Thursday, 30 August 2012

ASX 200 heads sharply lower

Last night's post pondered which way next for the Aussie market, asking "ASX 200 clinging to trend line for dear life, or is it?" and today the market answered by heading sharply lower. The measured target following completion of the wedge set up is for a decline to the base of the wedge, in this case at 4100 or so. Perhaps the up trend line drawn from the late June low will provide some support before the 4100 zone is tested. Then again, perhaps not, given the bearish big picture illustrated in last weekend's post. Chart includes after hours trade.

S&P 500 is marking out a new down trend line

If last week's false break above the wedge's upper line marked the termination point and completion of the pattern, a measured target is for the market to re-test the June low, in short order. Let's see. Chart includes all sessions trade, up to the time of the post.

DAX showing Head and Shoulders top pattern on daily chart

One week ago the DAX showed a Head and Shoulders top pattern on the hourly chart, which lead to a decline. Now the daily chart is showing a Head and Shoulders top, illustrated below. Added to the illustrated bearish megaphone set up, and that makes two classic bearish set ups at this time frame.

Australian, US, German, and Japanese shares priced in USD closely correlated so far in 2012

The following chart shows the main stock indexes for Australia (ASX 200), the US (S&P 500), Germany (Dax), and Japan (Nikkei) valued in US dollars for the year so far. Obviously (?) the same markets all valued in another particular currency would show the same close correlation, albeit with a different shape to the curve, depending on the currency chosen. 

What does it mean? Stock markets all over the world are rising and falling together on one big sea of liquidity.