With the ECB announcing the start of its own version of QE yesterday, the markets although where a bit confused in the first few hours, buyers overwhelmed sellers and pessimists and pushed indices in Europe and USA higher canceling any short term worries for possible crash. Fears of GrExit and and ‘bad’ economic news from China where forgotten in just a few minutes as both SPX and DAX managed to break above important resistance levels. DAX
With the DAX index holding above 10100 previous highs and trend clearly bullish with higher highs and higher lows, it was an easy task to decided to do what would happen if 10300 was broken. With price above the Ichimoku cloud in the daily chart, DAX was consolidating between 10300 and 10200. Then I tweeted this to my Premium Services subscribers of my real time Twitter trades and signals on Indices.
DAX has made an impressive daily candle yesterday and that is why I decided to hold on to my long positions and ride the bullish trend as long as it last. The QE announcement is very important and favorable to German Dax. Current price formation is very bullish as the upward moves are impulsive whereas the pull backs are of a corrective nature.
US indices where recently lagging behind the German DAX but lets not forget that they already have made new all time highs. In my last analysis for the SPX I posted a bearish scenario where we could see 1920 IF we managed to break below 2000 and IF we managed to hold below 2040-50. Breaking above that resistance area cancels any bearish scenario towards 1900 and confirms that the lows at 1988 are going to hold for some time as the bounce is expected to unfold up towards 2100-2150.
With SPX breaking above the Daily Ichimoku cloud area we can say that there is much more upside potential than downside. Bulls are now back in control of the market and I expect to see 2100 soon.
The decline is far from impulsive. The structure of the decline is in 3 waves and this does not support more weakness to come. On the contrary I expect the market to continue higher to new highs specially now that the trend line resistance was broken and prices moved above the Ichimoku cloud as shown in the 2 hour chart above.
A few weeks back I mentioned that traders should see the pull backs equity indices make as their last chance to board the bullish trend train. With Mario Draghi and the announcement of the European version of QE the rocket has been launched. Concluding, I remain bullish both in the short- and long-term regarding equities.