S&P 500 Technical Analysis 2011.10.26

Strong resistance at $1,260 area

The daily chart of the SP shows the price reaching the strong resistance of the 1,262 area.

The previous local lows of mid March and mid June along with the 61.8% retracement of the last few months of the decline forms a strong resistance in this area.

From Elliot Wave perspective we are, most probably, at the end of the second wave of a 5 wave down move on the long term. This is no guarantee that there will be a reversal here. The maximum wave 2 can travel is at the early may peak in in the 1,376 area.

Another bearish sign is the bearish engulfing candle pattern formed in the last couple of days (without the current day). If the bulls will show further signs of exhaustion in the next few days (keeping this week’s highs intact) we could witness the end of wave 2.         

Dow Jones Industrial Average (DJIA) Technical Analysis 2011.10.25

Is the trend reversing?

The Dow Jones Industrial Average is making higher highs after oscillating in the resistance area of the September highs (11,400-11,700).

The 4 hour chart covers the whole decline started in early April and the current rally reached yesterday the 61.8% retracement area. Therefore, the 11,950 level is set to be a strong resistance adding the fact that this area represents the mid June lows (end of wave [i]).

Having this levels in mind, we can think of two scenarios, both pointing to the down-side: if sellers will overcome buyers in this area, the break of the 11,700 support will set the market for further decline; if sentiment will remain positive in the next days, we can see bull move looking to test the 12,000-12,300 area.

Keep in mind that the Elliott Wave theory states that a wave 2 (which seems to develop in our case; formed of [a],[b],[c] sub waves) will make the investors think that the trend has reversed and most of the time reaches the 66% retracement area.        

EUR-USD Technical Anlalysis 2011.10.24

EUR-USD: 1.3900-1.400 is a strong resistance 

The EUR-USD reached for the second time the 1.3900 resistance level as the 1.3660 support hold well in the last week.

Looking at the bigger picture, the 1.3900-1.4000 area is a strong resistance area, given by the previous lows (created in the may-august period) and the 50.00%-61.8% retracement zone of the September decline.

In case of a reverse to the down side, the first important support is set around the 1.3660 level and the next one is down towards the early October lows in the 1.3150 area.

The other scenario is the break trough of the resistance area and targeting the late august highs in the 1.4500 zone. However, if this will be the case, we need to see the current resistance area turning into a confirmed support.  

Short break!

Leaving for Budapest today.
I'll be back on Friday night so NO POSTINGS until MONDAY,  24 Oct.

DAX Technical Analysis 2011.10.18

Looking for a zig-zag down correction

Yesterday’s price action of DAX index broke the most recent trend line and declined sharply toward the 5,750 area.

This down move is likely to continue after a correction (up move) that we are witnessing right now. The main support/target zone remains in the 5,500-5,700 area, set by the 38.2% and 61.8% retracement levels of the previous rally.

If the actual resistance zone (5,880) will manage to attract enough sellers, a more accurate target for the down move will be in the 5,600-5,660 zone. There are the late September highs in this area and the 50% retracement level. The 3 waves down move pattern (zig-zag) scenario keeps its relevance up to this point.

A closer look to the most recent price action (last 24 hours) reveals a resistance zone in the 5,880-5,955 area, set by the 38,2% and 61.8% retracement of yesterday’s decline.

Depending on the reversal level that will probably occur in the next hours, we can establish a down target in the 5,600 zone. However, if the buyers will prove strong enough to break through the up mentioned resistance zone, the next resistance is at the previous high, at 6,080 level.  

DAX Technical Analysis 2011.10.17

DAX Index is loosing momentum

DAX Index gained around 950 points (18.6%) from the 4^th of October until now, the most power being in the first third of the move.

The rally is clearly losing momentum as the multiple trend lines (connecting previous troughs) are showing a decreasing slope. In other words, sellers are becoming more visible and buyers are losing optimism.

If the 6,000 – 6,100 will turn out to be the top of the rally, we are expecting at least a down correction, targeting the 5,500 – 5,700 area. Most probable, the down move will be formed of 3 sub waves (as shown on the chart), creating a break-retest-continuation pattern.

    

EUR-USD Technical Anlalysis 2011.10.17

This is a pretty clear Elliott Wave count

As expected last week, the Euro climbed against the Dollar, breaking into the resistance zone 1.3850-1.4000. This is a strong resistance area as it represents the 50%-61.8% retracement of the September down move.

The Elliott wave count points out a 5^th wave in progression that eventually will be followed by a 3 wave correction (down move in this case). The T1 trend line (connecting 2 and 4 troughs) is the dynamic support of this rally and a break of it will signal the correction.

Wave 3 is extended, composed of 5 clear sub-waves, which sets a possible target of the 5^th wave in the 1.3910 zone (wave 5 = wave 1).   

On the shorter time frame (15min), the rally from early October has developed in 5 waves, the 3^rd being extended and the 5^th being in progress. Analyzing the 5^th wave, we can identify four waves already formed and the fifth (wave (v)) still developing.

The most probable outcome is a 3 wave down move (correction) as soon as wave (v) and 5 will be ended. However, the top of the move cannot be exactly identified, 1.3910 level being a good resistance zone. A larger resistance zone is ending at 1.4000 level.