Major supports

Completely subjectiv but defitively something to watch for the coming days.




"click on the table to enlarge".

US Bank index

The BKX bank index in the U.S. tested long-term support at 60 and will likely attempt to hold that level over the near term given that the index is very oversold and down approximately 30% over the past two months.

Sensex

How do me know when the trend has changed?
I use a simple method : the 1,2,3 trend reversal.
On this long term weekly chart of the Sensex (India) we can clearly see that the uptrend line was broken in March 2008.
This was the first part of the method.
The second part of this method is the pull-back and the lower high happening in May.
Part 3 which complete the reversal pattern is a lower low.
For this we have to wait for an eventual break below the support zone (dot red line).

Elliott waves bear market potential target

"click on the chart to enlarge"

According to the Elliott waves theory the bull market active since end 2002 ended in October 2007.(wave 5)

The chart below of the SP 500 shows that the decline into January was a nice "A" wave.
This was the first leg of the correction.
What we saw from January through May was the "B" wave higher, which essentially corrected the first correction.
As you can see the impulse waves, (decline from October) unfolded in five wave and the rally through May was arguably three waves.
That leaves us with the current decline now just getting underway.
The "C" wave is usually as long as A, but may often be 1.62 x A.
So the downside target of this bear market for the SP 500 could be between 1130 and 1075.
This last number corresponds to the bottom of the wave 4 of the last bull market.(horizontal line on the long term chart above)

A & C are (mostly) 5-waves

€/$

The rate rebounds strongly at the support zone around 1.54.

Sideways trading is expected between this zone and 1.6.

The long term trend remains bullish.

Buy&Sell DJ Euro Stoxx 50 and Dow jones Industrials

"click on the tables to enlarge"

Commodities bubble?

The first chart is a long term relative chart of the CRB index versus the SP500.
The second one compares the materials sector weight as a percent of the SP 500.Looking at these two charts I do not see a bubble.
On the contrary I'm still long term bull.
The last chart compares the financials sector weight as a percent of the SP 500 : this is not a great chart!

Sector relative strength

Each chart, rising (falling) lines indicate periods where the sector is outperforming (underperforming) the Stoxx 600.
While the economy remains weak, sectors that typically benefit from a weak economy have not been acting particularly well.
Recent action in the Food&beverage, Health Care and Telecoms sectors has been very poor.
I have started to see renewed interest for defensive sectors since last week and it may be time to favoring Food&beverage and Telecoms sectors after their strong decline.
It's not just defensive sectors that have been presting badly .
Financials and Technos remain in a pronounced downtrend.
Utilities continue to run into resistance at current levels.
Finally, Materials and Oil&Gas continue to trade in nice uptrends.
Although both of these sectors are trading at the upper end of the range, any weakness in them as they approach resistance is likely to be temporary.

US long term yields

Yesterday, the US 10 year bond yields broke the 4% and the declining 200 day MA.(green line)
The mid-term technical target of the bullish ascending triangle is around 4.7% for the coming weeks/months.

Brent

Le Brent arrive désormais à la hauteur d'une zone de résistance majeure vers les 130-135$, ce qui correspond à la borne haute du canal haussier sur le graphique long terme.
Actuellement, cette plage de cours a de très faibles chances d'être dépassées sans la réalisation préalable d'une correction.
Le marché est clairement en état d’exagération et les indicateurs techniques déjà fortement surachetés perdent en puissance.
De plus le volume récemment constaté est très important (configuration de blow-off) ce qui est souvent une indication de fin de cycle à court terme.
A plus long terme l’objectif reste 150$ mais avant le prix du baril devra faire une pause, ce qui implique une correction.
Le premier support à surveiller se situe vers les 120$ mais une correction plus importante comparable à celle récemment observée sur l'once d'or (15%) est tout à fait possible.

Short term decline or new bearish leg?

After failing to break above the 3900 resistance level the DJ Euro Stoxx 50 may start a correction.On this hourly chart, you can clearly see a break of a bullish ascending trendline.The first support zone is 3700.

