Friday, November 21, 2008

Double Top in S&P 500 of US?

First, please note that this analysis I'm presenting here is based on Long Term Monthly Chart of S&P 500 and so its not for trading but just an analysis of an IMPORTANT EVENT. Please see the following chart of S&P 500 from Yahoo Finance:

The S&P 500 index of US is a reliable benchmark for traders as well as investors, although people in general watch Dow Jones Average more. What I present here is an open secret - S&P 500 cash index made Double Top (2000 Top and 2007 Top), and yesterday it did what was most fearing for those who trust technicals - the breakout of that Double Top on downside. The number 768 was very important as was 1077 on S&P 500 and yesterday it closed well below that !

Now, considering the Double Top as a strong case, the target is way too down, so horrifying that I leave it to you dear readers. However, as I've already stated, this is not a trading recommendation as the time period is too large to consider tradeable.

Thursday, November 20, 2008

Target on Nifty Future Achieved


The Double Top target of Nifty Future was achieved today. Yesterday I advised to book at least partial profits and I hope most of my readers have done that.

I will update with my latest analysis very soon...

Happy Trading

Wednesday, November 19, 2008

Nifty and Sensex in Danger

Today both NSE Nifty and BSE Sensex closed below the Fibonacci retracement level of 61.8% of the up move from Oct lows to 5th Nov highs. In fact, Sensex was below that level (9850) yesterday itself but Nifty and Nifty Future maintained it.

The worrying thing is that BANKNIFTY, which is the sectoral index for banking sector stocks in NSE, is also below that 61.8% retracement from yesterday. This is considering that bank stocks were already not that much overvalued and Indian banks are relatively much better than that of US and Europe.

The target for Double Top that I had given here is also nearing and those who were short on my recommendation should book at least partial profits.

Tuesday, November 18, 2008

Nifty Future Analysis Based on Daily Chart

In my last post about Nifty Future based on Hourly Chart I spotted a Double Top and told the target to be around 2500. Today Nifty Future came down to almost 2650 and then some short covering (possibly) saved it to close near 2800. Here I present my views based on the Daily Chart of Nifty Future.
Nifty Future Daily Chart 18th Nov 2008
First let me explain objects on it:

Gray Curved Line : 5 Period EMA
Green Curved Line : 13 Period EMA
Red Curved Line : 34 Period EMA
Blue Curved Line : 55 Period EMA
Purple Curved Line: 200 Period SMA

Looking at the Daily Chart, Nifty Future trend is clearly down as the EMA sequence is negative along with falling series of highs and lows. The rally that followed after last month's low resulted in Double Top, which created a downside breakout on 12th Nov.
As I told the target of that Double Top to be near 2500, there is one big incident if that happens. The Fibonacci retracement of 61.8% of the total up move from 27th Oct to 14th Nov is at 2626. This means if we achieve the Double Top target, it will mean all the significance of that up move is lost and chance of a retest of Oct low resurface significantly.

Bulls need to save 2626 at any cost, otherwise all their hard work will be in grave danger. For Bears, they need to give bulls some room so that they can pounce with greater force. I still maintain the view that primary trend is still bearish and all rallies are nothing more than but good selling opportunities.

Tuesday, November 11, 2008

Nifty Future Analysis Based on Hourly Chart

Nifty Future (NSE Nifty India) show weakness after yesterday's up move on global cues. Last time I told my readers that those who have long positions should sell near 3250 rather than to buy fresh as I found a big resistance area around that level.
Nifty Future Hourly Chart 11th Nov 2008
Looking at the Hourly Chart of Nifty Future, the graph looks like coastline of Indian peninsula, on which India, Bangladesh have formed and Myanmar is in progress (Fun intended). Can you imagine if it goes on to complete the map with southeast Asia and then Australia and even New Zealand?

Well, leaving the fun part alone, let me concentrate on what I observe on the Hourly Chart:
  1. The up move of yesterday was although fierce, it failed to even test the high of Nov 4 (There is a Shooting Star on Nov 4).
  2. The EMA sequence on Hourly Chart had turned partially positive but still it is not very reliable considering today's down move has taken the Fibonacci 61.8% retracement of yesterday's up move.
  3. It appears like a Double Top is forming which can breakout downwards if 2850 is breached, then the target comes to near 2450 - 2500.
I would better wait for either the breakout downwards or any other clue rather than preempting. So far it looks like smart money is selling on rallies.

