Tuesday, 1 January 2013

Downside risk plentiful for US stocks as 2013 begins

Waning momentum (illustrated by MACDH) and steadily declining volume (not illustrated) suggests that the US S&P 500 will not break clear of the 15 year old trading range / trend channel illustrated below. To spell it out, the trend channel, bearish momentum divergence, and steadily declining volume all favour a turn lower and a new down trend developing to take the market toward the 2009 low.


The market's recent break below the trend line drawn from the 2011 and 2012 lows suggests that the decline from the top of the long term range / channel has already begun.


To quote the excellent MacroMon "only when markets revolt will... policymakers... get serious about structural reform". Perhaps 2013 will see the beginning of that market revolt?

ASX 200 remains in a bear market, recent rally almost complete

The ASX 200 had a positive 2012, rallying hard since June. The first chart illustrates where that places the market as 2013 begins. The ASX 200 remains in a bear market, yet to recover even 50% of the decline from late 2007 to early 2009, with strong resistance looming overhead at the 2009, 2010 and 2011 highs around 5000 points.


The second chart zooms in on the rally since June, showing that last night's after hours trade tested trend channel resistance. The market could turn down immediately, and although it is too early to say that a peak is in or how long any peak will endure, don't take for granted that 5000 will be tested.


Both charts include after hour's trade through to this morning's close.

AUD/USD continues broadly sideways, hints of impending weakness

The AUD/USD continues to trade broadly sideways within a triangle that is now almost a year and a half old. The recent false upside break from that triangle combined with a downwards trend line break both hint of impending near term weakness.


EUR/USD treading water

The EUR/USD was treading water for the second half of December. The direction of the break from that consolidation will likely be key to the direction for early 2013.


Gold's bull market intact

Gold's bull market remains intact as 2013 begins. By my reckoning the lower trend line sits currently at 1490, and only a sustained move below that would challenge the health of the bull market. Neither myself or the chart are saying that such a break will or won't happen, merely suggesting a point that risk can be measured against.


Zooming in to the action since late 2008 illustrates near term weakness within a trading range.Anybody who reckons they can predict the next move of a market that is in the middle of a range, is kidding themselves. The trading opportunities come as price teaches the edge of the range.


Silver range bound

Silver is range bound. Anybody who reckons they can predict the next move of a market that is in the middle of a range, is kidding themselves. The trading opportunities come as price teaches the edge of the range.