Friday, 24 August 2012

GBP/USD completes bearish false upside break from trend channel

Daily chart shows bearish false upside break

Weekly provides context. Massive symmetrical triangle, biased toward downside break out due to preceding down trend.

Charts of ASX8's component stocks strengthens case for impending weakness in ASX200

The ASX8 is something that The Prince / Chris Becker tracks over at MacroBusiness. It's a great idea, summarised here by Chris in one of his Trading Day updates several months ago:

I follow the ASX8, the top four banks (ANZ/CBA/NAB/WBC) and miners (BHP/RIO/NCM/WPL), very closely as they are effectively the entire market – the Houses and Holes. Add Telstra (TLS) and you’ve pretty much covered the major stars (or dogs, depending on your point of view) of the market, as the ASX8 is the ASX50 – which follows the ASX200 extremely closely on any chart.

Today I decided to have a look at the charts of the component stocks of the ASX8, to see if they confirm or deny the set ups for impending weakness in the ASX 200. Taken in totality, these charts emphatically confirm the bearish case, with 7 of the 8 ASX8 stocks either trending down strongly already, or meeting trend line resistance. WBC is the odd one out, but is not far from trend line resistance.

Each chart begins just before the big ASX 200 peak in late 2007. I haven't looked at charts for most of these stocks in years, as I am not interested in trading them. The trend lines are what jumped out at me after a 10 second glance... usually with trend lines, if it ain't obvious, it ain't useful, and conversely, if it is obvious, it is useful.

Here they are: 

ANZ meeting trend channel resistance.

BHP already trending down. Huge double top at 2008 and 2011 highs offers a measured target price of < $10 if we are generous and use a log scale chart. Arithmetic scale measured target suggests BHP is going out of business (< $0)

CBA recently turned down from trend channel resistance.

NAB has turned down following a false break above April high. Has been the weakest of the banks in recent years, so to my way of thinking will likely lead the way lower if market weakness is now beginning.

NCM already trending down.

RIO already trending down.

WBL rising toward trend line resistance.

WPL trending down and testing trend line resistance.

ASX 200 wedges in to a top and turns lower at trend line drawn from 2007 and 2011 highs

European and US market declined overnight, as did the ASX 200 after hours, currently trading around 4355, down from yesterday's ASX close of 4383. Both charts in this post include after hours trade.

The daily chart shows the market wedging in to a top, with a brief false break higher / throw over earlier in the week. The wedge is a bearish set up. If (IF) the market breaks the trend line test at the overnight low (4346), it should decline rapidly in coming days and weeks, initially toward trend line support just under 4200.

The weekly chart (log scale) shows the market turning lower at the trend line drawn from the 2007 and 2011 highs. Perhaps for now I should say testing rather than turning lower.... this week's candle looks bearish, but the week is not over yet. That said, if a decline is now beginning, the trend channel illustrated below suggests a decline to low 3000s before possible trend channel support is reached. If that level is broken, the next lower level is low 2000s, which I will illustrate in my weekend post.