How about the US market (2011-09-20 SPX analysis)

Daily chart of S&P500 Index (.SPX):















On daily chart, the index obviously is moving within a flag-shape pattern. This flag started with the low at 1101, and was upwards sloping.

Currently, SPX is at the very middle of the flag. It is hard to tell which way it is going to move, but we can keep aware of the support and resistant levels.

Considering again the red flag, we can find the resistant at around 1,260 and support at 1,170. These are the major levels we have to watch.

Another important observation is that stochastic-slow is showing a divergence regarding the movement of the index. This shows that the rise of SPX is relatively weak and would probably plunge.

Breakdown of the flag shape will further confirm the flag as bearish continuation flag in the middle of the bearish trend, signaling further slump.

Weekly chart of S&P500 Index (.SPX):















Weekly chart basically tells the same story. In addition, I have added a fibonacci retracement using the high and low in April 2011 and June 2010.

We can see that the levels are pretty strong in terms of supporting/resisting SPX.

On the other hand, MACD and its EMA is touching each other. We have to wait until the end of this week to confirm whether there is bullish cross or its just a zig-zag.

So the support and resistant levels are almost the same: 1,170 and higher than 1,250.

Good luck.

Break of flag shape? (2011-09-19 HSI analysis)

UBS trader losing 2B... He used to be a star earning a salary of £600k a year. Good luck to him.

Last week world's stock markets fluctuated quite greatly. At first, debt problem in Greek seemed to be unsolvable. Global stock markets just plunged hardly. Then, suddenly all the issues seemed to be eased due to consensus in European Union. Stock markets surged again. News-driven traders did really have to pay a lot of attention!

On Friday, EU ruled out the proposal by US suggesting EU to expand its rescue fund. But I think it should be kind of disgusted and have not much effect on today's market. So let's see how this week HSI is going.

Daily chart of Hang Seng Index (.HSI):















After the strong rebound on last Friday, Hang Seng Index was able to pare its losses on the days before and remain above the green up-trend support.

That three candlesticks showed a false breakdown, which meant that the index could not break below the flag shape continuation pattern.

Now HSI is still within the flag, and the next resistant is given by the red down-trend line at around 20,000.

Then the next resistant is provided by the upper line of the flag pattern, at around 21,000. These two levels are something we have to keep in mind.

As for downside, the lower line of flag-shape pattern is sloping upwards. The support level will keep on rising and the support is at slight higher than 19,500 by the end of this week.

This week I have no specific view on the index based on daily chart. It really depends on whether the index would break down again. So let's check out weekly chart.

Weekly chart of Hang Seng Index (.HSI):















The flag shape is clearer on weekly chart. This bearish flag continuation pattern means a further plunge of the index.

As usual, the purple Pitchfork was added and it has been an extremely good instrument to predict HSI's movement.

Upside resistant is at 20,000 given by the middle line of Pitchfork. Interestingly, this is the same level as suggested by the short-term down-trend resistant on daily chart. And once we can see that the Pitchfork helps a lot on finding trend lines.

However, on weekly chart, it seems controversial that whether the index closed above or below the green line. It looks pretty much at the line. So we have to see what happens today.

If HSI really breaks down, then the next support given by the Pitchfork is at around 18,200. Breakdown of it means the index plunging to at least 15,800 as mentioned before.

My view is more on the bearish side. But it depends on whether HSI breaks down. If not, then it would rebound and face resistant at 19,500 and 20,000.

If yes, then the only level to be aware of is 18,200. I don't expect the index slumping any further than this.

Important Economic Data this week (2011-09-18)

20-Sept (Tuesday)
09:30 Australia Reserve Bank's Board September Minutes
14:00 Germany Producer Prices {Forecast: Unchanged}
17:00 Germany ZEW Survey (Economic Sentiment) {Forecast: Drop from -37.6 to -45}

21-Sept (Wednesday)
16:30 Bank of England Minutes
19:00 Canada Consumer Price Index {Forecast: Slight increase}
22:00 US Existing Home Sales {Forecast: Slight increase}

22-Sept (Thursday)
02:15 US FOMC Rate Decision {Forecast: Unchanged at 0.25%}
06:45 New Zealand GDP (YoY) {Forecast: Slight increase}
22:00 Euro-Zone Consumer Confidence {Forecast: Slightly more negative}

source: http://dailyfx.com

Gold dropping to Golden ratio (2011-09-16 Gold analysis)

European Central Bank is giving out loans to banks to ease the credit crisis. With lower chances of default and liquidity is increased, all the US and European stock markets surged. German market boosted over 3% while S&P500 rose more than 1.72%.

Today Hong Kong market should be following this rally and Hang Seng Index would probably go up by 500-600 points.