Monday, November 10, 2008

Is it all Fine? Do Not Complain Please

Today, when I opened Yahoo Finance to see what is going on around US Markets, I found something interesting. Below is the screenshot I captured. You can see Dow Jones, Nasdaq and S&P 500 Streaming Quotes on the left side and news headlines on the middle-right. What is funny is that most of the headlines are so negative but stock markets show a completely different picture!

GM stock target $0 !!!
Circuit Cty filing for chapter 11 protection !!!
DHL to cut 9500 jobs!!!
etc etc.

What does it show? Confused? Well, in fact, it is not surprising at all. This is precisely why it is advised to ignore news and follow charts, which incoroparate news in advance barring few unforeseen things. This is also known as "factoring in" of news into price.
I have always maintained and advised here to follow technicals when trading and forget news, the simple reason is - we can't be fast enough to always have breaking news at our steps and we can't be good enough to judge what a news can do to price. Many times the expectation of an event is almost accepted and so it already reflects in the price.

Sunday, November 9, 2008

S&P 500 Analysis on Weekly and Daily Charts

It looks like high volatility has become more a norm than an exception. Last week US Markets fluctuated up and down but settled somewhat in the middle. I present my views on S&P 500 Futures based on Weekly and Daily Charts. Let me first put the common details regarding indicators on charts:

13 Period EMA - Green Curved Line
34 Period EMA - Red Curved Line
55 Period EMA - Blue Curved Line
200 Period SMA - Purple Curved Line
Trend Line - Green Slanting Straight Line

Weekly Chart:
S&P 500 Weekly Chart 7th Nov 2008
Looking at the Weekly Chart of S&P 500 Futures, I observed following:
  1. For some good time(start of June) S&P 500 Future is trading consistelntly below 13 Period EMA which shows how strong the selling force is.
  2. RSI 14 has been indicating oversold state for quite some time but still price is unable to show some good bounce.
Looking at the Weekly chart, I come to the conclusion that buyers have become very weak and even dead-cat bounces are turning out to be few-sessions events. If at all the bulls manage to steer the index up, there will be significant resistance at 1077 area considering it is previous important support and also near 13 EMA on Weekly.

Daily Chart: S&P 500 Daily Chart 7th Nov 2008
Looking at the Daily Chart of S&P 500 Futures, I come to following observation:
  1. After closing above 13 EMA on Daily on 28th Oct, it got resistance at 34 EMA on 4th and 5th Nov and falling from there it is again below 13 EMA.
  2. The 34 EMA resistance coincided with Downtrend Line, so making it a significant point of resistance.
  3. RSI for 14 days does not confirm oversold theory, in fact, if we see previous data, it looks like on a short term basis, it is fairly poised.
Looking at the Daily Chart does not convince me of an oversold situation and so I will refrain from buying into dips and maintain that selling rallies is still better idea.

Tuesday, November 4, 2008

Nifty and Sensex Up

Today the benchmark BSE Sensex and NSE Nifty of India closed up almost 4%. The upside followed previous four days of upmove in a row and traders seem to be more on long side.

Looking at the Daily Chart of Nifty Future, following is my observation:

  • After 22nd Sept, this is the first time it managed to cross and close above 13 EMA on daily chart, which means how weak bulls were in those days but looks like bears have decided to give them some relief.
  • The EMA sequence is still negative (13 EMA below 34 EMA which is below 55 EMA ) but the worry for bears is the gap between these moving averages.
  • Bulls should be looking to square off their longs rather than to buy fresh positions as : 1. this is a vertical up move and a V-shape recovery, which almost always is typical of bear market rally rather than bottom formation. 2. Nifty Future is nearing key resistance areas:
  • The first resistance is from here (3175 ) to the highs of 21st and 22nd Oct (near 3250).
  • Next resistance comes at 34 EMA (near 3460) but that is still some distance away. However, I personally don't think that "price" will go to meet 34 EMA, it could rather be EMA coming down to meet price.
  • If there is a correction in this up move, then support comes at about 2800 to 2700 levels, the Fibonacci 38.2% and 50% retracement levels.

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