What is truth?

Posts tagged ‘Support and resistance’

Bad Prospects for Extension of Stock Market Rally

By Andre_Gratian

SPX: Very Long-term trend – The very-long-term cycles are down and, if   they make their lows when expected (after this bull market is over) there will   be another steep and prolonged decline into late 2014. It is probable, however,   that the steep correction of 2007-2009 will have curtailed the full downward   pressure potential of the 120-yr cycle.

SPX: Intermediate trend – SPX has made a triple top, which is a   bearish pattern. It has now given a strong indication that an intermediate   correction is underwayAnalysis of the short-term trendis done on a daily basis with the   help of hourly charts. It is an important adjunct to the analysis of daily and   weekly charts which discusses the course of longer market trends.Market Overview

After several days of resisting the downtrend, the indices finally started to   rally on October 26. The SPX tacked on 31 points from Wednesday’s 1403 low, but   met with heavy selling on the next day after nearing its top declining channel   line, and retraced .618 of its advance. The Dow and NDX suffered the same   fate.

I had warned that the SPX would reach a resistance level at the opening and   to expect at least a consolidation. However, what started as profit-taking   became more intense as the day progressed and, by the close, the index had lost   all of its previous day’s gain, and filling the gap which had been created on   Thursday. In the process it came to rest on the support level created by the   base which had formed prior to the rally. Now the question is whether this was   only a severe but normal correction of the uptrend which started at 1403, or if   the counter-trend rally is already over. With cycles expected to start making   their lows as early as next week, the uptrend does not have time on its   side.

There is also a matter of an unfilled P&Fcount to 1395 and Fib projection   to 1386. While (near-term) the election may play a role in the background   uncertainty and resulting volatility, we know that the odds favor a continued   decline of intermediate proportion into January 2013.

Because of its influence on the market (especially the NDX), AAPL has to be   considered a key — if not the most important — short-term indicator. On Friday   it made a new correction low, losing almost 20 points, and was definitely partly   responsible for the overall market weakness. There was relentless selling until,   by the close it had reached what could be an important Fibonacci projection.   That projection taken from the high of 705 has already proved its effectiveness   by producing several temporary holds on the way down: at 626, 613, at 591 – all   of them important Fib measurements………………………….

full article at source:  http://www.marketoracle.co.uk/Article37345.html

Random Market Observations

Submitted by
Sy Harding

Financial pundits are explaining the market’s recent gyrations as reactions to daily news and economic reports. Tuesday’s big decline was supposedly due to uncertainties created by the Irish debt crisis, North Korea’s shelling of a South Korean island, and the 2.2% decline in existing home sales, while the market ignored the positive upward revision of third quarter GDP.

Wednesday’s big rally was then supposedly due to the decline in unemployment claims, and that incomes rose 0.5% last month, slightly better than the 0.4% economists expected. In responding positively to those relatively minor reports, the market rally supposedly ignored the big plunge in Durable Goods Orders in October (the largest monthly decline since January, 2009), that new home sales fell 8.1% in October, worse than forecasts, while home prices declined further, and the inventory of unsold homes rose more than expected.

It’s much more likely that the market’s gyrations are technical in nature, caused by traders watching and reacting to the market’s struggle with short-term support and resistance levels.

After initially spiking up in reaction to the Fed’s QE2 decision, the market topped out at least temporarily two weeks ago. The Dow subsequently broke below the previous support at its 21-day moving average for the first time since the big rally began in early September. That no doubt got the attention of traders.

The Dow then rallied back up to its 21-day m.a. last week, where the question was whether it would break back above the m.a., and re-establish the m.a. as support for a resumption of the rally, or would find the m.a. to now be overhead resistance with the correction likely to continue.

The question remains unanswered. In Tuesday’s triple-digit decline the Dow clearly found the m.a. to be overhead resistance.


However, the Dow’s plunge Tuesday halted at the potential support at 11,000, as did its triple-digit decline a few days ago. So a lower high was created by the resistance at the moving average, but not a lower low on the pullback.

And on Wednesday it rallied off that potential support back up almost to its 21-day m.a. again. So the jury is still out on the market’s short-term prospects.

Meanwhile, global markets are just as interesting. I don’t have space to show individual markets, some of which are looking positive, some negative. But the next chart shows that global markets as a whole topped out with the U.S. market a couple of weeks ago (leaving a potential double-top in place). And after finding their 21-day moving averages to be overhead resistance, declined to a lower low last night and yesterday. That has the chart in a potential negative pattern of lower highs on rally attempts, and lower lows on the pullbacks from those rallies.


Of course it’s the longer-term outlook that is of more importance. But the current short-term situation is certainly interesting, and its outcome may be important to that longer-term outlook.

source https://machholz.wordpress.com/wp-admin/post-new.php



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