Globle: Short term analysis

In my opinion the top of the up leg from the November lows is in place.

We will have the absolute confirmation when price establishes a lower high.

Below I show you the SPX weekly momentum indicators where we can see that the RSI has breached the trend line support in force since the November 16 low.

The next intermediate buy signal usually should occur when the RSI and the Stochastic retest the 50 line.

 
1

 

I rule out a major reversal, instead I maintain the scenario of a retracement of the advance from the November lows.

As I discussed last Friday the major reasons that suggest that price has not established a major top are:

  1. The up leg from the November lows has unfolded a corrective 7-wave structure ===> A corrective EWP cannot establish a major Top.
  2. The current pullback is also unfolding a corrective pattern ===> The intermediate trend remains up.
  3. Retails investors are extremely bearish (I have never seen a major top with an extremely low AAII Bull ratio)

Regarding the potential target, at the moment, since we are in the initial stage of a corrective pattern I can only say that price should establish a bottom in the range 1485 – 200 dma. (which today stands at 1453)

Once a lower high is in place the next down leg should aim at the 0.382 R = 1500, where probably a large rebound will take place. If bears maintain the sequence of lower high/lows then the following down leg will reach the target box.

 

3

 

Therefore I reiterate that the above “road map” looks very probable as long as the bounce, which began last Friday, establishes a lower high.

Regarding the long-term count I maintain the Triple Zig Zag wave (X) scenario. As I have discussed in previous weekly updates since the assumed wave (Z), which began at the November 2012 low is not impulsive I am suggesting that it should unfold an Ending Diagonal, if this is the case on April 11 price has completed the wave (I).

  The summation Index, which, peaked at the end of January is already oversold (RSI has crossed the 30 line) and on Friday it has breached the 200 dma. It is remarkable that SPX has been able to establish higher highs with such a weak breadth performance.

Going forward since price has just began a corrective phase an already oversold Summation Index should prevent a major decline.

 5

 

Lets move on to the current price action.

It is reasonable to expect that the rebound from last Thursday lod to reach the target box delimited between the 20 dma = 1564 and the 0,618 retracement = 1574.

If it tops at the 20 dma the 1×1 extension target for the following down leg would take us to the 0.382 retracement of the advance from the November lows at 1500.

EW wise price would be unfolding a Zig Zag therefore if lower prices were in the cards probably this initial Zig Zag would morph into a Double Zig Zag

 

6

 

Lastly VIX on Friday has “issued a Bollinger Band buy equity signal”. Friday’s drop has been larger than I initially thought moving back below the 200 dma. I still expect a bottom in the range of the moving averages (10-20-50) or in the worst-case scenario at the rising trend line support in force since the March 14 low. The lower is the retracement the larger will be the assumed SPX wave (B) rebound.

I still think that the pattern that VIX is unfolding does not suggest a major move to the upside but as long as the sequence of higher lows/highs is maintained the trend remains up.

 

7

Weekly Technical Analysis – Monday, Feb 3, 2013

My short-term scenario has proven to be wishful thinking. I was looking for a potential Zig Zag down instead bulls have once again aborted a pullback that in my opinion has been delayed but not removed from a pending outcome.

Regarding the long-term count I maintain the scenario of a potential Ending Diagonal. If it pan out it will complete the Double Zig Zag wave (X) off the March 2009 low establishing a major top.

Technical-Analysis

But instead of a expecting a larger subdivision of the wave (III) maybe price is approaching the end of this wave.

If this is the case then once the wave (III) is in place the next down leg, in order to be considered the wave (IV) of the Ending Diagonal, it will have to overlap below the peak of the wave (I).

The potential target for the wave (IV) could located in the range 1463.76 – 1435.50.

Weekly-Technical-Analysis

In addition if the Dow is unfolding the same ending pattern, then the wave (III) cannot exceed above 14089.64 therefore there is not much more upside left in order to maintain valid this option.

dow-jones-weekly,

.

DJIA Weekly Technical View

DJIA 020213

 

Mov Avg-Exponential Indicator:

Conventional Interpretation: Price is above the moving average so the trend is up.

Trend: Market trend is UP.

Mov Avg 3 lines Indicator:

Note: In evaluating the short term, plot1 represents the fast moving average, and plot2 is the slow moving average. For the longer term analysis, plot2 is the fast moving average and plot3 is the slow moving average

Conventional Interpretation – Short Term: The market is bullish because the fast moving average is above the slow moving average.

Additional Analysis – Short Term: The market is EXTREMELY BULLISH. Everything in this indicator is pointing to higher prices: the fast average is above the slow average; the fast average is on an upward slope from the previous bar; the slow average is on an upward slope from the previous bar; and price is above the fast average and the slow average.

Conventional Interpretation – Long Term: The market is bullish because the fast moving average is above the slow moving average.

Additional Analysis – Long Term: The market is EXTREMELY BULLISH. Everything in this indicator is pointing to higher prices: the fast average is above the slow average; the fast average is on an upward slope from the previous bar; the slow average is on an upward slope from the previous bar; and price is above the fast average and the slow average.

Bollinger Bands Indicator:

Conventional Interpretation: The Bollinger Bands are indicating an overbought market. An overbought reading occurs when the close is nearer to the top band than the bottom band. 