Stock markets going up usually means that safe haven plunging. Let's see Gold.
















Above is the daily chart of Gold (XAU=). Gold price has been rising along the red up-trend line for a few months, and just broke this trend line.

On the chart, we can see that the red solid up-trend line was a pretty strong one which successfully stopped Gold price from slumping below.

However, yesterday there was a large black candlestick breaking down the trend line, showing that the medium term bullish strong trend has come to an end and probably gold would undergo bearish trend in short term.

By using Fibonacci retracement, next support can be found at around 1,750 (38.2% retracement).

Indeed, MACD is at a pretty high level. Normally if it is at low levels, we might expect there will be at least a short rebound of the price. But this time it fits my anticipation that Gold price is going to slump further.

Orange line is the short-term resistant to the price, and next resistant level is at around 1,800.

FOMC meeting next week would definitely bring in some news to the markets, but we are not sure whether it is good news or bad news. So I think its better for us to lower exposures.

Pause in bullish trend (2011-09-15 DXY analysis)

Above is the daily chart of US Dollar Index (.DXY). This anti-euro index majorly consists of 58.6% Euro, 12.6% Yen, 11.9% Sterling and remaining percentage of Canadian dollar, Krona and Franc.

Especially after Franc was pegged with Euro, the feature of "anti-euro" would be slightly more obvious (Franc was only 3.6% of the index).

So on the chart, DXY broke out the green down-trend line last week, and started a bullish trend.

MACD and RSI both surged greatly, reaching a very high level which probably temporarily stops the index from going any further. DXY is more likely to consolidate a bit now.

I have added Bollinger Band with all typical settings as well. We can see that DXY tried to break out this highest line but failed, and two days ago it dropped below the highest line.

This tells us that the buying force wasn't so strong and that the USD is not yet strong enough to break higher. It is more likely that DXY would drop now.

Support is at around 76 given by both the 38.2% retracement and 10-day Simple Moving Average.

Upside is quite limited, with 77 being the next resistant (50% retracement).

Nevertheless, there is no doubt that the index is under strong bullish trend. So this is only a pause in the middle of the trend and the index would continue to rally.

Range bound (2011-09-14 VIX analysis)

Above is the daily chart of Volatility Index (.VIX). Yesterday when S&P 500 Index moved vigorously, the volatility jumped and broke the red short-term down-trend line.

However, at the end, VIX dropped below the line again and closed in between the red and green lines.

After being unable to break out, the index is more likely to slump to lower levels. Support is at around 29.5.

At 29.5, there is another support: 50-day Simple Moving Average. Though historically this average was not a very strong support/resistant, we could expect no break-down at this level.

VIX is likely to remain at the range of 29.5-40.5. This means that the index would keep on fluctuating, perhaps around 1-1.5% movements.

As Hang Seng Index usually follows the previous US markets, HSI is likely to move 200-300 points a day as well. Dropping over 800 points like that on Monday is less likely to appear again this week. And may happen next week when VIX is breaking out the red down-trend line again.

Bearish flag? (2011-09-13 HSI analysis)

Daily chart of Hang Seng Index (HSI):















As usual, the two red lines, one dotted and one solid, represent short-term resistant to the index.

The red solid line would resists the index at around 20,800, stopping HSI to surge any further. As we can see, the 50-day Simple Moving Average also acts as resistant.

This week I added one more for the downside support in green.

Last week, just after HSI having touched the green support, it rebounded and stopped at the middle of red and green lines.

It was due to the resistant force given by the 10-day Simple Moving Average. The index tried to break out but failed, and closed below 20-day SMA.

This week it seems to be more bearish trending. Hang Seng Index would probably retest the green support again at around 19,400.

What would happen if the index breaks below 19,400? Let's see the weekly chart.

Weekly chart of Hang Seng Index (HSI):















Its easier to check the support on weekly chart. The lower green line and the red line are the same as those on daily chart. And I have added one more parallel green line on the top.

This pattern looks familiar right? Yeah past 5 weeks HSI formed a flag while in a bearish trend. This shows a continuation of the bearish trend and would lead the index to very low level.

While we might confirm that the index would further plunge, we have to be careful of any potential rebound. Touching the lower green line at 19,450 is one of the reasons.

However, if this flag breaks (i.e. break down of 19,450), next support will be at 38.2% retracement at 18,800 and the Pitchfork at around 18,300. These two are major supports.

Then as I have said before, if these two break as well, it would mean a further 2,600 points slump. Again this would indicate an extremely serious things happening.

This week I expect the index to drop to 19,450 and rebound again. As there will be no extremely critical economic data to be announced, unless there is sudden breaking news, we could expect a stop from plunging below at 19,450.

Good luck.