Jun 4, 2011

Weekly review / Седмичен преглед

Ok, the sell off this week makes the bearish scenario equally probable as the bullish scenario - both shown on the first chart bellow.
In both cases I expect a rally for several days next week, reaching the upper trend line of the channel(see the hourly charts bellow SP500 and DJ). Interesting is what will happen after that. Will the bulls manage to break the channel and close above the last minor highs or not? Frankly no one knows. So I will keep an eye on both options.

->Bullish scenario(green) - a rally to marginal new highs 1380-1400 on SP500. The Index will hit the upper channel line of the wedge or a new trend channel with different slope(see the charts for the bullish scenario). The months June,July,August are not months where major moves happen. So I do not expect the next rally lasting several months with gains 20%+, but marginal new highs is in the cards.

->Bearish scenario(red) - the trend line is broken and we are in a correction of a bigger degree. SP500 will test the broken trend line challenging the last highs around 1340. The test will fail and we will see a sell off with first stop at the next support level around 1240.

P.S. I do not use Elliot wave to trade, but I have found an Interesting blog with Elliot wave count summing up my both options.Notice the post is from 25-th of May, but the Indexes follow it accurate like a clock:)

Next week expect a rally for 2-3 days followed by a higher low. The bulls will hold the support level at 1295. Then we will see the wedge playing out. There is another option - lower low with divergence, SP500 bottoming around 1285 and forming a new channel with different slope.
SP500 holding support and forming a wedge.
SP500 breaking bellow the last minor low but reversing quickly forming a trend channel with different slope.
One reason why I am expecting a rally for 2-3 days. DAX bullish candle and the oscillators are showing divergence.
See the chart above SP500 histogram - the same story but the bullish candle is missing. We need a solid up day on Monday.

The indicators are bearish - the histogram on the weekly chart is pointing down, the MACD on the daily chart is bellow zero pointing down, the price is bellow EMA50, the trend line is broken. The next support level is the next stop - ~1240 for SP500 and ~11600 for the Dow.

Weekly chart support level ~11600 which was important level several times in the last years, EMA50 support, trend line support from 2009 bottom.
Daily chart - trend line is broken next support level the last important low, support MA200, support the trend line.
Hourly chart - rally to resistance followed by a sell off to support level.

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