Dear Friends,
Today, let me tell here my view about the US index S & P 500, which is considered one of the most important index in the world by analysts.
I have drawn one downtrend line Line 1 starting at the high it formed in Oct, 07, and joining the high in Dec, 07 and extending it. This line maintained till April 08 and it looked like the downtrend in S&P is over, as it took support on the same line twice in May. But one thing to notice was the 200 SMA(the curved green line) - despite taking support on the Line 1, the 200 SMA proved to be too strong and it could not break it convincingly on the upside. Then in June, S&P fell below this line again and falling continuously since then. Around same time the Moving Average sequence for it also turned bearish again as the 34 EMA (Exponential MA, red curved line) crossed 55 EMA (blue curved line) on the downside and S&P falling below these.
I drew one more downtrend line - Line 2 joining the contemporary highs but this line has to be resisted at least once more to qualify as a trend line.
If we look at Jan Low and Mar low (Red circles), it looked like a double bottom formation, but recently those lows have also been breached. The overall scenario is very bearish for S&P. The only relief for bulls is - it is oversold. See the ADX and William's Percent Range - both saying it is in oversold zone. So, we can expect a relief rally in the near term. Also, any such relief rally can be resisted at first the prvious bottoms of Jan and Mar at around 1260, second the 34 and 55 EMAs and then Line 2.
Caution: Being in official Bear Market, the oscillators can remain in oversold zone for quite some time and any trade against the primary trend can prove to be too risky.
I conclude this analysis with the hope that you will like it and comment.
Disclaimer: My analysis is in letter and spirit "just an analysis" and not a trading recommendation. Trading in Stock Markets is full of risks so kindly consult a professional before initiating any trade.
Thanks...
Yours...
good info buddy but what about the political issue in india and the inflation fears rising.
ReplyDeleteIndian political issues doesn't matter much as long as its a solid issue which can directly shake govt and mkt.
ReplyDeleteIndian mkt move with global trend.
But 22nd july would be important day.
Dear Kapil and Namuna,
ReplyDeleteLike all concerned people, I too like the idea of looking at not only th political but all other fundamental issues. But, my emphasis is on the Technicals always, as charts incorporate all fundamentals and that too in advance!!! I will write a chapter on this very soon...
Thanks for commenting...
hi
ReplyDeletebut us market is oversold.
BYE
Hi harish.. nice write up..its amazing that a simple technique like trenlines can be used in a variety of ways.. its always a time to learn when i read ur posts..
ReplyDeletesimply simple and greatly great post..
Saurabh
PS :- would like to buy a book , if ever u write , on trendlines
Dear Mr. Willrock,
ReplyDeleteYou are right sir. That's what I told in my post - the US markets are oversold and a recovery may be due. Thanks for comment.
Dear Saurabh,
Thanks buddy. Well, there are always simple things which are powerful, but being human beings we tend to ignore them, the more we be simple, the more we can gain. Keep reading and commenting...