Update on US and Asian Indices 11 May 2008

Dow Jones Industrial Index

The Dow closed at the level where the downward trend line from Oct 2007 cuts the upward trend line from the March 2008 low. This level coincides with the 25 day moving average.

This is a support level and we shall see how the Dow goes on Monday. From the USO chart it looks like oil might have topped out on Friday. How will stocks move if oil prices retreat on Monday given that the latest focus and “reason” for the fall in the Dow last week was due to high oil prices?

It is still possible that this drop might be more of a correction than the continuation of a bear trend. One good point supporting this is that the falls in the markets recently have been due to rising oil prices rather than credit crunch and recession fears. This is not exactly new type of bad news and I think that the oil price rise will be dealt with very soon. The USD$ has strengthen quite a bit, hence that is no longer a reason for higher oil prices. Supplies have been hit by events around the world but I get the feeling speculators and traders have been the ones driving oil prices up.

No shorting for me just yet.

S&P 500

The S&P 500 similarly closed at the level where the downward trend line from Oct 2007 cuts the upward trend line from the March 2008 low.

I would like to see more confirmatory signals before calling for shorts at this point in time.

It feels like this might be a correction of the recent rally rather than the continuation of a bear trend.

However all this would change come Monday.

NASDAQ Composite Index

The NASDAQ has been a lot stronger than the Dow and the broader S&P 500. Are investors taking some money off the table from energy and agricultural counters and putting them in technology stocks?

If broad markets were to fall, it looks like technology counters would be the ones with a lot more meat to short.

Straits Times Index

The STI closed on the 25 day moving average. There is however bearish divergence between the index and RSI peaks. Confirmation would be a close below the Friday lows. Support tipped at 50 day moving average and 3000 level (necktie of 25 and 50 MA).

However we must wait for confirmation on both the STI as well as the Dow before shorting. It could very well also be the STI taking a breather before making an attempt to test the 200 day moving average for the first time since the start of the decline since Oct 2007.

Hang Seng Index

The HIS closed on the 25 day moving average similar to the STI. The key psychological level however is the 25000 level. And the HIS managed to eke out a close above it still.

25 and 200 MA are very close together. A rise in markets on Monday (due to a fall in oil?) would have them crossover forming a key area of support/resistance at 25000. Hence not only as a round number psychological level, but also a technical one.

In the event of a fall 23400 would be a support level.

Shanghai Stock Exchange

The SSE has been trading in a range with the 50 MA as the resistance. We will have to watch how the SSE performs over the next week.

Nikkei 225

The Nikkei closed below the upward trendline. Support tipped at the 25 day moving average.

Update on Dow, S&P500 and NASDAQ 3 May 2008

Dow Jones Industrial Index



The Dow broke past the 200 day moving average and closed above it on Friday 3 May 2008. Some people view this as a very bullish sign. Coupled with the fundamental news of the less than expected job losses in the US economy, some even say this is the beginning of a new bull run as the US economy recovers.

My time frame tends to be week to week these days so I'm not sure about that.

Obviously the bullish close is a positive point.

However there are several factors that point against this being a sustained breakout. Firstly the volume of trade done was relatively low. Secondly the RSI is deep in the overbought region. It is highly likely that the Dow is due for a throwback soon.

Support levels could be at 12765 and 12265. What I would be more interested in is to see what type of bad news cause this throwback. It is in my opinion that unless we see a new type of bad news hit the market, it is unlikely that the throwback will be too severe to even get close to the March lows.

Hence my strategy would be to let profits run at this point in time and buy on dips or oversold RSI levels.


On the SMA/EMA crossover trend change system, the uptrend is certainly still intact, however the 25 SMA is diverging quite a bit from the EMAs. Hence a throwback is on the cards soon, probably next week.

S&P 500

The S&P 500 mirrors the Dow except that it isn't the 200 MA that was broken but the downward trendline.

RSI is similarly overbought. Supports will be at 1400 and 1340.

SMA/EMA crossover trend change system also shows upward trend crossover.

NASDAQ Composite


The NASDAQ mirrors the S&P 500. Support at 2420 and 2300

Uptrend but 10 SMA is diverging and a throwback is likely soon.

Update on Dow 26 April 2008

The Dow closed above the downward trendline from Oct 2007 for the first time early this morning.

The Dow has now confirmed the double bottom and (weaker) reverse head and shoulders patterns for 6 days.

With this close above the trendline, the chart patterns looks bullish.

I have yet to check on the indicators.

More to follow later.....

