Apr 3, 2010

Weekly review / Седмичен преглед

Lets look at the big picture first - the weekly charts.
The big picture remains bullish. The prices are above EMA50 and MACD is above the zero line. The histogram is above the zero line and its slope is pointing higher.

But do not be too bullish. Lets look at the charts closer.
The indexes are now in a congestion zone between support and resistance levels developing divergence - you can see this on the charts bellow. You must be very cautious when you see divergences on weekly charts its very important signal.
RSI broke its trend line in January, which means the up move since March 2009 is over.
The up move is over does not necessarily mean the trend is over. There is bullish and bearish scenario:
- Bullish scenario - expect correction. The prices will move sideways in this congestion zone for some time and work out the divergences.
- Bearish scenario - expect trend change. The trend is changing and the indexes will carve out a top in the next several months.
I think the action bullish or bearish will develop between now and the end of August and then we will know which camp is winning the battle. Now is time be cautios and use the daily charts to squeeze profits.

P.S. Do not get emotionally committed to the bear or the bull camp. I am reading blogs in Internet and different predictions - forget the gurus some of them predict Armageddon other new bull market. In the market there is two direction some one will be right:)) then they will tell you how great they are - I will say bullshit. The truth is no one knows the future. So watch the charts and have both scenarios in your head.

DAX - RSI broke its trend line and now it is testing it. RSI is still bellow the 66 level which means we are still in a larger down trend.

DAX is up 115 point or 1,89% for the week and DJ 76 points or 0,71%.
I have been expecting pullback the last several weeks.... I did not happen:). This is not bullish for me. This up move lasts almost two months already without healthy pullback hitting resistance levels on the weekly charts... again this is not bullish for me.
The prices continue to move higher, but the oscillators and market breadth indicators are becoming more bearish.
- NYSE McClellan Oscillator is bellow the zero and NYSE McClellan Summation index crossed its EMA5
- SPX500 and NASDAQ - we have MACD cross and the Histogram is bellow the zero line, but DAX and DJ MACD still have not crossed its signal line.

Look at the daily chart - the Histogram is moving lower and RSI(5) shows divergence. Daily charts are sending us a message that this move is coming to an end.
(Long signal if DJ breaks above 10960, but short-term 1-3 days. Close bellow the base around 10820 says the top for this move is in.)

Look at now the hourly chart of Dow Jones 30 - the prices are correcting seven sessions sideways building a base. This price behavior is typical for 4-th Elliot wave some kind of triangle or flat correction. Prices are staying above EMA50, MACD above the zero line, Slow Stochastic says we have a correction not a top.

So lets summarize - we have conflicting signals on daily and hourly charts. The indicators are deteriorating on daily charts, but prices are correcting sideways and the signals on the hourly charts are still bullish.
What should we expect?
In such a situation the larger time frame will sooner then later prevail, but it takes time the signals on the charts of lesser degree to play out.
I expect to see higher prices 5-th wave early next week and then the daily indicators to play out bringing correction for this move which last already two months. Possible targets - DAX 5850-5900, DJ ~10500 (see the charts from the previous week).

No comments:

Post a Comment