Category Archives: U.S market

Flavours for 2015

Evening traders/investors,

Apologies for the inactivity during the last few months. It seems to me that I trade less, and have less to say as a blogger too – probably all due to the more patient and relaxed trend-following approach I have been making a transition to over the last year or so. Belated Christmas and New Year greetings to all of you. As market participants, it is best to wish one another a better year ahead! Every year the word “volatile” is used to sum up the markets but it is inevitable that markets will fluctuate and throw up some surprises somewhere inside a whole calendar year. 2014, however, was not so exciting as compared to other years. The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets for the first time. The USD’s languid state in the first two-thirds of the year did not present any concrete trend set-ups too. There were a few set-ups in certain markets, and those set-ups are still valid over the turn of the year.

The first flavour I have for the new year is the possible divergence between Europe and US. I first discussed this view in this post https://technicalanalysistalk.wordpress.com/2014/11/05/end-of-europes-uptrend-while-america-advances/ . It seemed difficult to envision an inversely proportional divergence between those two markets; so I concluded that it probably means general sideways movement in Europe while American equities continued the charge north. For now, the picture is the same to me: nothing has changed in the broad sense for those two markets.

The local bourse- the STI, still does not look that bullish to me even with a decent 6% showing last year. I think this is because I do not see that many bullish set-ups in the constituent counters. The banks did well for the STI last year, and they look set to hold the gains this year, though this will require analysis in the months ahead. SIA also surged suddenly late last year so I will see what is up with the national carrier. The “Jardines” jumped a little in the second half of last year but do not look to improve much from here on. The “agris” are tanking quite badly, and as a trend-follower, I will look for further downside. (Exclude Olam from this list; Olam is an example of what happens when some people interfere. Of course, I do not know what goes on behind their curtains and that of other places, but the way I see it, Olam was saved from utter embarrassment “unnaturally”.)

Funnily, most if not all of the counters in the STI with the word Singapore in the company name have bearish-looking charts. The general stance I am taking on the local equity market is a bearish one for the blue-chips. However, I think there may be better rish-reward opportunities outside the STI, therefore, I will look at the second- and third-tiers more closely. Judging from the last few months of last year, I do not have many interesting charts to share, hence what I mentioned in the first paragraph, “The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets…”. Oil and gas and shipping sectors are looking quite horrible, and property counters do not look promising too (I would have said outright bearish if not for the performance of one or two big players).

I will continue to watch Gold quite closely. The glittery metal seems to be on the verge of a continuation of a major downtrend. Somewhere last year, I was alerted to a break of major support. Gold managed to hold on after the slight violation of support but time will tell if gold can find favour or if investors will ditch gold for other asset classes.

gold1

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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End of Europe’s uptrend while America advances?

Good evening one and all,

While browsing through charts of my workstation, I noticed quite a difference between major European indices and American ones. The general picture of the European indices seems to be that of a high made in the middle of the year, then a collapse, followed by a quick recovery, then another fall, and a small recovery to where the markets stand now. American indices were tested when selling pressure came in a few weeks ago, but buyers came out fast and the indices made V-shaped recoveries. These V-shaped recoveries are quite reliable to be traded on: the buying pressure simply blasts the market back to where it was before the decline. What this all means to me – even as my previous sentences summarized the markets on both sides of the Atlantic. – is that US indices are still considered to be in their tremendously strong uptrends but European indices are looking quite “questionable” now – at least with regards to a long-term uptrend.

I will briefly say how I think the charts may be saying something about the general economic picture: If you consider the strength and shape of the uptrend of the US indices – and basic theory about how markets relate to one another internationally – it is quite obvious that US indices have been pulling the global indices along over the years – generally-speaking, of course; however, with my recent assessment of the charts of European indices, it seems to me like Europe may be facing harder headwinds soon. There are countless factors that can come into play – and I obviously do not want to go into them; not on this site at least –  and only when events come to pass can we look back and see everything play out on the charts. But it is something I will take note. American indices are definitely back on track, and there is no indication to me of any reason why American stocks will not continue higher.

