today, we may grind up at the open a bit, before moving lower towards 1107.

Minor support 1110. Good trendline support at 1107, followed by 1090 area.

Inverse Head & Shoulders ?

Notice the upsloping inverse H&S setting up with neckline where the 'B' label is, and the head at C. There was a small breakout, but whether it holds or not remains to be seen. An eventual breakout above would be short-term bullish with a target around 1150 - a retest of the highs!

It is not impossible, especially if the move down from 1150 was an A-B-C (the most obvious count).

All the best!