If the index failed to rebound in the coming days, there is a high probability of extending the slide towards the lower part of the rectangle. (daily chart-support around 3500)

New all time high for the Baltic Dry Index

This index is a measure of shipping costs for commodities and reflects strength in the global economy as well as strong demand for raw materials.

This is good news for energy and materials stocks.

Still bullish

In the US, the SP500 was able to remain above the important level of 1400 and is now testing the falling 200 day moving average.(green line)

The index now faces short-term overbought pressures and it may have some difficulty climbing above it.

The good news is that price momentum, patterns and investor sentiment suggest conditions are still supportive of further upside gains.(mid-term target is 1540)
The bad news is that the rally continues to be very selective, driven primarily by basic resources and energy stocks.
This rally needs to broaden or it may fail in the coming weeks.

In Europe, the DJ Euro Stoxx 50 and the Stoxx 600 were not able to break above resistances (respectively 3900 and 330).
This is an indication that bearish traders are more active near resistance zones.
Nevertheless, I still think new breakout attempts are likely in the coming days.

Short term pull-back?

Last week, the SP500 rose above the important level of 1400, which open the door to the 1540 level for the coming weeks.
In Europe the DJ Euro Stoxx 50 failed to break above 3900.
So far, I estimate that a break through 3,900 is still likely but a failure to confirm such a breakout by the end of next week would force me to reassess this scenario.
On a long term basis, I still believe that the current move is only a bear market rally and is probably not the start of a new secular bull trend.
On a short term basis the market is moving into an increasingly overbought position. (see chart below)
That could suggest that a short-term pullback may occur over the next one or two weeks but as long as we have the SP 500 above 1390 I don’t expect any major negative surprises.

India

This chart of the Sensex index (India) looks promising.

After a positive divergence (RSI lower panel), the index broken up the downtrend in mid-April .

Moreover, today it was able to reintegrate the bullish trend active since June 06.

Bund

The German 10 Yr yields broken up the downtrend which has been in place since June 2007.
Expect yields to advance further towards 4.30% or even close to the peak of 2007 (4.70%).

A bottom end April?

The equity markets remain rated short-term neutral. The scenario remains unchanged looking for a breakout above resistance zone, which will resume the medium-term bottoming process.
It is still expected to come towards end of April(weekly SP 500 chart with cycle finder and Fibonacci time projections) as it seems that most indices will probably try a bullish exit of their trading range. (daily chart DJ Euro Stoxx 50).

China

The CSI index has fallen over 35% from its high in January to its low to date near 3545. (double top pattern)
According to this chart the index could fall another 10% before testing the long term ascending trendline.(arrow)

Test of the lows?

The short term uptrend seems broken for the DJ Euro Stoxx 50 (upper chart) and in the same time we have a classical " flight to quality" for bonds.(German 10 years yields-lower chart).

SP 500

Why I remain mid- term carefully bullish for the SP 500:


-high level of pessimism, which is bullish from a contrarian point of view.
-during the March retest most technical indicators failed to match the new price lows (positive divergence)
-The fact that the market ignores the recent bad news (e.g. macro economic data, inflation, banks), indicates that the mood has changed.
-According to Fibonacci time zones, the bias for April should be bullish.
-insiders and “smart money” (commercials) are bullish.
-67% of stocks in the S&P 500 were above their 50-day moving averages. This is the highest level of the year for the breadth indicator, even though the index itself has not made new highs.
This is positive news for equity markets, since a majority of stocks are beginning to break out of their downtrends.
-According to Elliott waves analysis, the downside target for the bearish A wave ( from a double top pattern) was reached in March and a bullish corrective B wave is underway.
-The weekly Macd indicator is close to be bullish which increases the probability of a breakout above resistance.

A break above resistance zones ( 3900 for the DJ Euro Stoxx 50-1415 for the SP 500) would be very positive.
The initial upside target for the S&P 500 is 1560 if the index breaks above its February peaks.

On the negative side we have :
-short term bad risk return because of strong resistance zone ahead
-lack of volume (divergence with price).
- still a trading range and no bullish reversal pattern yet.
-Equity indices are trading below the falling 200 day moving averages.