Referendum, no referendum, resignation, no resignation, stay in Euro or leave, Whopper or Big Mac, Coke or Pepsi... whatever, we are in a bear Market!

What a successions of breaking news! Great for short term punters, if you are on the right side...No change of view since September, we are in a Bear market, where rebounds are violent.  Just wait for an exit level/signal. Eurostoxx tested 2500 resistance, S&P broke the 1250. In October, several equity indeces displayed a "Bullish Engulfing" in their monthly charts. This Japanese candle figure is a bullish reversal signal: it opens the month at lower level than the previous month low to close in end of the month at a higher level than previous month high. In short, October was a month when buyers were stronger than sellers, and we are to have a couple of months of rally, or at least not down...Still the "prepare to get out" recommendation.

S&P 500 Weekly: 1250 test, aiming at 1350

As expected, the S&P reached the 1250 level to even break it. The index is overbought, but still with an upward momentum. In the next few weeks it is to test the 1350 level, with support at 1250. 

Please note that on monthly chart, the momentum is downward.

Same conclusion as the previous month: Too early to exit, for aggressive players, wait, for the others sell some of your long...

Eurostoxx50: Same status as the S&P with different levels...2500 tested as expected, aiming at 2650.

Eurostoxx, S&P500 and several other indexes had exactly the same pattern/status. 

So same conclusion, wait before exit...

Support 2250 (2 std dev), touched 2500, which is now the resistance 2500 (50% fibo retracement), then next 2650 62% retracement)

Dollar Index: Bottoming out

In September, I highlighted that the Dollar index had probably reached its low...well it did and has even increased from 73 to 80 to correct to 77. The momentum is till upward. Keep the dollar...

Conclusion: On what to do, you got it... In the current mess, I just want to quote Napoleon: "In a great nation, the majority are incapable of judging wisely of things"

 

Bear Market rally, from oversold territory, prepare to get out...

What a month! As most things in life, one must not act on panic or euphoria...Had you sold on the back of the August fall, you would have missed the opportunity to exit at a higher level. OK, sounds easier said than done! That is where Technical Analysis brings its benefit: with Clear signals and levels to act upon. 
For the Black Jack players amongst you, knowing the stats table (ie when to hit /split/double/stay vs the dealer's card) will save you lots of money! (Do read the famous E. Thorp Beat the Dealer. Mr Thorp, a Mathematicien (MIT), proved that it was possible to have an edge; he is also a successfull Hedge Fund manager...)

Back to the Markets: indeces, extremely oversold, have rebounded as expected. We are probably close to SELL level...So be ready to pull the trigger. 




EuroStoxx50: As mentioned last month, it was expected to rebound to 2350 level. The index is short term overbought and will correct for the next few days, but on a 2-3 weeks view, momentum is still upward, and 2500 is a still the next target. 

S&P500: As with the Eurostoxx50, S&P500 index has rebounded from oversold level (and a positive divergence). Though overbought in the short term (one week), on a 2-3 week time frame, the index is still upward trending, and 1250 is the target (this corresponds to the 62% Fibonacci retracement on the recent collapse).






Conclusion: Equity indeces, Commodity have rebounded from extremely oversold levels. The Bear market rebound/rally offers a great opportunity to sell. 
There is still upside so I would recommend for the most agressive of you, to wait before sell; and for the others, start to exit some (half?) of your longs... 
Happy Investing

Equity Bull market that started in 2009 is over...

Dear all,
My sincere apologies for the last three months of silence, all the more as it was in such a critical -turnaround- moment! I was snowed under work and then took a long (and deserved!!) holiday.

In my early blogs, I wrote that we were at the last stage of the Bull market, and that the next big call was when to sell... Well, IT IS TIME!... The question is how to execute this, in other words at what level! 
August brutal collapse was a turning point that took me be surprise! I have to admit that, though I was expecting Bear market in 2H 2011, I was not expecting it before indeces reached higher level! Well we will not see the previous highs before the next bull market
Key resistances have been broken everywhere! Markets will not recover soon from such a knock out... We are moving into another cycle: 
Big bear is coming! Dont be fooled by any rebound: take advantage of rebound to SELL

EuroStoxx 50: Key support (2500) broken on the monthly chart. 
Index is oversold, to rebound to 2350, then next resistance is 2500. In fact, there was a warning signal in June (Negative divergence, these type of signal rarely falter- see March blog on Emerging Asia that led me to sell & switch into Japan...).
Let's see how ESTOXX behaves at 2350, if broken 2500 will be the exit level.

Dollar Index: Oversold and stabilising at 74 levels, may test the 72 level corresponding to 2008 lows. The dollar has probably reached his lowest level. The currency to own (vs JPY, Euros) I reckon...The least bad among these three... Paper money is worth nothing ain't it?

Conclusion: We have seen the end of the 2009 Bull market, we should now sell on rebound at resistance levels (PS for the S&P 500 it is 1250).
For the courageous ones among you, shorts can be placed at these levels...For the long only among you, take your profit, and be patient, buy opportunities will come... Like in 2009!....I will provide update in the next few weeks...


