weekend charting 13/14 feb, page-111

I don't normally write too much on the US indices, but I noticed this morning that they are at very interesting levels... And We All Know that despite our wishes, the good ole US of A tends to determine or unduly influence global equity indices and sentiment.

So I'll pop my thoughts on them here for the moment...

Taking a look at the Daily charts for both the DOW and the SPX500:

Price on both these charts is currently testing the 21 period moving average from the underside... for the first time in the current downtrend.
I regard this as a critical situation, reason being that in my historical observatioins of lower timespans, where a turn has appeared (defined simply by a close above or beneath the 21 period moving average opposite to the dominant trend)  , the reaction of price to the first touch of the 21 period moving average back in the direction of the major trend gives a grand indication as to whether the initial turn is just a correction to major trend or is indeed a new trend.
(note this is also very close to the standard 20 period midline as used in bollinger bands and would be an area watched by many traders for directional signals).

The last period on these daily charts is dominated by the long weekend in the US due to the Public Holiday, Presidents day.


Now, I have come across a particular short term trading "Idea" I beleive "discovered" and written about by a fairly famous trader/analyst, Jake Bernstein regarding trading the US long weekend holidays.

The idea is that one buys the appropriate US Index prior to the Holiday, and one sells it after the Holiday (the presumption here that this is a long only trade idea, opening the position before and closing it after the long weekend has finished.
Taking a step back and just considering the last part of the idea, selling the US index when the holiday is over, suggests to me that weakness could indeed occur.

Looking at the SPX500 Hourly:

It appears as though we MIGHT be getting indications on this time span on this index that an Hourly based down turn may be about to commence with a Double-top having occurred and the MACD moving averages making marked divergence to price...
Note as well the green arrow highlighting a MACD moving Average Cross over to the downside, and the location of the stochastic in the lower pane, just below the critical 50% mark.

It is not impossible that these signals are unduly muddied by the light holiday trading and it should be noted that the same signals are not as strong on the DOW, as the DOW has not made an equal high at the same time.


Looking at the slightly bigger picture of the Hourly, containing the entire "uptrend" of the last 7 trading days:

It is interesting to note that price has managed to retrace almost exactly to the 61,8% retrace of the strong drop that occurred 7 days ago... and price has stalled a few times at this level withougt a convincing break through.

Also interresting that price has stalled in the conservative target area based on extreme histograms and marked by the red Cross hairs.

It may not mean much more than other market participants, like myself are uncertain as to future market direction... and the decisioin as to that direction could go either way.

I suggest however... that if the market decision is to choose down as the way to go, then further rapid decline may well be on the cards and should that occur, I'd suggest the daily timespan will be showing either a very large "correction" or a down trend in the future.

The other possible scenario, that price makes it above the 21 period Moving Average and holds there suggests to me, without too much t/a to back it up at this stage, that a continued rise can occur, but the strength of that rise is "less likely" in my opinion to be as strong as the potential of downside.

;)