Saturday, 5 May 2012

Weekend update'1 - Weekly Index Cycles

It was another pretty crazy week in the market. First, I think its important to remember where we were last weekend. We had seen a bullish engulfing candle on most of the indexes, and the outlook was therefore bullish! What did we next see? Monday saw an early morning decline, but Tuesday saw another strong morning gap up in the market, and the Dow made a new 4 year high. At that moment, the entire bear case was completely blown out. There was nothing bearish, and much of the 'serious money' by the bears would have been stopped out.

Yet the Dow was indeed the only index to make a new high. By the end of Tuesday I had a theory we were putting in a new mini H/S...and that indeed panned out! It is not often I spot them myself, so that was the real highlight of my trading week :) 

So, we've gone from a bullish engulfing candle to what is almost a bearish engulfing candle! I say 'almost', since its not perfect, but it is around 90% of what it should be.on most indexes. Lets look at those weekly cycles!

IWM, (representing the Rus'2000 small cap)

A fail at the 83 line, that is THREE months of fail. This is pretty astounding, and is now the second most bearish index I can find (The transports remain the weakest sector). First downside target remains 76, a break of 75 would opens up 70 (equating to sp'1270/50)


The action in the NASDAQ looks like a mirror of July 2011. Now, I'm not saying we are about to see a giant collapse next week, but the pattern IS the same. First target remains 2875...if fail, then 2600.


The Dow broke above the key 13300 level (having failed for 7 previous weeks)...yet it could not hold. The weekly close of 13038 is VERY dangerous. A fall under 13k (which I now believe is assured, and actually happened in Friday AH trading!), will lead to at least 12700 and quite possibly 12200/300 within the next 3-9 trading days.

From a bearish outlook, we are 250pts down...potentially another 750pts to go...'soon'.


The master index is looking weak again, first target 7800, if fail..then 7500.


The SP' weekly is a very clean chart, a break of 1357 will take the index to at least 1300/1280. There is good potential for 1270/50..if the down cycles losses are more than 30pts on a given day.

One thing is clear, a break of the recent low of 1357..will trigger a LOT of bull stop-losses, that is where we could see some really big down moves occur, with further stops at 1340.


What appeared to be a bullish pennant last weekend on the Transports did indeed break to the upside, with 1% gains on both Monday and Tuesday. Yet...the Tranny could not hold! It is now putting in a VERY dangerous spiky/fail candle. First target now would be a break under the pennant, with a quick move to the big 5000 level.

A break under 5000...and the doomsters will have a major victory, next target would then be 4500 (as determined via the monthly cycle)


This market sure is a tough one to discern. In the space of just a week, we've moved from a bullish outlook - on good evidence - which WAS even confirmed on Tuesday (when the Dow made a new 4 yr high), but the market could not hold the gains.

The close on Friday was especially weak, and we will most likely see some very significant falls in the coming week.

Best guess right now, 1340...a bounce (10/15pts)...then a further move to the important 1300/1280 level. If the down moves this week are big, then the 'flash' levels are the 200 day MA - Sp'1276..and then 1200. The notion of 1200 right now though is obviously 'crazy talk', but those are the keys to be aware of.

Still to come this weekend....the '10 world indexes, monthly update'..and they are massively important for what may pan out across the next 3-6 months.