This time i am using the weekly chart for the Dow Jones. This is because the minor trend is too volatile and it's hard to gauge the trend of the market. A weekly chart will give more confirmation on the major trend.
On the weekly chart, we can see that there is a well-tested trendline which has been acting as a resistance for 2 peaks and 1 time as a support level. It broke this trendline recently and there is a fair chance that it will go back to test this trendline as a resistance by showing a long wick on the candlestick before plunging again.
Dow Jones Industrial Average Weekly:
For the minor trend of the Straits Times Index, it seems to be bullish since it covered back the gap down as seen on the chart. Currently it is heading north on a very steep channel support line and i am expecting it to test the orange trendline which is similar to the DJIA. If it fails to break this trendline, things will be more bearish.
Straits Times Index:
Personally, if we think that last week was the worse that we have seen, i think it's probably wrong going by the sentiment i percieved so far. There was an article in the New Paper last week which did a sentiment poll on the speculators in the market. The result was that most speculators are still quite hopeful on the outcome of the market. We know that the bear market will end when most speculators feels totally hopeless about the market and they are unusually pessimistic so the worse is yet to come. If u look at the market from a 10 year view, this current correction is just like a small blip. A bear market lasts for around a year to two so i believe the onslaught will still continue.
Maybe i will just quote what one of my friends said,
" So stop hoping for a rebound and accept the fact that we are going down, maybe you'll feel better. Start saving up for the bigger picture!"
Ferrochina seems like a prime candidate to short at around $1.48. This is due to the following technical factors,
1. $1.46 was the level of the August low
2. There was a gap down at around that region
3. It correspond with a fibbonacci retracement of 50%
Ferrochina:
Sunday, January 27, 2008
Weekend review of STI and DJIA
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7 comments:
good comments let me suggest some small things that should make you more professional:
1) Learn and use gap theory. It's not enough just to call a gap a gap, you have to identify it and know how to trade it.
While most gaps are usually closed, some are different. So classify them and state what is to happen next (it gives you, the trader, marching orders); ie pattern, exhaustion, breakaway, or common gap (no signficance).
2) As for the dow, the only thing , in my most humble opinion, we need to look for is the following, the dow transports.
It's very simple really, look at the Dow Jones Transports low for January 17th, 4140.29 and then align that with the low of Dow Jones, 12,099.38, on 18th Jan. Voila, IF they BOTH CLOSE lower than that:
BEAR MARKET on a tear.
They don't, then markets should be up or sideways. Always Try to use the transports with the dow and look for confirmation/ non-confirmation of new lows /highs. When you call that right, you can be adding any Tech analysis you like.
Thanks for the tips on the counters, I'm tempted to jump back into this market, Volatility is a traders best friend.
BTW, as for a good short, on your stock, you just highlighted, just look to the left of the chart, and up, where's the nearest overhead resistence, place your orders few cents below that. It's the low-risk entry.
Keep looking at those counters, I'm interested.
All the best
"When a stock (or commodity) advances into new territory or to prices which it has not reached for months or years, it shows that the force or driving power is working in that direction. It is the same principle as any other force that has been restrained and breaks out. Water may be held back by a dam, but if it breaks through the dam, you would know that it would continue downward until it reached another dam, or some obstruction or resistance which would stop it. Therefore, it is very important to watch old levels of stocks. The longer the time that elapses between the breaking into new territory, the greater the move you can expect, because the accumulative energy over a long period naturally will produce a larger movement than if it only accumulated during a short period of time" …… W.D.GANN
Gold has broken out to new highs, after a period of 28 years. Platinum is also at new record highs and is now pushing usd $1700 an ounce. It's been 28 years since silver made it's all time high of USD$50 an ounce.
Hi nikkei 225 trader, thanks for your comments.
1) I am lacking in gap theory cos prolly when i was learning about it, it did not stir up much interest in me. U are absolutely right about this cos i dun identify the gaps and that sounds unprofessional. I think i should go read up and revise on gap theory again. :)
2)I did came across using dow transports and the DJIA as confirmation and divergence signals. I never really tried to use this before but what i read about it is that back then in the US, the transport was mainly by rail. Nowadays, the economy is much more globalised and transport can include ships and planes. In fact, most of the world's trade are done through the sea. So the components inside the Dow Transport may not be serving their original purpose. However, all those stuff i said are just theoretical. If this has been working for u, maybe i shld give it a try too ! :D
I am actually waiting to short on a technical rebound or a rally but it seems that it's not coming. Still waiting patiently. I hope u are making profits too in this volatile market :)
I'm glad u liked my tips on the counters. Maybe u can offer me some tips too :)
Kay
1) one of the basics of "dow theory" and it's been working since it was created by Charles Dow over 100 years ago.
The numbers are there, it is what it is, or isn't. You want your LOWRISK "short entry," follow those 2 numbers and act on a close/confirmation or lack of dow industrials to dow transports.
(BTW, if you really interested in what shows GLOBAL transportation, follow the Baltic Dry Index - measures global shipping rates, and that's down -40%).
2) I trade futures, intraday. Volatility is our friend.
4) The sti has made a 3pt "bottom" on it's 99/120 minute chart. In these kinds of fast/volatile markets, end-of-day charts might not present the whole picture and/or in a timely fashion.
I'm not into counters as much as when it was bull city 2 years ago. Have shifted to the futures. But I follow STI closely. I'm LT bullish.
5) Volatility, the more you have, the more likely we'll be where we started come year's end.
http://stockcharts.com/charts/gallery.html?%24vix
True meaning of relative strength; understand ratios and you'll understand how to interpret. Same can be used on stocks to identify weakness/strength.
http://stockcharts.com/charts/gallery.html?$sti:$gold
http://stockcharts.com/charts/gallery.html?$nikk:$gold
http://stockcharts.com/charts/gallery.html?$sti:$xjy
look at how the Yen drives the STI; yen is getting stronger, STI/ counters getting weaker. Follow the Yen closely and you'll be able to call the direction of the market with more accuracy.
The above doesn't negate the use of Technicals, however there are times, like now, where "other things" are more important.
I just gave you a way to know what will happen with a lead of 1 or 2 days.
Good luck, 99% of anybody can't take this info and use it. It's called, lead a horse to water but can't make him drink. You appear young so I offer it; see what you can do with it.
And if I've confused you, never mind:)
Addendum to my post on W.D. Gann.
Blue line is Gold, London PM fixe; red is Tokyo gold (grams).
http://www.mmc.co.jp/gold/market/g_data/past5.html
I liked what u posted and it got me curious about some stuff.
Thanks for pointing out the Baltic Dry Index. I dun really know much about this index but since u said it measures global shipping rate, I think it is definitely worth a 2nd look. Is there anything else I should know about this index that can help me in forecasting the market ? :)
I have encountered the vix by following Rallyartist's thread. But my experience with it is very negligable. Can u tell me on how i can utilize the vix further ?
I think I will spent some time looking at the JPY charts before asking you more questions.
Ur comments has been very enlightening and it's not very confusing :D U pointed stuff which I can't find in standard books and thanks for pointing all these out. Is there any way i can contact you say through mail perhaps if u dun mind ? :)
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