Saturday, 11 June 2011

S&P 500 Huge Head and Shoulders Top

I first posted this scenario at the end of April, and at the time I didn't rate it a high chance of happening. Given the market action in the meantime, it's become more likely. I shudder to think what the target is if this Head and Shoulders pattern plays out, though we would need to see a move below 600 before seriously entertaining that possibility. This chart is arithmetic scale. The S&P often shows nicer trend lines on arithmetic than log scale, even at longer time frames. To produce a target above zero (!!) I'd have to swap to log scale.

EUR/USD Moves Lower

The Head and Shoulders top spotted yesterday on the hourly candlestick chart has lead to a strong decline, as this updated chart shows.

The daily candlestick chart shows that the market has now moved below the 40 day moving average (MA). While the market stays below that particular MA, I will consider the trend at this time frame to be down.

ASX 200 On The Ropes

The ASX 200 continues to trend down on the daily candlestick chart. The market's inability to bounce this week despite the strong momentum divergences at hourly chart level described last weekend is a sign of weakness, and a continued move lower is likely.

AUD/USD Moves Lower

The daily candlestick chart shows that the AUD/USD looks to be heading lower, to test the top of the previous trading range, just under 1.05. If support at that level fails, the market would likely trend lower to test the bottom of that trading range, around 0.98.

The monthly candlestick chart supports the likelihood of an impending move below parity. The market recently tested for the third time the trend line from two peaks formed earlier in the century, and will likely now trend lower by at least a similar percentage to one of the earlier declines. The first peak in 2004 lead to a 15%ish decline, while the peak in 2008 lead to a decline of almost 40%. Also, be aware that the larger degree Elliott Wave picture (posted in early May) points to an eventual move below 0.4776, over coming years or decades. 

Silver On The Cusp Of Another Move Lower

This daily candlestick chart shows the Silver market for the past year. The Silver bubble arguably began in late August 2010, at below $20. When a financial market bubble bursts, the market tends to trend back toward the price where the bubble began, so we can expect to see Silver decline to $20 or lower in coming months or years. 

This hourly candlestick chart shows the action for the past month. A move below the most recent daily lows would likely confirm a new down trend at this time frame.  

Gold Tests Trend Line

Gold is testing the trend line formed from the January lows. The trend remains up, but the throw over in late April was a classic warning of trend change. A move below the trend line, and the most recent daily low, would raise the odds of a down trend developing at this time frame, albeit within the context of the larger degree up trend. The weekly and monthly chart up trend is not under threat at this point. It would surprise me to see the larger degree up trend finish until Gold has displayed a blow off top similar to the one recently ended for Silver, which soared upwards by 150%ish in less than a year, and is now down by 30%ish in a little over a month.