Wednesday, 22 May 2013

ASX still wrestling with parallel trend line resistance

Yes, you've seen that post title before, and it remains true, the ASX 200 continues to test parallel trend line resistance. The parallel trend lines are shown on the following weekly chart, which includes after hours trade. Repeating what I've said previously, in 2010, 2011, and 2012 the market made marginal new highs in April or May, then declined powerfully, anywhere from 10% to 25%. How about 2013? We've got a marginal new high in May. The latest in the series of parallel trend lines may also be significant. Will history repeat and give us a decline from nearby current levels?

Daily chart zooms in on recent action and the nearby trend line. Earlier today I tweeted "ASX 200 < 4950 would indicate market is finally rolling over from parallel trend line test & beginning drop of 10%+". Whoops! I meant 5150, the low of the past two weeks, not 4950. Intraday iphone tweet typo, sorry. Less importantly, I wish I'd used the word could rather than would, as nothing is ever a given in the markets. All trading edges are probabalistic. Of course, there are two sides to a trend line, and while the market remains above 5150 it has every chance of rallying, especially given the continuing up trend on the US S&P 500.

S&P 500 about to get lively again? Rallying from retest of up trend channel line on hourly chart?

This week has been a slow one for the S&P, but that may be about to change. Hourly chart shows the S&P looking to rally from a retest of the illustrated up trend channel line. Either a rally from the trend line or a bearish break is due, and either could provoke a lively reaction.

Zooming out to the daily chart for context, and repeating what I have said previously, while the market stays above the upper trend line, we must respect its potential to accelerate (!) perhaps launching a blow off top.

And no, I still don't believe that this market has broken decisively above the 2007 high. Only a move above 1785-1800 would convince me. See last weekend's post for an explanation. For me, that big picture view is no reason not to play the short term moves. What's your plan?