18-Oct (Tuesday)
08:30 Australia Reserve Bank's Board October Minutes
10:00 China Real GDP (YoY) {Forecast: Slight drop from 9.5% to 9.2%}
16:30 UK Consumer Price Index (YoY) {Forcast: Increase from 4.5% to 4.9%}
17:00 German ZEW Survey (Economic Sentiment) {Forecast: Slightly more negative}
20:30 US Producer Price Index (YoY) {Forecast: Slight drop}
19-Oct (Wednesday)
00:30 US Fed's Bernanke Speaks in Boston
16:30 Bank of England Minutes
20:30 US Consumer Price Index (YoY) {Forecast: Unchanged}
20-Oct (Thursday)
14:00 German Product Prices (YoY) {Forecast: Unchanged}
16:30 UK Retail Sales {Forecast: Rise}
22:00 US Existing Home Sales {Forecast: Drop}
21-Oct (Friday)
17:00 Euro-Zone Government Debt-GDP Ratio
19:00 Canada Consumer Price Index (YoY) {Forecast: Slight drop}
Free technical analysis on Hong Kong stock market, world stock markets, foreign exchange market, commodities market, as well as some important notes for being a successful trader.
Sunday, October 16, 2011
Friday, October 14, 2011
Further analysis on volatility (2011-10-14 VIX analysis)
Hang Seng Index spiked another 2.34% to 18,757. It looked like those resistance levels meant nothing to the index. So basically after surging back within the Pitchfork, the next resistant should be at around 19,500.
But S&P500 Index was moving as expected. Two days ago it closed at around 1,207 and yesterday it dropped a little bit to 1,203. We can see the resistant zone actually worked.
Let's take a look at the volatility.
Above is the daily chart of Volatility Index (.VIX). As usual, we can see the big red channel with a wide trading range from around 30-46.5 now.
The index touched the lower boundary of the channel two days ago, and rebounded yesterday. It appeared that the channel is still a strong one which restricts the movements of the index.
However, I found an interesting fact. By drawing a fibonacci retracement using the low in April and high in August, we can see that 50% retracement is a pretty strong support level.
Firstly, it supported the index from plummeting even lower in mid-August, at the level of around 31.
Since then, the index more or less closed above this level, even after they had an intra-day low below this level. The lowest close was 30.98 on 16-Sept.
But yesterday, the index closed at 30.7. This means that the strength of the support is getting weaker. It might be time for the index to move on to the next retracement level.
Would it be the case I mentioned last week, that the index is going to plunge and drop to pretty low levels and move sideways?
If so, then S&P500 index would probably not slump, and is more likely to rise slowly or moving sideways.
But S&P500 Index was moving as expected. Two days ago it closed at around 1,207 and yesterday it dropped a little bit to 1,203. We can see the resistant zone actually worked.
Let's take a look at the volatility.
Above is the daily chart of Volatility Index (.VIX). As usual, we can see the big red channel with a wide trading range from around 30-46.5 now.
The index touched the lower boundary of the channel two days ago, and rebounded yesterday. It appeared that the channel is still a strong one which restricts the movements of the index.
However, I found an interesting fact. By drawing a fibonacci retracement using the low in April and high in August, we can see that 50% retracement is a pretty strong support level.
Firstly, it supported the index from plummeting even lower in mid-August, at the level of around 31.
Since then, the index more or less closed above this level, even after they had an intra-day low below this level. The lowest close was 30.98 on 16-Sept.
But yesterday, the index closed at 30.7. This means that the strength of the support is getting weaker. It might be time for the index to move on to the next retracement level.
Would it be the case I mentioned last week, that the index is going to plunge and drop to pretty low levels and move sideways?
If so, then S&P500 index would probably not slump, and is more likely to rise slowly or moving sideways.
Wednesday, October 12, 2011
Two stories (2011-10-11 SPX analysis)
Looks like the two charts with various time-frames of S&P500 Index are telling different stories.
Daily chart of SPX:
Weekly chart of SPX:
So basically, on daily chart, we can see an obvious MACD divergence and bullish cross. These are pretty nice indicators telling us that the index is going to surge.
The index almost reaches the upper line of its channel. The range is quite large, so it is relatively difficult for SPX to break out. Strong resistant area is at around 1200-1210.
On weekly chart, instead of signaling any spiking possibilities, the chart actually signals further slumps.
Orange dotted line was the previous upward trend line, SPX was rising gradually along this line. Then, in August 2011, the index broke the trend with an extremely long black candlestick. This told us that the bullish trend has ended.
