OK, so we got the rebound expected this week. What now?
We should put our attention on the actual levels of SPX and NDX for some clues. Rebound looks strong on daily charts, but if you get into further details the structure of rebound is weak, We know by now that there is no problem with that for the FED to keep pumping stocks, but this time it just ” feels” different.
We will have to wait for the price action to confirm. Also , going into weekly and monthly charts we can not help to notice that they seem due for a bigger correction than the last couple weeks correction. I reviewed all long time wave count and found many harmonics patterns between all stock indexes that point to a larger correction, not only on size but in time.
All in all, main trend still bullish and we have many supports below before we can put it to test, that is another reason why we should expect more downside next weeks. Much work to do below.
Last but no least. we haven’t seen any real panic yet on the selling action, so I am not buying this rebound for now.
As I said last week, 2014 looks to be a very complex year for short time traders. Stock indexes seem to be in wave IIs and Wave IVs on weekly charts, that points to whipsaws , overlapping, multiple wave counts, and finally in lots of $$$ for brokers, algos and the usual suspects with privileged information.
Taking all of this information into account, I will be putting my focus on weekly trading the Stock indexes and not intraday trading them for the following months. I may be wrong and uptrend could resume forever, in that case I would not have any problem getting on into a important breakout (like the failed European indexes breakout couple weeks ago).
This would lead to fewer intraday Twitter updates on levels, short term charts and comments.
I suggest you review your strategy at this stage and plan accordingly . It makes no sense. at least to me, to get caught in this choppy action during the day. What prevails is the main trend and that would be our friend forever. Play safe and have a nice week everyone!
Since last month , NASDAQ has been leading the sales , if you get into further details Tech stocks got smashed for the last months, even before the Nasdaq started to follow.
Some Tech stocks are showing signs of at least a 8- 10% bounce the next days-
This, along that there is no panic selling (at least for now) in other risk assets or strong dollar buying, would put us in a correction only selling mode that could last this month and maybe 3 or 4 % more before buying resumes to higher levels.
Said this, corrections are complex waves , with lots of overlapping and violent movements to both sides, so its a good idea to trade for the long term with wide stops or just sit on your hands(cash) and wait for the dust to settle.
Bullish trend seems to resume and European stocks look much better for the long term than US stocks. It seems strange to imagine much higher levels from this already high prices since 2009, but , maybe there is something cooking on some central bank kitchen for the next weeks. Time will tell.
1730 level very important for SP500 futures (ES). Below this levels the scenario could change to a more bearish outlook.
This is equivalent for :
3417 and later 3300 in Nasdaq futures (NQ)
8700-8500 for the DAX
5900 FTSE UK
Still with some room to the upside before resistance. AUDUSD stronger than EURUSD moving EURAUD into a wave 2 correction for now.
ECB doing some lip service to the exchange rate these last days, but we think they would have to see EURUSD above 1.4000 before they really do some stronger verbal intervention.
All in all EURUSD below 1.3600 would trigger the downside so while it stays above that level we could see it at 1.4000/4400.
Yen crosses continue the bullish trend. They are sitting at a important support right now and poised to breakdown if Risk off continues.
They Nikkei Index is sitting at a similar support at 13800 zone with the last support 13700 before some sell stops are triggered.
We have two counts for the EURJPY .
USDJPY looks like still has one push to the upside if able to hold current support around 101.00.
On the other side AUDJPY looks on its last stages of a zigzag correction to the 98.00 area for a sell signal.
And if you think this pairs have gone as long way, just take a look at the correlation with the SP500 for the last time. Do you think they have room to the upside?
As you could notice, the USDJPY pair still looks much bullish that the EURJPY pair, and AUDJPY, that would support a weak EURUSD and AUD USD for the next months once the reach their resistance levels. Next post.
Until last post, principal stock indexes around the world had nice and clear tops working their way. From last week there seems to be a breaking up developing specially from European indexes.
This week should leave us a clear picture but, if that is the case , we could still have plenty of room above . American indexes $NQ $ES are pretty extended but not the Europeans that look better for a run up.
This leave us with this weekly close as a very important one. If the American indexes recover from the NFP selloff this week, we could see a rebound in risk coming days. We could be taking a special look at technology stocks that lead the decline, any sign of rebound in technology could be the catalyst for a Risk On rally and selling the dollar again.
3440 for NDX and 1740 for SPX are the final support for this correction, anything below we could see a long lasting correction.