Saturday, 7 July 2012

ASX 200 turns lower from top of upwards corrective trend channel

Often in my weekend posts I begin with long term charts to set context. This week there has been significant action on the dailies, so I'll begin with them for each market, then zoom out.

The following daily candlestick chart of the ASX 200 includes after hours trade, and shows that the market has turned lower from its test of the topmost line of an upwards corrective trend channel (some would label it a trading range, fair enough). For some time now I have been citing 4200 as the key overhead level for the near term bearish case, and the after hours market came within 5 points on Thursday. So long as last week's high holds, the next big move should be down.

Zooming out now to the weekly candlestick chart shows the main reason why I consider 4200 to be key, although I have discussed others in previous posts. That level is now the scene of a bearish cross of the 18 week moving average below the 40. While the market trades below the level of that bearish cross, it will likely trend lower. If a trend lower develops, the key level will be moved down.

Zooming out further still to the monthly candlestick chart illustrates that the market is trading downwards within a clear trend channel. While 4200 is key to the near term trend, the long term trend of this market remains down while the market remains below 4500, the level of the top down trend line. A break above the 2011 highs around 5000 is required to turn the long term trend to up. If last month's low is broken, downside targets are low 3000s followed by low 2000s, taken from the mid-channel trend line and then the lowest trend channel line.

S&P 500 turns lower from trend lines

The daily candlestick chart shows the S&P 500 turning lower from a test of the trend line drawn from the March high. It also shows a bearish momentum (MACDH) divergence in to this week's high, an indication of impending weakness. This chart and the others in this post include after hours trade, which tested 1380 on Thursday evening. The cash index peaked just below 1375 on Tuesday. Last weekend (and many other times) I identified 1380 as one of my lines in the sand for this market, and it continues to be the next higher key level for the bearish case.

Zooming out to the weekly candlestick chart shows the market testing a key recurring trend line angle.

Zooming out further shows the market is once again testing the top line of a trend channel that has contained more than 90% of market action since mid-1997. Betting on a clean break higher, is betting against that much history. Also note the bearish momentum (MACDH) divergence leading in to the March peak, warning of impending weakness. 

Despite the clear bearish set ups across three time frames, keep in mind that the market will do whatever it wants. It pays to keep an open mind and eyes wide open. I posted in May that the Decennial Pattern on the Dow Jones index indicates that around about now should be a great time to invest in US stocks. I would wait for near term action to emphatically support the bullish case before trading in line with such a long term seasonal pattern. Ultimately I think only a break of the 2012 high would provide that bullish evidence.

DAX turns lower from false upside trend line break

On Wednesday's post about the DAX I wrote that "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." Clearly then, the downside has now been exposed, though 6400 appears to offer some support. A break below 6400 would raise the potential for a move toward a test of the lower trend line.

Zooming out, the weekly candlestick chart shows a weak candle for last week, and a possible kiss goodbye of the trend line.

AUD/USD continues to trade in a broadly sideways range

Last weekend I suggested that the AUD/USD could be forming a large symmetrical triangle, with medium term bullish implications. Nothing has happened this week to the AUD/USD itself that would rule out that potential, but action in all other (Undollar) markets that I follow is taking on a decidedly bearish tone, so for me it is not a high confidence view. If we zoom out and look at longer term charts, the AUD/USD has traded in a broadly sideways range since late 2010, and from a medium term point of view, perhaps it is best to leave the analysis at that, until the market breaks out of the range. ie. Range bound.

Daily candlestick chart illustrates a short term trend line that could be key to near term action.

Now zooming out, the weekly candlestick chart shows that the AUD/USD is testing from beneath the trend line drawn from the 2008 low. It also illustrates the lower boundary zone of the trading range that I mentioned above. Of course the upper boundary is the 2011 high.

EUR/USD falls to fresh lows for 2012, next support zone is around 1.19

On Tuesday I posted that EUR/USD closes under the 40 day moving average are worth watching for. Wednesday saw such a close, and subsequently the market has fallen hard to fresh lows for 2012.

Now zooming out, the long term weekly candlestick chart shows has closed below the trend line drawn from the 2001 and 2002 lows. The next potential support area is just below 1.19.

Gold turns lower from short term trend line resistance, watch for triple MA cross

The daily candlestick chart shows Gold turning down from short term trend line resistance. I showed in a recent post that most years since 1999, buying Gold in June or July and holding til end of year has been profitable. The June high and May low appear key. 

Zooming in a little shows that if Gold continues lower early next week, it is likely that there will be a triple bearish cross of the 40, 18, and 4 day moving averages. Such a cross often precedes a strong trending move, usually in the direction of the cross, but not always.

Now zooming out, the weekly candlestick chart shows that Gold continues to test the trend line drawn from the 2008 and 2009 highs. A break lower could target the next lower trend line support at 1400.

Silver turns lower from short term trend line resistance

The daily candlestick chart shows Silver turning down from short term trend line resistance. The June high and low appear key.

Zooming out, the long term weekly candlestick chart shows that Silver is still testing the trend line drawn from the highs of the early 1990s. If the June low is broken, the next support is around 20.00, or around 30% low current price.