Tuesday, 27 August 2013

Four blue candles

The US markets remain comfortably under the recent sp'1709 high, and there looks to be very reasonable downside into September. Prime target zone within the next 3-4 weeks is 1600/1575, which will probably equate to VIX briefly in the low 20s.

sp'weekly7 - near term overview

sp'weekly5 - fib levels


So, a weak closing hour for equities, and that made for a 13pt swing from the earlier high of sp'1669.

Yet, the weekly charts are offering a lot more for the bears. We now have the fourth consecutive blue candle on the 'rainbow' chart. Based upon many of the multi-week down cycles in the past few years, the current four candle setup is HIGHLY suggestive of much lower levels across the next few weeks.

Certainly, I can envision sp'1620/00s next week - even with Monday closed.

In terms of Fib' levels, the 1560s are particularly attractive, and there are a fair few other MAs and channel/trend support around that level.

Bigger picture...still tricky

I will again highlight the 'best bear case'...below...

sp'weekly'9c - a hit of the lower trend?

Under my rules, I need to see a hit of the lower weekly bollinger (currently 1564..and rising), otherwise I'll be VERY concerned that the next bounce will be able to take out the 1709 high. Any daily closes >1709, and this scenario would need to get trashed.

Looking ahead

There is a small array of econ-data for Tuesday, case-shiller, consumer confidence, and Richmond Fed. If those are at least 'reasonable' the market will have its excuse to rally not least helped with....

*very significant QE of $5bn for Tuesday.   bears..beware!


I remain on the sidelines (it has only been two weeks, but seems like years), and am seeking an index re-short in the sp'1680s. Considering there is further QE on Wednesday, I'm expecting to wait until then.

Goodnight from London