Additional Analysis: The market appears overbought, but may continue to become more overbought before reversing. Given that we closed at a 45 bar new high, the chance for further bullish momentum is greatly increased. Look for some price weakness before taking any bearish positions based on this indicator.

Volatility Indicator: Volatility is in a downtrend based on a 9 bar moving average.

Momentum Indicator:  

Conventional Interpretation: Momentum (1000.11) is above zero, indicating an overbought market.

 

Additional Analysis: The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. Momentum is indicating an overbought market, and appears to be slowing. A modest downturn is possible here. 

Rate of change Indicator: 

Conventional Interpretation: Rate of Change (7.69) is above zero, indicating an overbought market. 

Additional Analysis: The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. Rate of Change is indicating an overbought market, and appears to be slowing. A modest downturn is possible here. 

Comm Channel Index Indicator: 

Conventional Interpretation: CCI (170.27) recently crossed above the buy line into bullish territory, and is currently long. This long position should be liquidated when the CCI crosses back into the neutral center region.

 Additional Analysis: CCI often misses the early part of a new move because of the large amount of time spent out of the market in the neutral region. Initiating signals when CCI crosses zero, rather than waiting for CCI to cross out of the neutral region can often help overcome this. Given this interpretation, CCI (170.27) is currently long. The current long position position will be reversed when the CCI crosses below zero. Adding bullish pressure the market just reached a 45 bar new high.

 RSI Indicator: 

Conventional Interpretation: RSI is in neutral territory. (RSI is at 66.70). This indicator issues buy signals when the RSI line dips below the bottom line into the oversold zone; a sell signal is generated when the RSI rises above the top line into the overbought zone.

 

Additional Analysis: RSI is somewhat overbought (RSI is at 66.70), but given the 45 bar new high here, greater overbought levels are likely. 

MACD Indicator: 

Conventional Interpretation: MACD is in bullish territory, but has not issued a signal here. MACD generates a signal when the FastMA crosses above or below the SlowMA. 

Additional Analysis: The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. MACD is in bullish territory. And, the market just put in a 45 bar new high here. Look for more new highs. 

Open Interest Indicator: No open interest value in the database for this bar. Note: Open interest not available for all data types. 

Volume Indicator: 

Conventional Interpretation: The current new high is not accompanied by increasing volume, suggesting that the current move lacks broad participation. Look for a retracement soon.  

Additional Analysis: The long term market trend, based on a 45 bar moving average, is UP. The short term market trend, based on a 5 bar moving average, is UP.The current new high is not accompanied by increasing volume, suggesting that the current move lacks broad participation and the market may be overbought. A retracement is possible here.  

Stochastic – Fast Indicator:  

Conventional Interpretation: The stochastic is in overbought territory (SlowK is at 96.91); this indicates a possible market drop is coming. 

Additional Analysis: The long term trend is UP. The short term trend is UP. Even though the stochastic is signaling that the market is overbought, don’t be fooled looking for a top here because of this indicator. The stochastic indicator is only good at picking tops in a Bear Market (in which we are not). Exit long position only if some other indicator tells you to. 

Stochastic – Slow Indicator:  

Conventional Interpretation: The stochastic is in overbought territory (SlowK is at 94.33); this indicates a possible market drop is coming. 

Additional Analysis: The long term trend is UP. The short term trend is UP. Even though the stochastic is signaling that the market is overbought, don’t be fooled looking for a top here because of this indicator. The stochastic indicator is only good at picking tops in a Bear Market (in which we are not). Exit long position only if some other indicator tells you to.  

Swing Index Indicator:  

Conventional Interpretation: The swing index is most often used to identify bars where the market is likely to change direction. A signal is generated when the swing index crosses zero. No signal has been generated here.

 Additional Analysis: No additional interpretation.

Important: This commentary is designed solely as a training tool for the understanding of technical analysis of the financial markets. It is not designed to provide any investment or other professional advice.

Japan Market Following in US’ Footsteps

Japan is following in the footsteps of the man who laid the groundwork for the greatest global inflationary operation of the modern era. We see the Yen in the top panel of the chart below forming a similar pattern to that which USD made from 2000 to 2002 as an epic bubble in credit expansion was being fomented in the US.

japan-market-folow-usa

The similarity in the charts (with a decade stagger) is striking and it is probably no coincidence that Japan has chosen to leverage its currency – which had been chronically strong since the 2007 beginnings of the US-triggered global financial meltdown – just as the US did with the once strong ‘King’ dollar in and around 2001.

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EUR-JPY (Forex)

 

EUR JPY

 

Challenging the strong resistance at
111.44/111.60.
• EUR/JPY’s rise is overextended but, yesterday,
it managed to make new highs. It is now
challenging the strong resistance at
111.44/111.60. Given the general overbought
conditions, we favour a phase of weakness in the
next few days.
• EUR/JPY has moved above its long-term
downtrend (linking the October 2009 top with
the April 2011 top). Monitor the test of the key
resistance at 111.60 (31/10/2011 high).

Short 3 at 111.30, Objs: 110.35/108.10/106.10, Stop: 112.25 

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Just visit: Free Forex tips to Get costless Currency tips, news and learn technical analysis without any cost.

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If you have any questions or concerns about Forex, don’t hesitate to let us know. For more information contact: +91 9033862706 OR E-Mail on [email protected]