S&P500 Potential Downtrend Target

The S&P 500 is in a long-term uptrend on this chart and there were two sharp corrections in 2010 and 2011 (17% and 19.7%). A similar correction (18%) would carry the index to the low 1200s. There is, however, a higher support zone around 1300. The spring lows and channel trend line mark support here.

Source: Stockcharts

BRD - The Relative Breakdown against BETXT

Weekly chart of BRD against BETXT.

BETFI Index Rally is Taking a Break

BETFI Index marched higher and shattered the previous post discussed target area around 23 000 points (see daily chart above). The index rallied to the next resistance around 25 000 points until mentioned mid February target. Since then a distribution have started with volume-price divergence which may precede a correction back to the 23 000 area. 

The potential correction is supported by the emerging relative BETFI weakness against BETXT indicated in the daily relative chart below.

In the bigger picture, the weekly BETFI Index before Friday close (see weekly chart below) is still trending up but pausing at the potential internal trend line resistance which may bring a correction back to the broken 23 000 points area. 

The up break of the 23 000 area coupled with the break of the 200 weeks SMA and a bullish 20 and 50 weekly EMAs crossover bring the index in a medium term uptrend that may target the 2010 highs around 34 000 points if last year's highs around 27 000 points are cleared. From this perspective, any pullback may be a medium to long term buying opportunity which should be reconsidered if the index falls below 20 000 points.

The weekly emerging relative strength of BETFI against BETXT following the break of a 4 year under performance (see weekly relative chart below) is also pointing to a medium to long term strong BETFI index performance.

BETFI Index Marches to The Next Target

As discussed in the previous post more than two months ago, the Romanian BETFI Index turned bullish and reached the 20 500 - 21 500 mentioned target area by the end of last year. As also hinted in the same post, this target area was the first stop before going higher towards 23 000 later on this year.

 

In the weekly chart above we see the index challenging the weekly EMA50 that proved strong resistance last year. If successful by the close of this week, BETFI next target is the 61.8% Fibonacci retracement of the 2011 downtrend, the falling weekly SMA200 and a previous congestion area, all converging around 23 000.

In the daily chart below we notice the potential a-b-c correction to the 2011 downtrend with the "c" leg symmetrical with the "a" leg (that reached the previous target area around 21 000) pointing to the same discussed zone around 23 000.

The break of the falling daily SMA200 with increasing volumes in the first weeks of 2012 is also supporting the daily and weekly trending index to reach the next target area around 23 000 until mid February when both monthly and quarterly cycles meet. A longer and deeper correction may follow afterwards.

 

As suggested in the previous post, relative to BETXT, the BETFI Index managed to break out of both daily (chart below) and weekly (chart above) underperformance trends and started overperforming the market which also support the march of the index to the next target. 

The BETFI Index Christmas Rally

In the context of a global equity markets rebound discussed in a previous post, the Romanian BETFI Index is poised to trend higher until at least end of the year. The critical 25 000 points support(discussed in the last post exploring the BETFI Index) gave way shattering any bullish development and starting a long downtrend that may have ended in the beginning of October.

 

We notice in the weekly chart above the end of the weekly downtrend around 16K at the 161.8% extension of the previous rally (roughly 20K to 27K). If the downtrend is broken next week, the index could target the 20 500 - 21 500 area until end of the year and perhaps 23 000 later on.

 

The daily chart below paints a bullish picture showing a 5-wave downtrend move ending around 15 500 with an October test (the 5th wave) of the August selling climax (3rd wave, notice the spike in volumes) and a broken downtrend line accompanied by increasing volume. The uptrending index could target the 20 500 - 21 500 area (previous support, SMA200 and 50% retracement of the downtrend) until end of the year.

Relative to BETXT Index, the BETFI Index is still underperforming on both weekly (above) and daily (below) charts but with good chances to break the daily underperformance trend and perhaps weekly one later on.

Dow Jones World Stock Index Downtrend Correction

As discussed here and here, The Dow Jones World Index moved lower retracing most of the rise from May 2010 to May 2011, as noticed in the weekly chart above. 

The downtrend had an impulsive 5-wave structure (see the daily chart below) which may have ended in the beginning of October setting up an a-b-c correction which can run until perhaps end of November or early December. When this rebound is over, the longer term downtrend could resume. 

