One of the best contrarian indicator gives buy signals

Numerous global indices were deeply oversold and are now trying to break out.
Dj Euro Stoxx 50, Russia, Brasil, Netherlands, Helsinki, Ireland.. all are flashing short term TD Sequential (12/13's) buy signals.( green arrows)

Short term breakout?

While all my long term technical models are still bearish (chart1), I suspect that the SP500 made a short term bullish breakout yesterday.
As you can see on this daily chart, the index was able to rise above an horizontal resistance and is now close to break the downtrend active since May 08.
Today will be an important day as the DJ Euro Stoxx 50 will try to challenge the 3400 level.

End of this rally?

In such sustained bear markets, trend reversals are usually very sharp (V bottom pattern) and amplified by short covering. This is why we I'm not sure that the recent bullish rally will be sustained as the SP500 and the DJ Euro Stoxx 50 are now close to resistance zones (respectively 1300 and 3400)

The Financials stocks are probably the key here as the rally in US financial stocks has driven prices near a key Fibonacci level.(38.2%)

A failure to break above the 72 level could see the index drop back quickly.

€/$

The US dollar continues its short-term rebound and continues to profit from falling commodity prices.A trading range is expected between 1.6 and 1.54

Short term bollinger buy&sell signals DJ Euro Stoxx 50

"click on the table to enlarge"

Brent

The Brent recently validates a minor double top pattern.

The minimun target of this bearish pattern is 115$.

The long term trend remains up.

SP 500 Elliott Waves targets Part 2

The trend remains bearish for the SP00 and all technical bounce attempts have failed so far.

As you can see on the chart, the targets of this “devastating” C wave for the SP500 is

C= A : 1163.61

C= 1.38XA : 1066.84 (note that this corresponds to the bottom of wave 4)

C= 1.62XA : 1005.73

Bear markets sometimes extend well beyond what we can imagine.

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.