Monday, 26 August 2013

ASX 200 forming Head and Shoulders top? Or no top at all? 5000 the key

Last week I pondered whether the ASX 200 was wedging in to a top. Subsequently the market broke lower from the wedge pattern, but for the wedge interpretation to be correct the break lower should have lead to a swift and dramatic decline, which hasn't happened. So what is the ASX 200 doing?

4 hour chart including after hours trade suggests that perhaps a Head and Shoulders top is forming.

Zooming out to the long term weekly chart shows support at 5000. A move below would 5000 would both break that support and break the neckline on the 4 hour chart. While the market remains above that level, the current market action is likely consolidation preceding another advance.

USD/JPY testing trend line resistance, break higher to confirm EUR/USD weakness?

A break higher here would lend strength to the possibility that the US dollar index made a double bottom at the June and August lows, and that the EUR/USD is on the cusp of a steep decline. Of course, the opposite may happen.