Thursday, 23 May 2013

ASX 200 turns decisively lower from parallel trend line resistance, now testing trend line support

Weekly chart shows the turn down from parallel trend line resistance. Tops in April or May during 2010, 2011, 2012 were followed by declines of between 10% and 25%.

Daily shows current (after hours) test of trend line support. Should be little more than a speed bump if (if) the bigger picture bearish scenario is playing out.

Why last night's S&P 500 high may not be beaten for years, even decades

The S&P 500 futures have been range bound since this century began. I don't believe that the recent rally above the 2007 high has carried high enough to confirm a break from the range. Why? To escape the gravitational pull of the long term trading range, I think the market must beat the 2007 high by a greater distance than its false break lower in 2009. In 2009 the market broke the 2002 low by approximately 98 points or 13%, then swiftly snapped back above that 2002 low. As yet the market has rallied nowhere near to 13% above the 2007 high (ie. 1785), so in my view it remains in the trading range. Interestingly, last night's high carried slightly further than the same 98 points shown in the false break of 2009, then turned sharply lower.

Monthly chart illustrates all the above levels.

So, against that backdrop, why do I think last night's high is potentially so significant?? Daily chart illustrates a completed throwover / false break above of the recent up trend channel, indicating that the trend is finished. Finished. If that view is correct, the long term trading range should pull the market swiftly back below the 2007 high, probably within weeks, leaving last night's high unchallenged for years or even decades. Let's see.

AUD/JPY bursts lower through support shelf

EUR/USD approaching neckline of Head and Shoulders top

What caused the Nikkei to decline 7% today? Long term trend line resistance. End of story (updated)

7% was just the start. Nikkei futures have extended the decline from the Tokyo close of 14484.