US markets short term analysis

‘Sell in MAY and go away’ has come early this year.
April 19, 2013
Is EURUSD starting to discount a rate cut?
April 23, 2013

US markets are trying to bounce upwards from the support levels created by the early April lows, despite the weakness that is visible across most European Indices, even the major ones.  We have mentioned many times that the upward move from last November is near its end or it has already ended. After both S&P and DOW have made new all time highs, a sharp pull back to test April lows was witnessed. Prices fell below that level only at intraday level and not at a daily close level. This does not mean that should not be worried. The only thing that we should wait to confirm that a top is in, is a close below the lows made on April 19th.

spxD

Both indices have broken their upward sloping channels. Both have made 5 waves up from last November. However there is no clear 5 wave downward move and both support levels mentioned in previous posts were only broken intraday and not on a close basis.

DOWDAILY

What to expect next. still have some slim hopes of a renewal of the upward trend since prices did not close below support. on the other hand will try to increase selling pressures after an expected short lived upward bounce. We believe a move towards 1566-74 for S&P and 14700-800 for DOW is to be expected as buyers that bought near the support will try  to push prices higher.

We believe that after this upward bounce it is more probable to see selling pressures in US indices that will finally break support levels.

spx60M

However as mentioned before we should respect the support and resistance levels. The decline looks more corrective than and therefore short trades should be made with extreme caution. The only correct stop level for short positions is the April highs. The only correct stop level for long positions is Fridays low at the 1535-40 area in S&P and the 14450-14400 level in Dow.

dow60m

Additionally, if both indices break support or resistance levels, then the trend and direction signal will be stronger. If one of those indices diverges relative to the other, then be extra cautious.  Concluding, we are at a certain pont were positions should be taken near important levels to minimise losses. The market makes violent swings at times and it is very important when we enter our positions. We are downward biased with a view that the rise from November is over and we should expect at least one to two month corrective pull back towards at least the 38% retracement.

As always, thank you for taking the time to catch up on my thinking.

A term used to describe a trader who is expects that a particular asset – be it a commodity, currency or product – to rise in value. The opposite of a ‘bear’.

The idea is that bulls attack by bending their heads and poking their opponents upwards with their horns, symbolising the fact that they are buyers, driving prices up.

Beliefs held by the aforementioned ‘bulls’ of the trading world, are described as bullish. Characterised by a generally optimistic outlook on the state of a given asset, a bullish outlook would suggest that a rise in value is imminent. Opposite of bearish.

A term used to describe a trader who is expects that a particular asset – be it a commodity, currency or product – to rise in value. The opposite of a ‘bear’.

The idea is that bulls attack by bending their heads and poking their opponents upwards with their horns, symbolising the fact that they are buyers, driving prices up.

Beliefs held by the aforementioned ‘bulls’ of the trading world, are described as bullish. Characterised by a generally optimistic outlook on the state of a given asset, a bullish outlook would suggest that a rise in value is imminent. Opposite of bearish.

A term used to describe a trader (bear) who is expects that a particular asset – be it a commodity, currency or product – to fall in value. The opposite of a ‘bull’.

The idea is that bears attack by getting up on their hind legs and striking their opponents down with their paws, symbolising the fact that they are sellers driving prices down.

Beliefs held by the aforementioned ‘bears’ of the trading world, are described as bearish. Characterised by a generally pessimistic outlook on the state of a given asset, a bearish outlook would suggest that a fall in value is imminent. Opposite of bullish.

impulse-wave-rules

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.