May 16, 2010

Weekly review / Седмичен преглед

Hello traders,
huge swings ha?
Many are surprised from the moves, but on 28 April I wrote that correction has began. Surprised could be some one which does not watch the charts and does not listen what the market says.
I must admit that I have not expected such huge swings.... but when you are on the right side of the trade who cares:)
The market is very volatile, trying to forecast what will happen in two weeks or two months is very very difficult as long the trend is not clear. So what opportunities do we have?
- day trading use 1h and 15min charts and go with the flow until we have clear trend
- stick to the facts:) look at the charts and find the highest probability

So I will show the charts and see how the probabilities look like.
For me the highest probability looking at the charts is that the move from March 2009 is over and in the next months the indexes will carve out some kind of topping pattern. WHY?
- look at the market breadth indicators (see the post from 28 April). They are telling us that the party is over. They have shown us the 2009 bottom and now screaming TOP
- MACD and the oscillators on the weekly charts are pointing down
- divergences on the weekly charts MACD
- resistance zone hit and Fibonacci retracement
- broken trend lines

Where is the catch? The problem is that on the weekly charts MACD is above the zero line, the prices are above EMA50 and we do not have lower low. That means a down trend is not confirmed that is why I expect in the next months a top to develop. The last chart shows bullish scenario keep it in mind. Even if it plays out and we hit new highs in the next 2-3 months this will be part of some kind of top.

Looking at the charts above the most probable scenario is the bearish one - something like that:

On the weekly charts the prices are still above EMA50 and MACD above the zero line. So we must keep in mind an alternative bullish scenario if the bearish one does not play out.

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