Update on Dow, S&P500 and NASDAQ 19 April 2008

Dow Jones Industrial Index


The Dow broke and closed above the confirmation level for double bottom and head and shoulders bottom formation on Friday. It tested but did not break the downward trendline from the peak in Oct 2007. This is a bullish sign. The downward trendline (12850) and the 200 day moving average (13100) will be the immediate resistance levels. See the previous post on US economic calendar and companies earnings reporting schedule to see if you think the results and economic data will be good for the US next week.



The trend change indicators from the moving averages crossover now looks a lot more defined. The Dow is on an uptrend clearly.


S&P 500

The S&P 500 tested the conformation line for double bottom but did not break it. It is very close to the downward trendline from the Oct 2007 peak. Looking bullish indeed.

Similarly to the Dow, the downward trendline and the 200 day moving average will be the resistances to aim for.


Trend change wise it is not so well defined for the S&P 500 but is still on uptrend.


NASDAQ
The NASDAQ gapped up on Google's massive results but did not break the resistance line at 2420. The NADAQ drop from January was pretty steep and severe. If the fears that caused that drop turned out to be unfounded going by the results of the major tech companies, I would expect the recover to be just as steep as the drop was.


Trend change wise, I would like to see the NASDAQ continue to rise powerfully to define the trend change much better.

Update on Dow, S&P500 and NASDAQ 12 April 2008

DJIA


The Dow closed right at the 25 day moving average support level. I would tip the next support level at 12170 which is also where the old downtrendline is. A drop below 12170 would represent shorting opportunities to test the Jan and March lows.

It is entirely possible that the Dow may shake off the GE news just like that. Reason being that everyone forgot that GE has a financial arm in GE Money. Why should GE Money be any different from other financial companies? The CEO also has to blame for making empty promises.

In any case people may digest this and look forward. Next week is when the US reporting season kicks into high gear.

The GE results have also lowered the bar substantially. So the market is expecting very bad news. Any good news will bring relief to the market. We'll have to see how Monday goes.

From the SMA/EMA crossovers we can see that there is a signal for change to uptrend. But the 10 SMA has pulled too far from the EMAs hence a pullback was to be expected. Negative signal is that the price dropped below the 20 and 30 EMA.

S&P 500

Similar pattern to the Dow. 1312 support.

Also similar to the Dow.

NASDAQ
NASDAQ 2260 support as well.

Update on Dow 8 April 2008

The Dow closed down 36 points last night.

However when I saw this in the morning I was quite relieved.

The reason why everyone was so edgy yesterday is because on Tuesday, the Dow tested the previous highs but later closed down near the lows forming a doji or almost a "gravestone" doji. This was a bearish signal based on candlestick charting. Psychologically it meant that the bulls were on the run but later lost control and prices closed where they began or near the lows.

Usually for candlestick charting confirmation has to be made with subsequent candlesticks.

So if last night the Dow had closed down strongly it would have more or less confirmed the bearish doji and hence a change in direction. However the Dow did not close down too strongly.

In fact it tested the 12525 level and it held. This is called a tweezer bottom as compared to the lows last Friday and on Monday. Will this be a support?

Secondly looking at the bigger picture, the consolidation from last Thursday up to yesterday still looks like a flag continuation pattern. The problem though is that within this flag are mostly high waves or rickshawmen and a bearish looking doji! These usually signal turns in candlestick charting. Although we know it is not that accurate.

There are views from other technical analysts that would prefer a drop back to the 50 day MA ie 12360 to give the flag a more downward sloping appearance before the next rally.

Nevertheless things are still looking very edgy. A drop below 12525 would certainly result in a drop down closer to 12360. Hopefully that level holds and rebound subsequently or else it would mean confirmation of the Doji formed on Tuesday!

We are not out of the woods yet. But last night's Dow close did not confirm anything bearish either.

Dow Trend Change?


Just for interest as I was just reading about this in an old issue of the Trader's Journal, there is this method to look for trend changes. Take the 10 day simple moving average (10 SMA), 20 day exponential moving average (20 EMA), and 30 day exponential moving average (30 EMA) and apply to the chart. In an uptrend move the 10 SMA>20EMA>30EMA. And in downtrend moves the 30EMA>20EMA>10SMA.

There are bowtie crossovers of these moving averages signals a change in trend.

If you look at the chart above those arrows drawn all point to bowtie crossovers. We have just had one not too long ago for the Dow. But then again these crossovers can be rather close together as seen by the 2 crossovers in the month of Dec alone.

Dow fibonacci retracement?