Happy investing...

Back to normal, people have forgotten about recent misfortunes, and Markets resume their normal course...Forgive my cynicism...Indices are heading where signals indicated they should a few months ago.

Several Equity charts around the world are showing positive development with some breaking key resistance, while others accelerating from their tight range. As predicted, commodities continue their rally to break key level, and the dollar index is closer to 2008 low...No change to my conclusion: Keep the long in Equity, with Japan, European charts waking up... 


S&P 500 Monthly Chart:

The S&P is on the verge to break the last resistance (62% Fibo retracement of the 2007 top-2009 low). The momentum is still up, but the chart is overbought. Though we may see a correction, the odds of reaching the 07 top are higher.
Keep your long, with the 1550 target in mind. 
Now the question is when to sell? At 1550?...Some advocate a % of correction, I prefer simply when... there is a sell signal, or if you want to preserve more gains a sell warning...




Russell 2000 Monthly Chart:
The Russell 2000 index, (representing 2000 small US cap) is breaking 2007 highs, with upward momentum.
However, we need to monitor if the break is not a trap, as there is a warning in the weekly chart.
The negative divergence, a pattern highlighted couple of months ago on Asia, is characterised by increasing tops (2007, and 2011) with declining top on the momentum indicators. See next chart.


Depending on your style, you could take profit now, with the risk that the warning signal is not confirmed (like in Asia) or wait for a sell signal... But that means less profit....Compromise, compromise.. C'est la vie...

Russell 2000 Weekly: Negative divergence
If the warning is confirmed, by breaking the 20 week moving average (grey line), 760 is the target








Nikkei Daily Chart:                                                                                                               

More than a month after the earthquake, the Nikkei bounced back and has been in a tight trading range. It is now breaking up, a prelude to rally, back to the 10300-500 area, my target being 11000.












The Dollar index (DXY) monthly chart:

The DXY is now below previous low of 2009, and is now heading towards my target of 2008 low. The index is oversold, but with a clearly downward momentum.
This 2008 level is probably a buy level...To be monitored


Conclusion: Keep the long on Equity, Commodities. Keep the short on dollar. Stay away from the Bonds... Happy Trading...

Don't be that sucker who sells on panic or buys on euphoria... If like me you think you could be that one, learn Technical Analysis..

What a fortnight! 

Like for everything in life, there is money to be made on excessive emotional reaction...And in March we had two fantastic examples, Gaddafi and Japan... Oh yes there is another one.. the Ipad 2 (I bought 4 of them...Hope to sell them with 30% premium.. wish me luck...). 

Nikkei collapsed and had an intraday low of 8227 to close at 8600: luckily the level I highlighted in mid March! The recommendation was to switch into Nikkei on a buy signal (ie a level, and indicators) - Well we had both of them...


Nikkei weekly Chart

Last week, there was a Buy signal on the Stochastic oscillator (oversold, cross up). The buy signal is still on.
First resistance is 10300, then 11000, my first target.
The three-six months target being 13000.

SPX weekly Chart:
Almost back to pre Gaddafi level, and Buy signal on the oscillator , oversold. So back to the previous months conclusion, ie aiming at 2008 high...1550....

CRB monthly chart:
CRB index still testing the last Fibo retracement, overbought. 
The momentum on the quarterly chart is still positive so a break is likely
To be monitored












Conclusion: Keep your long, even add some if you have some excess cash. 
I re-iterate that we are in the last stage of the bull market...One telling sign, Corporates around the world are on a buying spree, and several are boosting their M&A teams...and vice versa for bottoms, and I speak from personal experience on both...Happy trading...

Flash Nikkei - Update following the terrible earthquake.

My deepest condolences to those who lost loved ones in this terrible tragedy. 


Nikkei monthly chart:

Nikkei index fell 6% directly to its Fibonacci retracement, the next support is ~9000 (Fibo), then previous 8800 ie Aug low (which happen to be the Bollinger lower band)


For what it is worth, in Jan 1995, when the Kobe earthquake happened, the market fell 16% in the next three months - which, applied to the Nikkei's Friday close, gives around 8600.

 

Nikkei weekly: It broke through the 50% retracement to test its Bollinger lower band & last Fibo. hence a strong support. If broken, the next support is the previous low (8800). The market is now oversold. Let's wait a few days and see if Nikkei overshoot.

Eurostoxx Weekly:

The chart is testing its 20 week moving average. 

The daily chart is oversold, it could overshoot 30 point lower (ie the next Fibo support).

Conclusion: I maintain the switch out of EM markets to Japan, Europe. The Nikkei's fall is an opportunity to buy, and Asia Pac ex Japan market resilience is an opportunity to sell. Timing wise, do the latter now, and wait for a signal to buy the former. What are those signals? Test of support level, reversal candles etcetc...

The overall bull market is intact. 

Markets do not move straight, don't they? Commodities testing last retracement level. Emerging markets rebounding from oversold...