US Treasury Bond Yields Leading World Equity Markets Lower

As noted here, here and here, the US 10-year treasury bond yield trends are leading the trends in other asset classes. Last week we had a good example of how US bonds are "leading" the equity markets around the world.

The 2.90 US 10-year Treasury bond yield support level, well discussed in the mentioned posts, eventually gave way and started the plunge on Friday July 29th, as noticed in the updated chart below:

On Monday August 1st, German DAX dropped through key support (6-month uptrend line and 200 SMA), see chart below:

Tuesday August 2nd was the day when key support levels were broken in many equity markets including the US S&P500 Index (levels discussed here, see updated chart below),

the Romanian BETXT Index (levels discussed here, see updated chart below),

and the Dow Jones World Stock Index (levels discussed here, see updated chart below).

Dow Jones World Stock Index - Healthy Correction or More Downside to Come?

As we notice in the weekly chart above, after touching the 178.6% Fibo extension of 2010 spring correction, the Dow Jones World Stock Index correction reached a critical long term support found at the confluence of 2010 - 2011 uptrend, Fibo fan line and the flat weekly 50EMA. A break below mentioned support could quickly target the next two Fibo fan lines support, otherwise the long term uptrend could resume and the world stock markets may challenge the May 2011 highs.

Zooming in through a daily chart below we notice a potential Head&Shoulders formation with a down sloping neck line that was broken, then tested thus the index being now theoretically prepared to drop to at least its H&S projected target that coincides with the second Fibo fan line support. A return above the neck line negates the bearish daily chart view.

If the drop towards the H&S projected target unfolds in the coming days and weeks, the world stock markets will remain under downward pressure.

S&P500 Top Formation

As noticed in a previous post in the beginning of May, "Sell in May and go away!" was a good advice once again. The updated weekly chart above shows the weekly breakout above 1350 was fake and reversed the week before starting a deeper correction and perhaps forming a long term top. We notice the index broke the uptrend coming from the 666 March 2009 lows. The break occurred on the logarithmic scale chart only but usually it precedes the break of the arithmetic scale chart (see below), as well.

The index halted around 1370 where are 76.4% (38.2% x 2) retracement of the fall from the 2007 highs to 2009 lows and 161.8% extension of summer 2010 correction. The internal symmetry is indicative of a potential long term top set in May 2011 which could trigger a deep correction targeting at least the 1000 area (2010 lows and 38.2% retracement of the 2007 - 2009 plunge), thus retracing half the 2009 - 2011 recovery until sometime in 2012.

The updated daily chart below shows the potential 5-wave count which may be completed and the correction that ensued by breaking the uptrend (coming from August 2010) around mid May, as discussed in the mentioned previous post. The correction has touched the targeted rising SMA200 and approached this year lows and the bottom of the corrective wave 4 located around 1250. A break down through this area is extremely bearish and seals a long term top at this May's top around 1370. Nevertheless, the index may stage a rebound preceding the important 1250 area break down while a return above 1350 would suggest the top is not yet in place.

TEL Breakout

TEL finally managed to break through the strong resistance around 22 with high volume and on cycle time, as noticed in the daily chart above. The obvious short term targets are roughly 23.5 (already touched) and 25 but the medium term target could be the area around 27.

In the daily chart below we have TEL relative to BETXT. We notice the breakout above SMA200 and through the downtrend around a double Fibonacci time zone area which sent TEL strongly overperforming the market.

World Stock Markets Indexes Dancing on the Edge of Abyss

The Chinese Shanghai Index

MSCI Emerging Markets Index

The German DAX Index

The US S&P500 Index

The Shanghai Index - Make It or Break It?

The Shanghai Index continued to moved higher, as discussed in a previous post in January, reversing in April from the falling dowtrend (as shown in the weekly chart above). The index is approaching the apex of a huge rising wedge which usually have bearish resolution when broken down.

Nevertheless, as we notice in both the weekly chart (above) and the daily chart (below), the index is testing a daily uptrend line (just above the weekly wedge uptrend line), the rising daily SMA200, the flat weekly EMA50 and the last Fibonacci retracement (which held in the previous two circled instances). The area formed by the mentioned elements around 2800 is key support which if broken, can have strong bearish consequences. Make it or break it?

BETXT Index Correction

The last year high target (around 620) was not reached as expected and discussed in a previous post, the index reversing at the less known 78.6% Fibo level as shown in the weekly chart above and daily chart below.