Was just reading about midtrend entry and pyramiding and one of the strategies was to use fibonacci retracement levels to enter the market again.

I had a though at decided to see how the Dow chart looks with a fibonacci retracement level drawn in.

The big move started in mid July 2006 and ended in Oct 2007.

Looking at the fibo levels, 12000 is the 61.8% level. Usually strong moves beyond this level would mean big trend reversals than retracements. From the chart, we can see that the Dow is currently flirting with the 12000 level.

In fact it breached the 12000 level in Jan and March but could not follow through. 12000 is definitely the inflection point for the Dow.


Similarly for the STI, 2900 is the 61.8% fibonacci retracement level which was breached in Jan and March.

Update on Dow 29 March 2008

The Dow suffered declines over the past 3 days. I was originally thinking that it would rally on Friday. And I was initially quite disappointed that it closed below the downward trendline it had broken this week <12300.

However looking at the chart formation again, it looks like a rally might be coming over the next few days.

This move back from the recent rally is a throwback. After an upward breakout occurs, the price declines to or comes very close to the breakout price or the chart pattern trendline within 30 days. There must be white space between the hooking price action of the throwback and the breakout price.

Looking at the chart, the breakout upwards probably happened on 18 March 2008. Friday's Dow close was back to around those price levels. And there is certainly white space. (see the shaded oval)

The selloff for the past 3 days was also on low volume. Which doesn't seem to suggest strength in the down move.

Also notice MACD divergence with the downward price movement.

It all seems to be setting up for a good rally next few days!

On the downside watch 11950 and 11640 as support levels. If these give way then we're headed much lower.

But the chart is all setting up for a rally next week on Wall Street.

Update on Dow chart

The Dow is still on track for confirming a double bottom reversal pattern. Note the nice W pattern being formed? We've got the 2 bottoms. And the right side of the W is being finalised.

Note that in some W pattern reversals there is a A pattern whereby there is a throwback before finally making a strong assault on the confirmation levels.

It is however too early to say how things will go. I will wait for confirmation signals. To be safe a chart confirmation (ie close above 12765) plus a 5 day time confirmation (ie after 5 days of first breakout of 12765 still closing above 12765)

Other bullish signals currently are the 3 days of closes above the downward trendline. The Dow yesterday managed to close above that trendline despite the very very bad news out on financials, durable goods order and housing starts. The Dow has also been trading above the 50 day moving average. Notice the 50 day MA? The first hit of the 50 day MA is usually followed by a strong bounce down. This is what is seen on the chart. The second assault on the 50day MA proved to be a breakthrough and the Dow has been trading above it ever since. Will it hold?

If the Dow does recover today it looks like 12300 would be a necktie crossover of the 25 and 50 day moving averages and would be a near term support to watch.

All eyes on the US GDP results and Jobless claims tonight at 830pm (local time).

It will also be interesting to see how the Dow closes if the news is bad.

I am generally bullish looking at the chart. Of course for charts they don't tell you why but more when.

A close above 12600 would be bullish for me because that's a close above the trendline joining the peaks of Dec 2007 and the one on Monday. Certainly not impossible if you consider that is +178 points away from yesterday's closing and right now it seems the market reacts more strongly on the upside to ANY good news compared to yesterday's -100 to extremely horrible news.

A close below 12300 would be a bearish signal to me and I'd probably consider taking whatever profits I have right away.

But somehow I think we might be surprised on the upside tonight.

Good luck to everyone! :)

US and Singapore index charts

DOW JONES INDUSTRIAL INDEX

The Dow looks like a possible double bottom formation. Confirmation would be a breakout upwards above 12765.

Notice also the upward channel the Dow is currently trading in. Also the downward trendline from January is nearby. Breakouts above the channel and the trendline would be bullish signals.

13365 would be a very key resistance level in the event a double bottom reversal is confirmed.



US S&P 500

The S&P looks like a double bottom formation as well. A breakout above 1396 would confirm this reversal pattern. However there is a HCR right at that level. Watch the 25 day moving average. A break above it would be a bullish sign near term.


NASDAQ COMPOSITE

The NASDAQ has an interesting chart. Recent lows took out the January lows. This looks more like a descending right angled triangle formation to me. False breakouts are noted recently. A breakout above the downsloping trendline would confirm this as a busted pattern and usually powerful upwards moves are observed. However there is a HCR from 2425-2500 range.
Neckties are noted at 2615.



STRAITS TIMES INDEX

The STI is still on track for a double bottom pattern. A break above 3170 would confirm it. There is a necktie at 3500.