In the first three charts below, I have the Dax, CAC 40, and the Footsie. The general picture is the same: a huge consolidation after a long and strong uptrend. The worrying thing is that the recent retracements cut deep, and the markets were not able to recover back to prior levels. This is very different from American indices that have shown healthy recoveries into the prevailing uptrend. I am not suggesting a crash in European indices – barring a global decline – but when I see such trends stall, it simply means more sideways trading in the months to come. Contrast with advancing US indices, Europe certainly should not be overweight in a portfolio.

Dax   Cac  ft

sp5

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Local bourse looks dull

While I was on hiatus in the latter months of last year, I still monitored the markets. The general story went like this: US markets soar, European markets take cue, and Asian markets disappoint (“ex-Japan” – as they like to say).

spsti

Singapore counters did not give much reason for cheer. I remember vaguely seeing a potential inverted head and shoulders that should have been on the radar of some chartists. It is not the best-looking of its kind but the general idea is there.

failedihs

The then unconfirmed pattern resulted in a downward breakout. It can be seen as a successful downward breakout actually. But I will not go into it anymore.

For an index like the Straits Times Index – STI, one way of analysing it is to look into the constituent components. After a brief look at all of the charts, my simple view of the local bourse is that many counters are either range-bound or trending lower. Property counters were downright bearish quite a while ago, and the picture does not look very different now; the telcos look like they have finally reached a fair level after years of the market pricing them higher; and, the Agris look either flat or in downtrends. The only sector that may surprise is banking. (Even then, my analysis in future may point in the opposite direction).

In the charts below, you will see a similar story: major support breached, and a clear case of what seems like more than the start of a downtrend.

e5h c31 s63 c07

While western markets resume their upward trajectory, I think the large-cap local stocks will continue to disappoint. Some are even presenting downtrend trading opportunities. However, I do see some of the second-, third-tier counters that look promising. As the weeks and months go by, I will upload some of those charts.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

STI erases gains. US indices making it too easy?

Evening all,

It seems like the long-awaited correction in equities has already begun. The last 2 weeks of trading was characterised by more selling pressure than buying pressure. For the local bourse (and Asia in general), the selling was quite intense. Whatever gains the STI made from the start of the year were totally erased in about two weeks of trading. The STI broke key support at 3300, and Friday’s close of 3184 is where the important 200-day MA is at.

First off, I want to reiterate my bullish stance. In my last post on general market sentiment – https://technicalanalysistalk.wordpress.com/2013/03/31/like-it-or-not-the-bulls-in-the-house/ – I said that I was leaning slightly on the bullish side since the short-term rally then was too strong. Now, I see this correction (and probably many other investors too) as a good time to get in. Of course, the present situation for the STI is that of “falling knife”. But, always monitor for the right signals to occur on the chart. Preferably, I am hoping to see a small reversal pattern of some sort. If not, it will be better to look at the constituent counters to trade.

sti

Now, on to comments for US indices. I have charts of the S&P 500 and Nasdaq.

On both charts, I highlight a very obvious continuation pattern. Basically, we have a solid trend in place, then prices decline to a MA – in this case I have a 50-day MA for mid-term trends. What should happen next is renewed buying pressure to push the market off to higher highs. In the Nasdaq, we even have a pattern to work with – a bull flag. Nasdaq’s current correction gives form to a simple small downtrend channel. Indicators are not giving out bearish divergences of any kind, so I do not see any other reason for further significant decline in the market. The set-ups on US indices look too easy to be true, but I do not think it warrants being a contrarian for the sake of it.

s&p

nas

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Like it or not, the bull’s in the house

Evening traders/investors,

Along with mainstream media, I have been waiting for a good-sized correction in equities for quite a while already. In the same period, the market gave us small corrections but subsequent rallies left me bringing my eyebrows together. On the fundamental side, not much bad news from the States is always a good thing. The recent Cyprus scare got me ready to pull the trigger on risk-off set-ups, but it did not turn out to be much in the end. (What surprised me was the greenback inching up along with equities). Another piece of news messing with my mind is the war rhetoric and dangerous games played in that region of Northeast Asia. It is debatable whether such non-financial factors are priced into the market quickly or not, which presents a kind of wildcard for chartists. I try to be as true to certain pioneering chartists when they say that every kind of factor will be priced into the market even before confirmation of the factor. Some will say it is ridiculous for the market to know if war will emerge or when the next tsunami hits a developed country.