So given S&P500 index is moving under bearish trend now, the red flag actually becomes a bearish continuation flag. Such pattern signals further drop.
Indeed, MACD shows no bullish cross or divergence on weekly chart. So on a medium-term view, the index is still not considered as being under bullish trend. Chance for falling is higher.
This lets us go back to Hang Seng Index. Though yesterday the index broke the Pitchfork easily and closed above 18,140, if US markets are not going to rocket, HSI is less likely to surge greatly too.
Let's spend one more day to observe how HSI would go!
Daily chart of SPX:
Weekly chart of SPX:
So basically, on daily chart, we can see an obvious MACD divergence and bullish cross. These are pretty nice indicators telling us that the index is going to surge.
The index almost reaches the upper line of its channel. The range is quite large, so it is relatively difficult for SPX to break out. Strong resistant area is at around 1200-1210.
On weekly chart, instead of signaling any spiking possibilities, the chart actually signals further slumps.
Orange dotted line was the previous upward trend line, SPX was rising gradually along this line. Then, in August 2011, the index broke the trend with an extremely long black candlestick. This told us that the bullish trend has ended.
So given S&P500 index is moving under bearish trend now, the red flag actually becomes a bearish continuation flag. Such pattern signals further drop.
Indeed, MACD shows no bullish cross or divergence on weekly chart. So on a medium-term view, the index is still not considered as being under bullish trend. Chance for falling is higher.
This lets us go back to Hang Seng Index. Though yesterday the index broke the Pitchfork easily and closed above 18,140, if US markets are not going to rocket, HSI is less likely to surge greatly too.
Let's spend one more day to observe how HSI would go!
Tuesday, October 11, 2011
Turned bearish (2011-10-11 DXY analysis)
Following Germany and France's assurance on bank recapitalization in an attempt to save the EU countries from going bankrupt, European market and US markets spiked. S&P500 closed at 3.41% above previous close.
Most likely Hang Seng Index would follow the surge as well. As mentioned yesterday, 18,000 is a pretty strong resistant to HSI. So be aware of this level.
So let's see how US Dollar is doing after the announcement from Europe.
Above is the 4-hour chart of US Dollar Index (.DXY). As you all know, the heaviest component in this index is Euros. Then it would be Japanese Yen and Sterling.
We can see that the index rose gradually since early September. This means that US Dollar was strengthening at that time, most likely because of the concerns towards European debt problems which pulled down the Euros as well as the pounds.
But starting in early October, the index appeared to have topped and started to fall. But it was still within the red upward trending channel.
The news announced did successfully cause a huge movement in the index. DXY finally broke the channel few candlesticks ago, which was due to strengthening of Euros.
It is obvious that if the "concerns" about Europe debt problems are eased, then more people are confident on buying bonds and longer-term debts from the government, and that EUR would strengthen. This is therefore the reason why DXY falls below the support.
Using the low in late August and the high in this month, we can draw a fibonacci retracement. Interestingly, the previous plummet of DXY stopped at around the 38.2% retracement level. So I believe that the index would do a slight rebound.
The rebound would be stopped at around 78, when the index meets its 10-day Simple Moving Average. Then the index probably slumps again, and reaches the next retracement level which is the support: 76.7.
So the whole trend of DXY turns to be bearish now, which means that US Dollar would probably be weakening. However, one question pops out: given the negative correlation between Dollar and Hang Seng Index, if I suggest that DXY is going to fall, HSI should be ready to rocket. So today's analysis on DXY made me review my analysis on HSI again to check whether I have made something wrong. But somehow I still don't have much idea up till now.
Therefore, I think we should spend 1-2 more days to observe any special movements, such as break out of the previous Pitchfork on HSI daily chart and so on.
Good luck.
Most likely Hang Seng Index would follow the surge as well. As mentioned yesterday, 18,000 is a pretty strong resistant to HSI. So be aware of this level.
So let's see how US Dollar is doing after the announcement from Europe.
Above is the 4-hour chart of US Dollar Index (.DXY). As you all know, the heaviest component in this index is Euros. Then it would be Japanese Yen and Sterling.
We can see that the index rose gradually since early September. This means that US Dollar was strengthening at that time, most likely because of the concerns towards European debt problems which pulled down the Euros as well as the pounds.
But starting in early October, the index appeared to have topped and started to fall. But it was still within the red upward trending channel.
The news announced did successfully cause a huge movement in the index. DXY finally broke the channel few candlesticks ago, which was due to strengthening of Euros.
It is obvious that if the "concerns" about Europe debt problems are eased, then more people are confident on buying bonds and longer-term debts from the government, and that EUR would strengthen. This is therefore the reason why DXY falls below the support.
