Wednesday, 26 August 2015

S&P 500 headed to test 1700 unless a multitude of overhead resistance levels are beaten

Monthly chart shows the S&P 500 testing parallel trend line support within a 25 year old trend channel. If support breaks the market will target 1700, and for now the trend is down so we must favour that outcome. What levels would the market need to rally through to suggest that the bearish case is unlikely? Let's zoom in to recent action. Charts include all sessions trade.

Daily chart shows that the nearest serious cluster of resistance lies between 1960 and 1980, with another between 2040 and 2050. The two most likely scenarios for coming weeks are that either (1) the current decline extends lower before rallying to test even the lower of those clusters or (2) the market thrashes broadly sideways for several weeks below the top cluster to establish a range, then breaks either lower or higher from that range... given the trend, most likely downwards. Let's see.

Gold falls to test dual trend line support after rally from long term trend channel support

Weekly chart shows Gold rallying from trend channel support. Previous rallies from the nearby trend line have been good for 200, give or take. At this point, why expect anything different this time?

Daily chart shows that after Gold's initial rally from the July low, it has fallen back to test dual trend support. Which would be a neat place for a tradeable low to form, though lower levels would not necessarily cancel the bullish picture for coming months.

4 hour chart zooms in to show the best fit wave count for recent action. Following five waves up and a three wave correction, look for another five waves up. The three wave correction may not yet have bottomed, and could morph in to a more complex correction. Another important trend line support is shown, being the top of the trend channel. A move back to test the area of wave 4 is another common stopping point for corrective waves. Let's see.

AUD/USD significant low in at support from 14 year old up trend line?

Monthly chart shows the AUD/USD testing support at a 14 year old trend line, drawn from the lows of 2001 and 2008. After a brief pop lower through support, the market is now back trading above it. Let's drill down to see if there is other evidence that a significant low could be in. First though, as an interesting aside, if a seven year cycle is in place, 2015 would be time for the next big low.

Weekly chart shows that the AUD/USD has been sliding lower down trend line support, and is currently just below the down trend line in question. So there is no additional evidence of a low here, unless we see a rally back above the down trend line.

Daily chart backs the call that a significant low could be in. Markets are inherently uncertain but at the least a good risk to reward setup has presented. I'll explain why. The market has completed a five wave decline from the top in May of this year, which calls for a rally back toward the area of wave 4, at the least. Note that the market's decline so far halted at the parallel of the line drawn from the tops of wave 2 and wave 4, when projected from the low point of wave 3. This is classic Elliott Wave and indeed market behaviour. Combine all that with the brief poke lower through the 14 year old trend line, and a significant low could be in, with an initial target of 74.50ish, and the potential for higher levels subsequently.