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Major markets (Dow, Gold, Oil and more) analysis – August 2010
What a rally, the RISK is ON – I got two words: SHORT SQUEEZE! As mentioned in previous June analysis
that a close above 10288 on Dow will open room for further rally. There
is still a 2% to 5% more room for risk to go up, before stopping for a
breath and then to reverse. AUD has recently shown very strong
correlation to equity markets and it did not stop at its 200DMA to take a
breath, just goes to show how strong the squeeze has been on DJI, AUD,
SPX, you name the risk and it has been rallying……
Alright, enough of narrative, lets get to the charts.
DOW:
Supply line from Oct 07 to May 08 has now become a declining demand
line followed by another demand line from Mar 09 to Jul 10, where both
intersected. This new demand line, if we use the technique of forming
parallel channel, shows us a short-term supply line from Nov 09 to the
topping in Apr 10. Simple terms, technically the chart is bullish, the
only hurdles left are 200MA and channel’s top line resistance, which
could also be nice areas to short from overbought.
Short levels/zones therefore are marked on chart with confluence patterns including pivots.
So levels/zones to watch for short opportunities for August 10 are:
11250 – Double top + 61.8% fib level from credit boom highs to recession lows + monthly R2 pivot + 200MA in near vicinity.
11900 – Channel top resistance + monthly R3 pivot.
GOLD:
Gold has been in an uptrend since 2002. Demand line from Sep 05 to
Oct 08 will be the ultimate support with 200MA nearby. Since Oct 08 it
has gone parabolic for all the right reasons. However, now the parabolic
trajectory supported by demand line is broken, and gold may become
heavy until the next major support (previous resistance) around 1040.
Therefore levels/zones to watch for gold are:
1040 – Previous support becoming resistance + monthly S3 nearby + 38.20 fib level from parabolic move from Oct 08 to recent high.
Failure of 1040, should see us reach the ultimate demand line in a
hurry. That may not happen in August 2010, but I will keep this on my
charts.
OIL:
Looks range-bound to me, also shown by MA criss-crossing each other.
It must have been a hell for MA cross-over traders. Top around 87 and
bottom around 68. Not a lot more to add here really, I was expecting
this to capitulate based on the pattern last month. It should not have
crossed above 50 and 20MA to maintain bearish bias.
EUR/USD:
The darling of short squeezers! Everyone’s been talking about it, but
technically (if fundamentals are forgotten – which is easier said than
done), it was beautiful.
Both, the bullish engulfing candle of 14 June and pinbar of 21 June
(marked with horizontal line around bear trap in image) around previous
support were valid signals to go long. It has got plenty of room to run,
even in risk averse environment as EUR/AUD and EUR/CAD shorts unwind
during risk-averse days. EUR looks like the new dollar; it maintained
its climb during days when Dow and SPX were taking a beating. I don’t
see any stopping before reaching 13375 (previous support) and also monthly R1 for long targets.
Short levels/ zones are potentially from 50MA and monthly R2 around 13755.
Looking at recent AUD/USD and NZD/USD climbs above 200MA, it won’t
surprise me if both cable and Euro also did the same. The only thing
that can throw a spanner to the Euro party is if SNB wants to exit their
positions (very unlikely – but possible, as they may want to fend off
the perception of being losers as per recent headlines for buying
Euros).
Please note: Levels and zones are potential pivot
areas – For trade entries, the price patterns around these levels/zones
should be observed (break below hanging man, pinbar, etc) or pyramid
your shorts if you are brave.
Disclaimer:
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above average returns are available for educated and experienced
investors who are willing to take above average risk. However, before
deciding to participate in financial markets trading, you should
carefully consider your investment objectives, level of experience and
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Link to original source: http://desihedge.com/?tag=monthly-analysis
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Futures pumping has been named as the driving force behind recent "optimistic" market behavior and some evidence of futures quote stuffing has been provided by Mr. Denninger recently.
But how can this have such a strong DIRECT effect on the indices (especially when done at night)? Other than by FAKING a positive sentiment, I cannot see why indices should go up when someone is pumping up futures. I mean, unless an (automated algorithmic?) link is being created by the manipulator, there is no direct buy/sell link between futures and underlying indices/stocks/commodities, no? Who else than the manipulator and some informed speculators playing along would buy stocks just because futures keep going up for sometimes unknown reasons (in retrospect)?
I have been wondering, therefore, if the direct manipulation of indices (and stocks or other underlying assets, e.g. precious metals or oil) isn't done rather through high-frequency ETF trading (using short and long ETF trackers, probably leveraged). Because then there is a direct link between the price movements of underlying assets of the ETF and the price of the ETF, isn't there? If one shorts a reverse ETF or one massively buys a long ETF, the markets can be pushed up. Or is my reasoning wrong, in that buying/selling of an ETF does not force the issuer to buy/sell underlying stocks in proportion to the move of the index?
Anyone has insight in this?
TA, the thinking man's cargo cult.
I have more faith in TA than CNBC to be honest. Best is to see it replay after a while and learn the patterns that the market shows.
For example, Gold having the habit of breaking short term support only by a few points before rallying to new highs. I think the debate should be new ways to analyse technically.
Appreciate all your comments.
" Simple terms, technically the chart is bullish, the only hurdles LET are 200MA and channel’s top line resistance, which could also be nice areas to short from OVERSOLD".
Oversold, huh? Maybe you should proof-read before you post next time.
Thanks banksterhater. Will do next time.
Why would "upside" TA be anymore valid than "downside" with all the HFT activity and the futures pumping? (I am more curious than sarcastic or critical of your viewpoint.)
BTW Sapacman SPiff is COOL!
While I'm not a huge TA guy, I do take it into account a little. I pay a bit more attention to upside indicators because the HFT activity and futures pumping seem to favor volumeless rallies up. The big down side indicators don't seem to materialize (thinking of the Big H and S pattern in July of this year and last year... the 'death cross' recently, etc) As for downside TA, the resistance levels seem to be places that the bulls/algos/etc. fight tooth and nail to stay above, so those I keep in mind.
AS IF TA means anything in this market anymore.
Do you guys think these "resistance levels" and "Inverted H & S" patterns, "black doji's" and "Death crosses" mean anything anymore in this market? We have had those and still the market goes up. The dollar was strengthening, and yet the market is going up, and who the hell knows what is up with the Euro. Isn't the market supposed to go down when the dollar rises???/
It's kinda like Morpheus and Neo in the Dojo, and I paraphrase "Do you think any of the "real world capabilities" means anything in a place like this?"
"So you think that is air your are breathing? Hmmmm!"
I think with the HFT and the 'bots fighting it out, the money on the sidelines, and the bond market giong to hell, NONE OF THE ANALYSIS MEANS ANYTHING AT ALL.
This POS market can go down and up no matter gravity, economic principal, or technical resistance levels.
That is what I know about Investing in the Year 2010.
Agree completely, TA is useless in the face of all the manipulations. It's not even an honest casino, it's beyond disgust, especially the whole financial sector. Just make your own analysis of the fundamental reality and act accordingly.
I wouldn't discount TA if they show upside moves in this market. Any downside TA should be taken with a huge dose of caution.
You know, it builds and builds until someone says something really stupid, then it just erupts; you cannot control it.
Afterwards, you get warn satisfied feeling now that you got it off your chest.
All I can say is: Oft was thought, but ne’er so well expressed."
http://en.wikipedia.org/wiki/Alexander_Pope
"and then to reverse."
Really? Even when, just about that time, there are even stronger signals about Fed purchases? to be followed by $6.4 trillion in purchases in December? Sounds like stock market bubble to me!