Sunday, 7 August 2011

ASX SPI 200 the bearish and the bullish cases

All charts in this post illustrate trade through to 7am Saturday morning Sydney time, ie. 1 hour after New York's Friday close.

The monthly chart illustrates the bearish case very clearly. The market is trading below the 40 month moving average, and momentum has turned negative. Just like 2008...  


The bullish case is illustrated in three separate weekly charts, for clarity's sake.

The first chart for the bullish case shows that the market is now testing the 50% retracement of the rally from the 2009 low. This Fibonacci level is more likely than most to support a rally...


The second chart for the bullish case shows that the market is testing the bottom line of a corrective trend channel, which may provide support for a rally...


The third chart for the bullish case shows that the market is testing a trend line parallel to others which have contained most of the market action for the past two years...


What should we make of the opposing views expressed by these charts? To me, they act as a reminder that anything can happen. That is a truth of the markets which we must never forget. All three bullish scenarios would be destroyed by a continued move lower this coming week. In the case that we get a rally and that your plan includes catching falling knives, there are definite levels to set stop losses.

EUR/USD daily and hourly charts


Following the weekend's drama surrounding the S&P downgrade of the US credit rating, one of the big questions is, which way next for the US dollar? That largely means, which way next for the EUR/USD? as the Euro is by far the biggest component of the US dollar index.

No analysis method can answer the above questions with anything approaching certainty. The charts at least provide some levels and trend lines by which you will be able to judge future action, and which you can use to manage your risk.

The daily chart shows that the EUR/USD has been trading in a range since the peak in May...


The hourly chart shows very clear trend lines...

Gold and Silver daily charts

Gold...



Silver...