Monday, 16 May 2011

ASX 200 weekly

This chart shows the past 4 years of action on the ASX 200. Note that the fastest and furthest decline in late 2008 began after the market broke decisively below 5000. Note also that the market failed twice in 2010 to overcome the 5000 resistance zone, and once again in April this year. To state the obvious, markets are made up of people, and people have memories. Will the market test 5000 again in coming months, or is the market in the early stages of remembering and echoing the panic in 2008? We will have to wait and see. A move below the trend line, currently at 4550, would open the way for a test of the March lows at 4450. Until either the March lows or the 5000 mark are broken, there is no long term edge for traders, and any long term forecasting of the ASX 200 is IMHO pure guesswork.

EUR/USD down trend

The swift move lower on the EUR/USD has now travelled 9 cents from top to bottom. The kick-off move upwards in January travelled almost 10 cents, followed by a correction of almost 4c in February. The market is likely to begin an upwards correction of similar magnitude to that 4c in coming days. As stated previously, I consider the trend in the EUR/USD to be down unless the 40 day moving average is breached.  

Zooming in to the hourly chart, we see that the down trend line formed from the initial high is currently just above 1.45. A move above that level would indicate that the larger degree down trend was finished. Reassuringly, 1.45 is a similar price to the key 40 day moving average on the previous chart.  A move below the lower trend line on this hourly chart would mean that the EUR/USD plunge is accelerating. Stranger things have happened.