Markets technical overview and trading signals for the week 19-23 November 2012


Good evening.

Brief recap, we started the week with a lot of nothing. No clear signals, a couple of possible bounce alerts that didn’t come to fruition and supports being challenged across the board. We had a pretty weak week with a strong selloff registered in the last two trading days. Several European indices closed out of the lower Bollinger band.

Here’s what the algo is saying for next week.

Amsterdam AEX

The lower bollinger has not only be tested but smashed with price accelerating to the downside and a close at the lower of the day below the support of 323 and below all the major moving averages. Pretty bad situation, worse than other indices that are still holding a support looking increasingly fragile.

The algo never gave a reversal signal. For those who hold the short  from 337, good job. For those waiting for a bounce play: be careful. On Friday’s close the algo gave an alert signal. The grey triangle is the weekest alert, should a blu triangle appear the chances for a quick bounce play will increase. We are now out of the trading range and it looks like we are starting a down trend. With this configuration of moving averages and price action the signals to pay attention to are the yellow and red triangles. Our gameplan here: no longs: even if we bounce, the reward doesn’t match the risk. We hope for a bounce to 326-330 to start a new long term short.

France CAC40

No clear signals on the CAC40. Price is sitting on the spport around 3350, out of the lower bollinger and in oversold territory, but still looking weak. Should the support fail to hold a possible trade is to try to play the breakdown. I’ll not play the CAC unless a clear signal shows up.


German DAX

Close out of the lower bollinger and below support. Very bad acceleration to the downside. The weak alert (grey triangle) was rapidly negated. As for previous charts, playing for a bounce here may be profitable but frankly I don’t like the risk reward. If we continue to slide and gain momentum we could go to 6800 quickly. Gameplan here: wait to see if we can have a short entry point at the 7100 resistance or play it intraday.


Italy’s MIB

The alert received on Monday brought us back at the 15500 level from where we started to selloff.

Nothing special to add to the descriptions above. No signals, no swing plays in sight except for  intraday plays with intermediate reference points 15400 or 14600.

IBEX35

Surprisingly strong the Spanish index gave us a long play on Monday. Price reached the declining 25 and 50 moving averages that are acting as  strong resistances. The internals of the algo started to reverse but no closing signal appeared because thresholds have not been reached. Longs still open should be closed here in my opinion, the reversal in the algo’s internals is quite strong.


DJIA

U.S. indices falling down the (fiscal?) cliff. This gives me the chance to explain some detail of the algo that  never show up in trading ranges. The images here contains all the signals  (all the triangles). This is useful to because it gives us an indication of the status of the internals of the algo. However, not all the signals are buy/sell signals. A mental filter should be used to trade only in the direction of the major trend. In particular: red and yellow are sell signals in ranging and downtrend markets, green and blue are buy signals in ranging and uptrend markets. Yellow and red signals in strong uptrends or blue and green in strong downtrends only act as an indication of a possible bounce. This is what happened on Wednesday on the DJIA chart.

SP500

Super strong downtrend. My plan is to wait for a yellow triangle to initiate a short. We are very close to the 1334 support and I don’t want to get caught short in the hole. If we get a yellow triangle we’ll initiate a swing short.


NASDAQ100

Same as above: too close to support and too oversold to initiate new swing shorts. Waiting for a bounce and more clear signals.


Conclusion

Weak week in what seems to confirm the beginning of a dowtrend after several months of trading range. However, we are too oversold to put up long term shorts here in our opinion. Either we bounce or we crack and go down very quickly. Too difficult to predict what will happen, the best thing is to stay safe and play only when enough evidence is on our side. Should the market breakdown, we will lose a great short but the market will be there with other opportunities.

I leave you with a look at some useful indicators, courtesy of Barchart.com: the number of stocks above the 50 and 20 day moving average. Both are in hystorical oversold territory, associated to the major reversals registered during last year.

 

If you are interested in more analysis, remember that you can follow updates directly on our twitter stream or by liking us on Fb here.

Don’t hesitate to leave comments below. Also, if you want to see what the algo is saying about some specific stock, leave a message below.

Stay safe.

One Response to Markets technical overview and trading signals for the week 19-23 November 2012

  1. Pingback: Markets technical overview and trading signals for the week 26-30 November 2012 « Mktgeist blog

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