Mar 28, 2010

Weekly review / Седмичен преглед

Weekly chart - the long-term picture and intermediate-term picture remain bullish. The prices are above EMA50 and MACD above zero.
This week the Histogram cross above the zero line and MACD cross the signal line, which is a bullish signal.

The Inverse Head&Shoulders which I have shown for several weeks has played out and has hit it's target ( ). But now the market is very overbought and as you can see the chart bellow DAX is hitting resistance. I think we will see a pullback before the market breaks it and go higher. This move higher will carve out a divergence on MACD and the Histogram and this will be the beginning of a much deeper correction.

On the other side we must open our minds for other scenarios - more bearish:)
It is possible that the index fail at this resistance level and carve out a Double Top or a complex Head&Shoulders pattern and this will be the begging of a serious correction, not like in July 2009 and February 2010 just 8-10%, but much deeper 20-25% or new lows... why not. I have shown the bearish charts bellow.

Bellow you can see daily charts of DAX and Dow Jones indexes. I expect a pullback to support levels. The Cup with Handle pattern is still in play.
( )

Short term indicators are showing danger ahead. Momentum is waning - the histogram is falling and the short-term RSI(5) shows divergence. The same picture shows the McClellan Oscillator too, which means the internals are weak.
That is why I expect a pullback and i do not believe that the indexes will break the resistance from the first try in this overbought condition.

Hourly charts.
The prices are still above EMA50, MACD above the zero line and the bearish candlesticks on the daily charts are not confirmed. So we should be patient.
I expect next week the wage to be broken. On the DAX chart you can see the two possible targets. The first is a parallel line of the broken wage carving out a steep channel. The second is the trend line from the March bottom.
Dow Jones hourly chart is not shown - the target is the trend line from the March bottom (see the daily chart above).

The Bearish case.
Many people believe that we will have double dip. I do not believe I am following the charts and I am open for everything:).
When to become bearish? - if after the pullback the indexes fail to make new highs and break the third trend line, or instead of a pullback we see a reversal and trend line break then I will be in the bear camp. Until then we should be more bullish, because we do not have bearish signs on daily or weekly chart.
So how will bearish scenario play out? Something like the charts bellow.
- Head&Shoulders or Double Top pattern.
- The third trend line (the fan principle) is broken, which means the trend has changed.
- MACD divergence on the weekly charts.

Mar 21, 2010

Weekly review / Седмичен преглед

The big picture has not changed.
The indexes are up for the week - DAX 0,63% and DJ 1,10%.

The Histogram slope turned downwards. I expect the correction to begin next week, and this correction should be a buying opportunity.

Mar 14, 2010

Weekly review / Седмичен преглед

The long-term picture remains bullish.
Weekly chart - the prices are above EMA50, MACD is above the zero line, the slope of the Histogram turned upwards.
Daily chart - the prices are above EMA50 and MACD is above the zero line (see bellow).

But the short term picture looks overbought. It is not a good idea to chase the move at this stage, wait for a pullback to jump on.
I expect pullback in the next 1-2 weeks and the indexes to carve out some kind of handle befor they continue higher.
Bellow is shown the bullish view. We should see oscillator reset and the indexes should retrace more time then price without breaking the new trend line. The pullback ideally should end at the new trend line around 5750(support level) for DAX and 10300-10400 for DJ.

For now the trend is bullish and we should follow the trend, but there is always BUT.
We do not know if we will see just a pullback or something else. I have shown the bullish and the bearish view. Let's wait and see what the market want to do - go higher or make some kind of a top.
If the scenario above does not play out, there is a bearish view too:). We could see a Head&Shoulders top (DAX) or double top (DJ).
DJ Transportation, Russell 2000 and Nasdaq are making new highs, but Dow Jones Industrial is bellow its January high. You can see this as a bearish sign too, but its not confirmed.

The short term indicators and the oscillators are sending signals that the market is overbought.
The last three days we have a high volume. I think this is a climax volume. We have distribution bellow the surface and the short-term move is coming to an end. I do not think the big boys are jumping on the move after four weeks rally. I think they are taking profits at resistance levels.
VIX does not make new lows as SP500 makes new highs. McClellan Oscillator is falling the last two days.
Candles - black candles have appeared on the ETFs QQQQ,SPY and grave stone doji on DAX. They are still not confirmed but candles are sending us warning signal. Histogram - we have a divergence on DJ. Slope turned downwards and we have mMm pattern on the DAX and DJ. The histogram is sending warning signal too. On hourly chart we have a MACD divergence.
But be patient - all we have is warning signals. On the hourly charts, the prices are still above EMA50 and MACD above zero.
I expect DJ to break the rising wedge on the hourly chart and carve out a channel next week. After the pullback we should see higher low and Cup with Handle playing out.

Mar 11, 2010

Mar 1, 2010

Close short poition

Close short position and wait on the sideline untill the direction is clear.