Feeling a little lost the past week or so, I decided to go back to the charts and rely on them as I have for so long. The media will turn from bull to bear to bull so fast you do not even know what hit you. That is why I do not trade on news and make Bloomberg my best friend on weekdays. The news messes up with your trading methodology, and even worse for those whose systems are based on the news itself. Tried and tested analysis is there to give you an edge, and money management is there to save you when you are wrong.

S&P500

In the chart of the S&P 500 above, it is ever so clear that the trend for whatever time frame you look at is up. The significance of the last 7 to 10 trading days is that US indices have breached major highs (all-time highs in some), and look set to stay above those levels. Indicators giving bearish divergences have run their course already, so I deem them as done and passed – this happens when a market reverses (makes a correction or consolidation), and the indicator drops clearly to “neutral” levels. So even though the market does not nosedive, it has made a small correction, and the previously bearish divergence has run its course, and the chartist should drop it from the chart.

I do not have any patterns to work with for now, so I do not have specific set-ups for indices. But, I am pressured to jump into equities if the bull is in the house. In a bull market, prices just keep rising. It does so in a silent way, without much fanfare from the media – unlike quick, sudden declines. As a trend-follower, I cannot keep waiting for the sake of being a contrarian.

The paradox here is this: if you think hard about it, every single day or week that the market advances brings it closer and closer to the period of consolidation or correction. So, even if you know the longer-term trend is up, it will be foolish to jump in so quickly because you know a better opportunity will come. However, we have no crystal-ball, and there is always the fear of a runaway train. Need an example? Look at USDJPY. Or, there are always “normal” mid-term equity rallies to refer to. (The 3-month run-up at the start of 2012 is an example. Look at the chart above).

I do not think this post left you any biasness on which side to favour for the days ahead! But, what I am trying to say is that while I am still waiting for a correction – I do not think it is irrational of me because my money management system tells me to avoid the market – I have no choice but to respect the trend in indices, and look at other instruments to trade.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Indices have arrived

Evening all,

After the good showing by stock markets at the beginning of this year, quite a number of indices are now touching or very near major highs. In February alone, markets did not do as well as in January though markets did hold on to their gains. On the news front, there has been nothing major to move markets. It seems like the stock market has been somewhat quiet over the last few weeks. If you zoom out of your charts, you will notice that indices are at previous major highs. And when you look at how far we have come ever since the 2008/2009 crisis, it is simply testament to the multi-year bull run we have been in. So, after a long while, market have finally arrived at all-time highs.

The S&P500 closed at 1519 on Friday – which is just a few percentage points off all-time highs. And the Dow Industrials is already above 14,000. The Nasdaq is a different story, though you cannot discount the buying pressure to push the Nasdaq clearly above previous year-highs.

dow s&p

All-time highs are always important. I always see it as a 50 – 50 bet whether the high is bested or not; what is definite is that the market does not stall there. The market will make up its mind whether to go higher or lower, decisively. At times, when I see reasons why I should perceive the odds as unbalanced (not 50 – 50), that is when I look for a set-up to trade. In this case, I am a little concerned for the uptrend we have been in.

After the US debt downgrade scare in 2011, the US indices have been moving in a certain pattern: the market makes a run upwards, blows past previous strong resistance, then undergoes a correction. I illustrate this on the chart below. In January, the S&P 500 broke past 1470 easily, and has continued climbing to where it is now. Based on what I have seen in recent history, it would suggest to me that the index is going to face some headwinds in the near-term.

s&p2

Also, indicators are showing slightly bearish divergence signals. While indices have been edging up, indicators are falling (have made lower highs). I see these as very reliable indications to take from technical indicators. The case for downside to come is looking stronger as the days go by.

As a side note to chinese readers out there, Gong Xi Fa Cai! Here is to wishing all of you a belated happy lunar new year! May this year bring you good results in the market.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

US indices show history repeating itself

Evening traders/investors,

Today, I have a retrospective post. (Heck, all technical analysis posts have to do with history!) I will show you all a chart of the Dow Jones Industrial Average, and how the maxim of history repeating itself is ever-present.