During last week the index was also affected by dividend adjustments that sealed the break of the daily EMA50 support. Though the negative influence of the dividends may be seen artificial to the index and stocks in general, the collective market memory is not adjusted for dividends and is more likely to react to the same technical levels existing before adjustments. The same rationale is also applied to index composition changes (e.g. recent FP inclusion).

The downtrend should be halted in the important 500 points area (round number, rising daily SMA200 and 1-year recovery uptrend line + rising weekly EMA50) unless long term monthly uptrend is broken and reversed.

S&P500 Recovery Continues

The S&P500 weekly chart above depicts a bullish picture bouncing to and from Fib retracements and extensions. Last week the 1350 resistance was broken on the third attempt heading towards 1440 area and possibly even higher towards the 2007 all time high.

Nevertheless, the daily picture below shows that the recent leg higher could also be the 5th and last one targeting the 1400 - 1440 resistance area until around mid May. A longer and deeper correction could follow afterwards. "Sell in May and go away!" could be a good advice once again!

TLV Potential Breakout

We notice the increased volume supporting the TLV price (daily chart above) pushing into the 50% retracement of the March - December 2010 downtrend after escaping the Fibo fan. The price seems ready to spring through 1.53 resistance targeting at least the obvious 61.8% Fib retracement in the 1.60 - 1.65 area until beginning of May.

Relative to BETXT (daily chart below), TLV is also showing signs of potential overperformance. After a strong underperformance, the stock moved mainly in line with the index since October last year shaping a potential reversal Head & Shoulders formation which may trigger TLV relative strength during the next cycle ending in June.

The BETFI Index Correction

As noted in a previous post, BETFI pulled back from the strong resistance found in the 27 000 - 28 000 points area where wave 3 of the uptrend (started in December 2010) may have ended. An a-b-c 4th wave correction started towards the 25 000 point support area which has almost been touched before reversing higher.

As long as the 25 000 point support area holds, the chances are the 5th impulsive wave starts running towards the 30 000 or even 34 000 area until end of May (see the chart above).

On the daily relative strength chart of BETFI against BETXT (chart below) we also notice a correction that reached support in the EMAs and broken downtrend area from where the BETFI may start overperforming again into the next time cycle.

Nevertheless, on the weekly relative strength chart (above) we notice BETFI is struggling to overperform while still being below the downtrend. We shall have to check if it breaks higher or continue lower during the next cycle.

MSCI Emerging Markets Index is Bullish Again

In the weekly chart (above) and daily chart (below) we notice the breakout to the upside of a 5-month long range (after the top in November discussed here) with high chances of touching 1250 area (Fib extensions and previous 2008 high) until end of April.

In the longer term the new weekly cycle can drive the index further up to challenge the all time highs around 1350 until August 2011.

The chart below is the relative strength of S&P500 Index (proxy for developed markets) against MSCI Emerging Markets Index. As noted in a previous post, the developed markets enjoyed an overperforming trend that seems to have just finished (see the trend break below).

The probability is now tilted to the return of the secular emerging markets overperformance.

ARAX Breakout

Nice breakout in ARAX after managing to escape a range and a Fib resistance.

Short term the move is first targeting 0.18 and then 2010 highs around 0.20 during the new time cycle ending around Easter.

BETFI Index Enter Strong Resistance Area

The BETFI Index entered in the 27 000 - 28 000 targeted area just before end of March as noted in a previous post. The index is trending up but the strong Fibonacci and chart resistance around the 28 000 level can trigger a pullback (see updated chart above).

The break of the 28 000 resistance is targeting 30 000 and then 34 000 later on while a pullback towards 25 000 should be bought with stop loss levels just below.

The BETXT Index Bullish Potential

The BETXT Index has just stepped into a new cycle with a strong bullish potential. As noticed in the weekly chart above, the first stop in the uptrend could be the April 2010 highs and the weekly SMA around 620 and then the 750 area towards the cycle end in August.

In the daily chart above we notice the index is marching towards the April 2010 highs around 620 after entering with a trending mood in a new cycle (ending mid-April until when the target might be touched) and shattering the 61.8% final Fib retracement. With all three moving averages heading higher the picture is bullish while the rising 50-days EMA playing the stop loss level.

Wondering if the recent FP inclusion in the index is distorting the picture? Time will tell but we have no surprises so far and I would bet the targets (and stop losses) stay the same without any needed adjustments.