Tuesday, 6 March 2012

EUR/USD shows bearish trend line break

Yet another Undollar tradeable showing a new bearish trend line break today.

ASX 200 shows bearish trend line break

On MacroBusiness earlier today I posted a comment saying that the ASX 200 is showing potential to enter a whole new world of hurt. The first chart below shows some of the reasons why. Supporting evidence for the near term bearish case is provided by the US indexes also making bearish trend line breaks in after hours trade, with the S&P 500 potentially having made a huge double top. And most importantly of all for the ASX 200, the larger degree trend is down, as we will see below.

The daily chart shown immediately below includes after hours trade. It features a bearish trend line break, and also a new bearish triple moving average cross. The triple moving average cross raises the odds for an accelerated and extended move lower. Why? The three moving averages crossing together shows that the market has been quiet for a period. In the stock market, periods of quiet trade alternate with periods of volatility. We are due for a period of increased volatility, and the trend is down. For an example of a similar bearish triple moving average cross, look at the top left corner of the chart, to the cross in late July. Then look at the aftermath, a strong down trend. The triple moving average cross is one of my favourite indicators, bullish or bearish, on all timeframes, for all markets. It doesn't always work, nothing does, but the times it does work more than make up for the times it doesn't.

Below I have zoomed out to show the weekly chart of the ASX 200 including after hours trade since mid 2007. In recent weeks the market attempted to beat the 40 week moving average, but the market is now below all three moving averages, indicating that the trend is down. The down trend channel illustrated on the chart supports that view.

S&P 500 and NASDAQ 100 show bearish trend line breaks

In after hours trade, both the S&P 500 (SPX) and NASDAQ 100 have sliced downwards through the up trend lines that supported trading since late last year.

S&P 500 (SPX)


On the weekend I suggested that a trend line break on the SPX would raise for a double top on that index. The double top is not a huge potential at this stage, but it's certainly possible. The measured target for a double top would be around 775. The weekly chart shows that level was last seen in early 2009.