Ever since the last months of 2009 (the year the market bottomed), the Dow (and other US indices) has gone through a certain cyclical pattern. In other words, a general pattern of price action has happened again and again: the market experiences a drastic drop (in red arrows); then some sort of bottoming, rangebound pattern forms – usually some kind of inverted head and shoulders; and finally, the  market goes on a quiet but steady rally. Take a look at the chart I uploaded below. You may not strictly classify it as a cycle of some sort since the wavelengths, amplitude, and what not are not the same. But, the general repeating pattern is a still a sight to behold. As a chartist, the chart looks beautiful – as it should always look so in hindsight. This is a good example of history repeating itself. Of course, price action cannot be the exact same thing all the time – if it is, then we will all be chartists and instant millionaires. But in general, history proves history repeating itself as true. Also, just by looking at the short-term trends, we see that markets drop fast – very fast – and markets rally slower, oftentimes with hesitation because the media tugs at our fear and doubt. We all know this as a phenomenon of the market. But, it is good to sometimes take a good, hard look at the chart and remind ourselves of how old principles, adages, and maxims continue to prevail in the markets.

In the rally at the last portion of the chart above, you will see that the rally did not exactly last long enough or big enough for trend-following gains. Whatever fundamentals were out there in the last two weeks sent markets down significantly. Clearly, the volatile rally we had over the second half of this year is over. And, in the Dow’s case, almost all upside from May has been eaten up. After what I have written so far, and the chart I uploaded above, it would seem that I am implying a market bottom around the corner, and a consolidation before a huge move up again. I am not a cycle investor/trader, so I cannot say I am looking for that to happen (although I am hoping at the back of my mind, just so that it proves technical analysis to be so useful in trading) . But, it does puts the recent downside into perspective. Is it a bull trap, since overall, we are in an uptrend (for US indices at least)? Or is it for real this time?

While I do not indulge in heavy speculation of what pattern will happen, I take what I se presently on the chart. The Dow broke down from a nice-looking head and shoulders pattern a week ago. I am not sure why but I did not catch it. A projection based on the height of the pattern would have been around 12,500. And, the Dow hit that in last week’s trading. In general, I believe a short rebound occurs when a price objective is hit. There is no psychology behind this “theory” but my experience tells me it happens a good number of times. So, I am going to be looking for consolidation in the short-term ahead. Maybe the market is gearing up for a Santa rally or a January rally! Who knows? Only time will tell. If the market continues to show weakness, I will look at some stocks to short.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Dollar and equities

Evening all,

I must apologise to regular readers starved of technical analysis here for the draught of posts in the last few weeks. I have been suddenly more active in a time-consuming hobby – golf – so time for the markets and charts have been shortened. Anyways, I should be back to churning out at least 2 posts every week soon.

Ever since the drop in equities because of the US Debt downgrade last year, the market – as it should be doing so in a multi-year bull-run – defied bears by going on a good-sized 25%+ rally. At the same time, the US Dollar has been strengthening as well. On the fundamental side, with all the dire predictions aimed at the Fed for setting off the printing machines, the US Dollar has still strengthened. There are reasons out there, but I shall not discuss here.

As of now, while equities are still trudging higher, the Dollar has lost some strength in the last few months. Chart-wise, the Dollar has already started to look bearish. The death cross a few weeks ago plus the breaking of a mid-term uptrend channel are obvious bearish takeaways. Equities may turn down in the weeks ahead. With growth forecasts cut around the world, mundane-to-disappointing earnings from corporations, and a subdued-to-gloomy outlook for major economies (including China), the case for falling equities has been making some headlines in financial media. Chart-wise, I still have to keep my head up as mid-term and long-term trends are still strong. Bearing in mind that the Dollar and equities share a negative correlation in general, is it time the Dollar depreciates against other currencies and equities fly off to even greater heights? When comparing two instruments that supposedly share some kind of correlation, the basic theory is that when there is  a contrary movement, what should happen after a while is that the two instruments will go back to the correlation that they are supposed to share. In this case, I will watch and see if the greenback continues to fall while equities hold up strong.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

For real? Or a bull trap?

Good day investors/traders,

The past two weeks have been hard on me. All my set-ups were bullish Dollar and bearish equities. I got stopped out a couple of times, and started to wonder if I should jump on the other wagon. On Friday, I was holding on to a short EURUSD position. For those who trade forex, you should know what happened. Some kind of good news about Spain’s banks being able to tap on more emergency funds propelled the EUR/USD pair to close 200 pips higher for the day. Thank goodness for stop-loss orders.

