Wednesday, 4 July 2012

ASX 200 tests trend channel resistance and shows potentially complete upwards correction

The following daily candlestick chart of the ASX 200 includes after hours trade, and shows the market testing the upper line of a corrective trend channel. With the US S&P 500 and German DAX both testing resistance, it is premature to announce an upside break here for the ASX 200.

The next chart shows ASX trade only, to illustrate my tweet from earlier today where I said "ASX 200 poke above 4160 gives us textbook EW upwards flat correction nearing completion. While below 4200, next big move will be down.". Under Elliott Wave the five wave move lower defines the trend as down, and indicates that when wave C is complete (it could be already) it will be followed by another five wave move lower. Previous posts explain why I think 4200 is significant with regard to the near term trend, though a rally above that level would by no means negate the longer term bearish case.

S&P 500 testing trend line drawn from March high

The US stock exchanges are closed tonight but futures and after market trade has continued. The daily candlestick chart shown below illustrates that the S&P 500 is testing the trend line drawn from the March high. Add this to the list of trend lines and resistance levels that the S&P must beat for continued upside to be favoured (for some examples see last night's post and the weekend's post).

DAX butts up against resistance at 6600

The DAX is testing resistance at 6600. Knife edge action here, as a break above 6600 would favour further upside, while a move lower back in to the trend channel would complete a false upside break and favour the downside.