Using the low in late August and the high in this month, we can draw a fibonacci retracement. Interestingly, the previous plummet of DXY stopped at around the 38.2% retracement level. So I believe that the index would do a slight rebound.
The rebound would be stopped at around 78, when the index meets its 10-day Simple Moving Average. Then the index probably slumps again, and reaches the next retracement level which is the support: 76.7.
So the whole trend of DXY turns to be bearish now, which means that US Dollar would probably be weakening. However, one question pops out: given the negative correlation between Dollar and Hang Seng Index, if I suggest that DXY is going to fall, HSI should be ready to rocket. So today's analysis on DXY made me review my analysis on HSI again to check whether I have made something wrong. But somehow I still don't have much idea up till now.
Therefore, I think we should spend 1-2 more days to observe any special movements, such as break out of the previous Pitchfork on HSI daily chart and so on.
Good luck.
Monday, October 10, 2011
Time to calm down (2011-10-10 HSI analysis)
Last week was a choppy week. Hang Seng Index first plunged to as low as 16,170 on Tuesday. Then everything had changed after the public holiday on Wednesday. Good news from Europe led the global stock markets to undergo a huge rebound and HSI jumped and closed at 17,707.
Though it looked like too volatile to trade, the rebound after reaching ~16200 was not too hard to catch. It is the level supported by a medium-term upward trending line. Macao Gaming stocks rallied greatly, with over 30% jump in stock price in just two days (Thursday and Friday). Given their performance, I guess this week's focus might be on them as well.
One more extremely important issue. The last Policy Address by HKSAR Chief Executive Mr. Donald Tsang would be revealed on Wednesday. It is expected that he would talk more about property prices and policies, with a possibility that more flats are built for Home Ownership Scheme which could impact the property industry. So for those who are holding any these kinds of company would have to be prepared for any event risk on Wednesday.
Now let's get back to our regular HSI analysis.
Daily chart of HSI (finally):
I haven't been posting daily chart for two weeks because I could not get any clue from the previous charts. But this week it seems to be a bit clearer.
The orange Andrew's Pitchfork was the normal one. The index broke it in mid-September. The lower line became the resistant to HSI (which was shown in late September).
I have identified another Pitchfork, which is a short-term one, shown in purple. Hang Seng Index was following the upper channel and slid since September 2011.
After the rebound last week, the index is currently testing the upper line of the Pitchfork. The level represents a strong resistant line which HSI did not go beyond since September.
Other than the current pitchfork, there are two another big resistance forces at around 18,000, which is around 300 points from now.
The first one is of course the previous Pitchfork shown in orange. This is just the same case as that occurred in late September.
The second one is the fibonacci retracement. By using the high in late August and the low last week, we found that 18,000 is the 38.2% retracement level. This also resists the index.
So daily chart is telling us that HSI would need an extremely strong buying power in order to break out these resistant; otherwise, this week would be a bearish week.
Weekly chart of HSI:
The orange pitchfork is just the same as that one on daily chart, while the fibaonnci retracement is a different one.
The green upward trending line was able to support the index well last week, stopping HSI to slump below 16,000.
Using the low in Oct-2008 and the high in Oct-2011, I drew another retracement. We can see that ~16,200 is the 61.8% retracement. So actually there were two forces supporting the index last week. We have no surprise why the rebound was so strong then.
So the situation is getting a bit interesting now, or actually I should say not interesting from traders' views.
For the upside, the previous pitchfork with down-trend is resisting the index. For the downside, the medium-term up-trend green line is support the index. HSI is now in the middle, and both sides are pretty hard to break.
Still remember my post on VIX last Friday? I suggested that its time for VIX to take some rest and calm down. This also means that the volatility would drop. Stock markets either move gradually upwards or consolidate (it is always hard for the markets to move downwards slowly).
Considering also the VIX, I believe that HSI would start moving sideways, with the current range of 16200-17800. This range is definitely narrowing given the converging support and resistant. This also means the purple pitchfork on daily chart will collapse (which is not a surprise as its slope is too steep for a long-lasting trends).
So the coming two weeks would be a cool-down period after fluctuations in past few weeks. This is a good period for us to do more research and find out how most stocks are performing and whether the markets would end its bearish movement or not. And we can grab some time to find out any undervalued stocks.
Though it looked like too volatile to trade, the rebound after reaching ~16200 was not too hard to catch. It is the level supported by a medium-term upward trending line. Macao Gaming stocks rallied greatly, with over 30% jump in stock price in just two days (Thursday and Friday). Given their performance, I guess this week's focus might be on them as well.