Overnight, US indices also found massive buying pressure – Nasdaq ended up 3%. Right now, it seems like Europe has gotten some things under control, and things will be much better from here on; or at least, that is what financial market participants seem to think. On the other hand, here is an article from Jim Rogers: http://finance.yahoo.com/news/financial-armageddon-happen-despite-eu-061542925.html;_ylt=Al9ON_bd6HOgyD_T4SMCPZKiuYdG;_ylu=X3oDMTQ4NHBsbjRwBG1pdANDTkJDIFRvcCBTdG9yaWVzBHBrZwM4MTk2ZTVmZC1iZDcxLTM4ZmQtYjdkNC05NGQ1ZGNjZjk0OWQEcG9zAzMEc2VjA01lZGlhQkxpc3RNaXhlZExQQ0FUZW1wBHZlcgMyYTY0ZGM5MC1jMWI1LTExZTEtYjdiYi1jMWQ5NjQyZmYyMzc-;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3

I am not going to delve into my take on the fundamentals, so I will just give my technical opinion. I will use the S&P 500 and the STI for analysis.

First up, take note of the long-term uptrend in equities coming out of the 2008 crisis. In the chart below, I added in two blue boxes signifying the sell-in-May-and-stay-away adage. Presently, this phenomenon occured yet again, and it has succeeded – the S&P 500 lost about 9% in value in May. So, if you look at a long-term chcart like the one I uploaded below, a simplistic view will be to look for upside from now on.

Fundamentally, we know news drove markets the way they did over the last two weeks. Technically, was the chart hinting of upside to come? Yes, charts everywhere had head and shoulders patterns (inverted also). From equity charts to the chart of the VIX. Did I call for upside? I must admit I did not, though I was expecting it as a surprise. Did I trade it that way? No, and obviously lost some money. In the charts below, you will see just what happens when a head and shoulders pattern (both upright and inverted) appears after a strong move. The first one is a little ugly (which is exactly why I did not buy the bullish story), but the second one – the Singapore market CFD – is very nice looking.

 

Based on technical chart pattern projections alone, the case for upside – in the STI CFD at least – is closed. The target has been hit already. But, a small pattern can always do better than the target projected. So, my trading set-ups in the weeks ahead will be less defined, with no clear bias to either side. I tell myself that I should ride on the uptrend while it is hot; however, I still see markets as rangebound, and my long-term view is a bearish one. A little conflicting?

In summary, I see markets possibly extending gains. But, I stay firm in longer-term weakness for equities. I will continue to watch US markets rebound from the lower band of the long-term uptrend, and the STI trading inside the right shoulder of its massive unconfirmed head and shoulders.

Is the positive sentiment for real? The seasonal downswing in equities may have ended for all we know; and equities may just start climbing up from here on. Or will Jim Rogers be right? In his words: “How many times has this happened in the last three years – they (EU leaders) have had a meeting, the markets have rallied, two days later the market says wait a minute this doesn’t solve the problem.”

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Surprise in store?

Good day all,

The last trading week gave us quite a few good pieces of news. Strictly, I am still a brear on equities; but, I see the current market as a ranging one after I got stopped out on a few shorts. I tell myself that as a chartist, I should not be swayed too easily by news. It is alright to read up and be in the know but be cautious not to let news articles cloud one’s judegment. With that, I am still a bear – there is no clear indication on the chart yet that tells me to buy dips instead of  selling rallies. I support my bearish view in the charts below.

 

Basically, I see downward parallel channels depicting the general downtrend indices have been in for quite some time now. European indices are mostly below the 200-day MA. Technically, I do not see any reason to be bullish on indices though it may seem the recent consolidation is hinting at a rebound. So, what surprise exactly am I thinking may happen?

Several indices are forming unconfirmed inverted head and shoulders patterns. Take a look at the video below. The presenter, Oscar Carboni, shows us the formation of an inverted head and shoulders pattern in quite a few indices.

Link: http://www.youtube.com/watch?v=-itHSTMMkkE&list=UUez8uA1o_fDYsrSf4auWSjg&index=1&feature=plcp

In conclusion, if these inverted head and shoulders do confirm with an upward breakout, it signals the start of a climb upwards. A downward breakout means the general downtrend shall continue – as I have been pitching for a few weeks already. Let’s see how this goes.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.