Monday, 2 January 2012

ASX 200 is trending down

Before we get to the business of discussing what is currently happening on the ASX 200, yesterday I discussed four possible scenarios for 2012. If you missed it, I suggest that you have a look.

Now to the daily chart, which shows the market trading broadly sideways since August. The moving averages indicate that the trend is down, and the trend line break last week supports that view.


The moving averages on the weekly chart also indicate that the trend is down. The market is trading within a down trend channel. I must say that I am slightly disturbed by the disconnect between the weekly chart down trend on the ASX 200 and the trend line break on the S&P 500.... makes it difficult to have high confidence in the moves on either market.


S&P 500 breaks upwards through trend line

Weekly chart. Last week's break higher was on very low volume as many traders took holidays. We should find out early this week whether the upwards break is genuine or false. The moving averages show that there is no trend at this time frame.

AUD/USD breaks upwards through trend line

The AUD/USD finished 2011 not many pips away from where it finished 2010. The market has broken upwards through the down trend line drawn from the October and December highs. Given the broadly sideways, choppy, volatile nature of trade in this currency pair during 2011, it is difficult to have high confidence in a new trend developing now. Given the paradoxical nature of markets, this is precisely why we must be alert to the possibility of a new trend beginning now.

EUR/USD shows possible bullish false break below 2011 low

The EUR/USD is trending down on the daily chart, but last week saw a false break below the January 2011 low, a bullish edge, albeit another falling knife... not my thing. A move back above the trend line and 1.30 would add some confidence to a bullish call, especially with the background of extreme bearish sentiment against the EUR/USD (see The Metallica Indicator). Failing a move back above the trend line and 1.30, expect further declines.

Gold shows possible bullish false break

The daily chart shows a possible bullish false break below the September low. Personally I don't like catching falling knives, but for those that do, now is your chance.

Silver shows Shooting Star on yearly chart

For the candlestick afficionados, the yearly chart shows a Shooting Star. This is a bearish pattern, if the market confirms by moving below the 2011 low.


The daily chart shows a down trend channel.