One more extremely important issue. The last Policy Address by HKSAR Chief Executive Mr. Donald Tsang would be revealed on Wednesday. It is expected that he would talk more about property prices and policies, with a possibility that more flats are built for Home Ownership Scheme which could impact the property industry. So for those who are holding any these kinds of company would have to be prepared for any event risk on Wednesday.
Now let's get back to our regular HSI analysis.
Daily chart of HSI (finally):
I haven't been posting daily chart for two weeks because I could not get any clue from the previous charts. But this week it seems to be a bit clearer.
The orange Andrew's Pitchfork was the normal one. The index broke it in mid-September. The lower line became the resistant to HSI (which was shown in late September).
I have identified another Pitchfork, which is a short-term one, shown in purple. Hang Seng Index was following the upper channel and slid since September 2011.
After the rebound last week, the index is currently testing the upper line of the Pitchfork. The level represents a strong resistant line which HSI did not go beyond since September.
Other than the current pitchfork, there are two another big resistance forces at around 18,000, which is around 300 points from now.
The first one is of course the previous Pitchfork shown in orange. This is just the same case as that occurred in late September.
The second one is the fibonacci retracement. By using the high in late August and the low last week, we found that 18,000 is the 38.2% retracement level. This also resists the index.
So daily chart is telling us that HSI would need an extremely strong buying power in order to break out these resistant; otherwise, this week would be a bearish week.
Weekly chart of HSI:
The orange pitchfork is just the same as that one on daily chart, while the fibaonnci retracement is a different one.
The green upward trending line was able to support the index well last week, stopping HSI to slump below 16,000.
Using the low in Oct-2008 and the high in Oct-2011, I drew another retracement. We can see that ~16,200 is the 61.8% retracement. So actually there were two forces supporting the index last week. We have no surprise why the rebound was so strong then.
So the situation is getting a bit interesting now, or actually I should say not interesting from traders' views.
For the upside, the previous pitchfork with down-trend is resisting the index. For the downside, the medium-term up-trend green line is support the index. HSI is now in the middle, and both sides are pretty hard to break.
Still remember my post on VIX last Friday? I suggested that its time for VIX to take some rest and calm down. This also means that the volatility would drop. Stock markets either move gradually upwards or consolidate (it is always hard for the markets to move downwards slowly).
Considering also the VIX, I believe that HSI would start moving sideways, with the current range of 16200-17800. This range is definitely narrowing given the converging support and resistant. This also means the purple pitchfork on daily chart will collapse (which is not a surprise as its slope is too steep for a long-lasting trends).
So the coming two weeks would be a cool-down period after fluctuations in past few weeks. This is a good period for us to do more research and find out how most stocks are performing and whether the markets would end its bearish movement or not. And we can grab some time to find out any undervalued stocks.
Sunday, October 9, 2011
Important Economic Data this week (2011-10-09)
11-Oct (Tuesday)
China New Yuan Loans
13:00 Bank of Japan Monthly Eocnomic Report
16:30 UK Industrial Production {Forecast: More negative}
12-Oct (Wednesday)
02:00 US Fed Releases Minutes of 20-Sept FOMC Meeting
16:30 UK Jobless Claims Change {Forecast: Increase from 20.3K to 24.0K}
13-Oct (Thursday)
07:50 Bank of Japan Publish Minutes of 6-7Sept Board Meeting
08:30 Australia Unemployment Rate {Forecast: Unchanged}
14:00 Germany Consumer Price Index {Forecast: Unchanged}
16:00 European Central Bank Publishes Oct. Monthly Report
14-Oct (Friday)
10:00 China consumer Price Index {Forecast: Slight drop}
17:00 Euro-Zone Consumer Price Index - Core {Forecast: Increase}
20:30 US Advance Retail Sales {Forecast: Increase to 0.5% from 0%}
21:55 US U. of Michigan Confidence {Forecast: Slight increase}
source: http://dailyfx.com
China New Yuan Loans
13:00 Bank of Japan Monthly Eocnomic Report
16:30 UK Industrial Production {Forecast: More negative}
12-Oct (Wednesday)
02:00 US Fed Releases Minutes of 20-Sept FOMC Meeting
16:30 UK Jobless Claims Change {Forecast: Increase from 20.3K to 24.0K}
13-Oct (Thursday)
07:50 Bank of Japan Publish Minutes of 6-7Sept Board Meeting
08:30 Australia Unemployment Rate {Forecast: Unchanged}
14:00 Germany Consumer Price Index {Forecast: Unchanged}
16:00 European Central Bank Publishes Oct. Monthly Report
14-Oct (Friday)
10:00 China consumer Price Index {Forecast: Slight drop}
17:00 Euro-Zone Consumer Price Index - Core {Forecast: Increase}
20:30 US Advance Retail Sales {Forecast: Increase to 0.5% from 0%}
21:55 US U. of Michigan Confidence {Forecast: Slight increase}
source: http://dailyfx.com
Friday, October 7, 2011
Findings on Volatility (2011-10-07 VIX analysis)
R.I.P. to Steve Jobs. Though I'm not Apple fans, he did help a lot in innovation.