Commodities, represented by the CRB index, confirmed the break of the 50% retracement level. The Index moved straight to the next resistance, the 62% Fibonacci retracement. This level is the last resistance before the 2008 high. Due to the strength of the this level, the pace of the rally and the fact that it is overbought, a consolidation or correction is to come, like with Equities in February.

CRB monthly chart. Last month the index broke the 50% retracement, and accelerated to the next Fibonacci level, the 62% retracement...So what are Fibonacci retracements? When a stock, index, or a currency falls from a high to a low, it has a tendency to rebound to "sticky" levels: 50%, 38% and 62% of the distance between the high and the low. 0.38 and 0.62 are Fibonacci ratio. Strange, and irrational, just take any chart, pick a top and a bottom, find these levels, and you will see... 
Ok, what's next? The current level is not easy to break, and as the index is very overbought, a consolidation or correction is expected, 2-4% support.


Most Equity indeces have not shown any development. Only Emerging markets have rebounded from a very oversold level. I would take any rebounds to take profit. Why?
Below on the left, the monthly chart of the MSCI Asia Pacific ex Japan, has been moving up with oversold/overbought indicator (stochastic) highs moving down, as shown by the yellow lines. This pattern is called "negative divergence", a warning that it may correct or reverse in the coming month. Be vigilent!

Dollar index: The free fall continues!

The Dollar Index, an index measuring the value of the USD vs EUR, GBP, CAD , SEK, CHF & JPY, continues its fall as shown on the daily chart above on the right. The chart is oversold but the momentum on monthly, weekly and daily charts are clearly down, so way to go...Aiming at 2008 low...~5% downside in the next three months... see monthly chart below.



Conclusion: Consolidation on Equity market, with rebound of Emerging market: an opportunity to sell&switch -as highlighted previously- to Europe, Japan, and US. Commodities are reaching a key resistance and is to consolidate; its trend is still up and aiming probably at 2008 high. This is consistent with the fall of the USD which is similarly aiming at 2008 low.

Equity continue its run, commodities breaking up, treasuries reversing? moving to last stage of bull run...

Equity Markets continue their rally, with some indeces confirming resistance break and some breaking key levels: eg Korea, Nasdaq, Mexico are above 2008 high, while Bovespa and Sensex failed. Overall equities are clearly in an uptrend. Two points worth highlighting:

1)  The CRB index, which includes 28 commodities futures, has broken its 50% Fibo retracement leaving 35% upside for the next 2 quarters.
2) 10, 5y US treasury yield index are starting to bottom. The yield index, though still in a down trend, is likely to confirm the reversal. This week witnessed an acceleration of the bonds sell off.

What to do then? Keep your long in Equity and Commodities. Within Equity, continue to switch
some longs from Emerging Markets into US, Nasdaq, Japan. Definitely not the moment to hold bonds...

The CRB index monthly chart broke the 50% Fib retracement, the next target is the 62% retracement ie 35% upside. Yes the index is overbought. One rule I learnt over the years, is that in a bull market, you don't sell an overbought signal. However, you buy a oversold signal.

The 10 Year US Treasury Yield Index Monthly chart is bottoming, as the recent low higher than the previous one, with upward momentum on MACD indicator. This upward trend is likely to continue as weekly chart (below) and daily chart show an acceleration of move (Bollinger band break up)

The 10 Yr Treasury yield index weekly chart, is showing a break of the tight trading range. The last bar represents only one week of activity!

Nasdaq (NDX) index breaking 2008 high on monthly chart. As daily/weekly charts have positive momentum (see MACD indicator), the upward trend is likely to continue. 
The next resistance is the 50% retracement of the 2000-2003 crash ie around 2500.

Monthly Eurostoxx 50 chart: tempting a break up of the 38% fibo retracement, which I suspect is going to happen as several markets have broke up, and there is upward momentum on its monthly/weekly chart.

With next target 10% and 20% above.

In all, CRB (oil, metals, food) price is on uptrend, bonds to continue their fall and Equity indeces who have not yet broken their 2008 high, are heading toward it. Keep your long in Stocks, and forget Bonds....Happy investing

Some charts as of 1st Jan 2011: Still Bullish but waiting to take profit

Dear all, Happy New year, it's been a while since I wanted to share my passion and views of the market. 

Some of you are aware of my last few major calls on the market (long in 2003 , sell -too early- in 2007, buy (Asia Pacific Ex JP in Feb 2009). The next big call is when to sell/short?

The views expressed are only based on 20 years Technical Analysis experience as Equity Sales at Merrill then market strategist with an Hedge Fund; no fundamental analysis. Below S&P, Nikkei, and Eurostoxx on the second page

S&P 500 Monthly chart, the next three months view: Stay long , target 1400

Still on upward trend, slight overbought. 
Market broke the last Fibo retracement level (68%/1220) of the 2007-09 fall, so the next long term target is 2009 top (1550)
Support: The 68% Fibo 1220
On one week view, Stoch/MACD shows overbought triggered. Index is to correct and test 1240-50.

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Nikkei, next three months: Long, target 11300

Oversold, with positive signal triggered on Stoch/MACD with target 11,300 target

However on three-four weeks view, market is overbought,  with 10,100 support.

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