Thursday, 19 May 2011

Turning Point Confirmation

Morning All,

Asia had a strong session yesterday that was followed by a strong trading day in the US overnight. Yesterday, I saw a number of bullish patterns lining up and posted about a bullish turning point in Equity markets: Last night's follow through triggered many of these patterns and I am looking for more gains in days to come. Advancing issued closed 3.5:1 vs declining issues which I believe confirms this tradeable low. If this is the genuine deal, Asia should go from strength to strength as we close out the week.

S&P 500 60mins:
Price traded back above the 1330 breakdown level confirming the A=C down pattern. Look for breaks of this downward trendline to add, targeting back up to the Daily highs at 1370 and beyond.

S&P 500 June Eminis 60mins:
This 3 Lower Peak pattern worked a treat last night. 3 lower lows in price with 3 higher highs in the momentum indicator are strong indications of a change in trend.

Nasdaq 100:
The upward trendline held and the bearish break of the flag looks set to be a bear trap. Since the liquidity driven bull run began in 09, bearish flag patterns and the like have FAILED to play out. In fact, the trade has been to fade these classic patterns once a confirmation signal has been given. If price recovers from the previous break, get long. There was a v.interesting post the other day by Peter Brandt who highlighted a number of bearish flags:–-a-sign-of-death/. I stated in the comment field that such flags have actually been very poor performing patterns and great setups to actually do the opposite of anticipated.

EUR 60mins:
The EUR has also broken out of the downward sloping trendline confirming a possible transition from downtrend into a new base/uptrend. Look for breaks of 1.43 for more strength up to 1.445/1.45

Asian Equities are primed for a strong thrust higher here. If this doesn't work, then I fear this market really is tired.

SPI June 60mins:
This is the ending wedge pattern I have been showing for a while. We are set to breakout today

SPI June 15mins:
This morning we are indicated at 4725. As you can see, short term res comes in right here at 4725/4730. Look for breakouts of this zone for a move up to 4760 and then 4785+. I think we will be well bid on any dips down to 4715/4710.

BHP Daily:
I showed this upward sloping trendline off the 08 lows a few days ago. The stock tried to breakdown but has recovered very strongly and formed an Island Reversal candle pattern. Once again note that the intal close below the trendline may have trapped many bears and people calling for a crash etc. Failed signals are often the best trading patterns. This is a GREAT risk/reward trade to get long above 45.

Finally, China is putting in a solid low here with follow through. This has been my area for a long while and finally price is beginning to confirm the setup.

Shanghai Composite Daily:

In sum, I believe that we are on the cusp of good tradeable bounce here in many markets. I am not sure yet how high this can go and for how long. This should not be our concern as we trade first, ask questions later. Certainly, there are some indices that are looking toppy and there are concerns out there as ever. However, the doom and gloomers have been at it again but this market is still clearly in an uptrend and we are now breaking out of consolidation patterns. When an edge appears and setups align, you have to be willing to pull the trigger and go for it.