So basically yesterday European Central Bank announced that they would introduce year-long loan again to let banks get enough cash. Some strategists even said that the biggest rally in S&P500 since 1998 in the last quarter in 2011.
Interesting enough, isn't it? Though I don't think the markets would surge crazily, I think the plunge will temporarily end here when HSI touched the medium-term support at around 16,100. Rebound is following and the index will probably test the resistant at 18,000 again. This is the first stage, if it passes, then then next resistant will be at around 19,700.
Today I am going to talk about volatility.
Daily chart of Volatility Index (.VIX):
The index has been moving in a range recently, as shown in the red on the above chart. This channel ranges from around 32-48.
But the channel is a downward trend channel, so both the support level and resistant level drop as time passes by.
In last few days, S&P moved around 1% every day, compared with more than 2-3% days ago, so the index dropped.
As suggested by the channel, the next support level is at around 30. Therefore, it is quite likely that VIX would drop to around 30 from the current level. This means that S&P500 won't suffer from great slumps at least in these few days.
Apart from this, I found an interesting pattern on weekly chart.
Weekly chart of Volatility Index (.VIX):
Basically, as mentioned before, the index could hardly surge above the level of around 50. The only time was due to sub-prime mortgage crisis in 2007-2008. VIX was up to almost 90.
However, VIX did try a few times to break this critical level. We can see that there were six trials in total including the two recent ones.
Interestingly, each time after two trials, the index would be quite likely to drop.
The first box represents the two trials in 1997 and 1998, after that the index remained at the trading range of 15-30 for almost 3 years.
The second box represents the two trials in 2001 and 2002, and after that the index slumped to the range of 9-15 for almost 5 years.
So this time we observe a double top again. Would it follow the historical fact? or would it spike and break 50?
Not having a breakout at 50 means that S&P500 would calm down and is not likely to plunge. It might even snowball to higher levels. So it also means that EU and US both get rid of the poor situations now and global stock markets would gradually rise.
So basically yesterday European Central Bank announced that they would introduce year-long loan again to let banks get enough cash. Some strategists even said that the biggest rally in S&P500 since 1998 in the last quarter in 2011.
Interesting enough, isn't it? Though I don't think the markets would surge crazily, I think the plunge will temporarily end here when HSI touched the medium-term support at around 16,100. Rebound is following and the index will probably test the resistant at 18,000 again. This is the first stage, if it passes, then then next resistant will be at around 19,700.
Today I am going to talk about volatility.
Daily chart of Volatility Index (.VIX):
The index has been moving in a range recently, as shown in the red on the above chart. This channel ranges from around 32-48.
But the channel is a downward trend channel, so both the support level and resistant level drop as time passes by.
In last few days, S&P moved around 1% every day, compared with more than 2-3% days ago, so the index dropped.
As suggested by the channel, the next support level is at around 30. Therefore, it is quite likely that VIX would drop to around 30 from the current level. This means that S&P500 won't suffer from great slumps at least in these few days.
Apart from this, I found an interesting pattern on weekly chart.
Weekly chart of Volatility Index (.VIX):
Basically, as mentioned before, the index could hardly surge above the level of around 50. The only time was due to sub-prime mortgage crisis in 2007-2008. VIX was up to almost 90.
However, VIX did try a few times to break this critical level. We can see that there were six trials in total including the two recent ones.
Interestingly, each time after two trials, the index would be quite likely to drop.
The first box represents the two trials in 1997 and 1998, after that the index remained at the trading range of 15-30 for almost 3 years.
The second box represents the two trials in 2001 and 2002, and after that the index slumped to the range of 9-15 for almost 5 years.
So this time we observe a double top again. Would it follow the historical fact? or would it spike and break 50?
Not having a breakout at 50 means that S&P500 would calm down and is not likely to plunge. It might even snowball to higher levels. So it also means that EU and US both get rid of the poor situations now and global stock markets would gradually rise.
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