Dow, S&P500, Nasdaq still bullish

DJIA ? Heading for 2009 high (bullish)
S&P500 ? Heading for 1035 resistance (bullish)
NASDAQ ? Strong rebound at 6-month uptrend line (bullish)

Dow Jones Industrial Average (DJIA) ? Heading for 2009 high

Retesting 2009 high: The index could be heading back up to re-test the 9628 level (2009 high) in the days ahead after rebounding strongly last week.

Bearish divergences: However, with the RSI and MACD indicator still signaling a bearish divergence to the price action in the last 1 month, the 2009 high could prove too strong an obstacle to overcome.

S&P500 ? Heading for 1035 resistance

More upside in the days ahead: After breaking above the key 1000 level, we could see the index heading towards the 1035 resistance in the days ahead.

Warning signs from indicators: However, with both the RSI and MACD indicators showing bearish divergence to the price action currently, the index could potentially be heading for another significant correction if it fails to conquer the 1035 resistance.

NASDAQ ? Strong rebound at 6-month uptrend line

Heading for 2009 high: With the index rebounding strongly from the 6-month uptrend line, we could see further upside in the coming week towards the 2060 resistance (2009 high).

Beware of bearish divergence signals:With both the RSI and MACD indicator already showing bearish divergence to the price action, it pays to be cautious as the index look to re-test the 2009 in the days ahead.

Sponsored Links

Nasdaq and S&P500 hard to clear the resistance - tone turn bearish

NASDAQ - 2000 key resistance proved too tough to clear

Further correction likely: The continued failure to stay above the key 2000 resistance level could see the index heading lower still in the coming week.

Indicators showing bearish signals:With the RSI on the verge of falling out from the overbought level and the MACD initiating a bearish crossover last week, they also suggest that the downside momentum is building up.


S&P500 - Hovering at key 1000 level

Hovering at 1000 key level: The index is currently hovering at the 1000 key level and it could still break either way.

Technical indicators favor correction:But with both the RSI and MACD indicators looking to head lower, the risk is to the downside.


Dow Jones Industrial Average (DJIA) - Tone has turned bearish

A tall order to reach for the 9652 resistance:After maintaining above the 9000 key support successfully, the index may struggle to reach the next resistance at 9652.

Technical readings point bearish divergence:This as the RSI has shown a bearish divergence to the price over the last 3 weeks and the MACD indicator are showing signs of a bearish reversal, both suggesting that the tone is starting to turn bearish for the index.

Dow and S&P500 - Still some room for further gains

Dow Jones Industrial Average: Still some room for further gains

Increasing by more than 600 points since early Jul 09. Wave 4 within the Dow Jones Industrial Average (INDU Index) may have ended sooner than we thought as the index continues to rebound off its low at 8,087. With the candlesticks depicting successive higher highs and higher lows which indicate that the trend is positive, we believe that the current Wave 5 could still push the index up even further.

Trading opportunities are present. The various technical indicators are also looking bullish. The MACD chart has just produced a centreline crossover while the bollinger bands have started expanding, signifying that the bullish trend has further room to go. Short-term investors are recommended to ride on this uptrend before the Dow meets with its resistance.

Resistance is outlined at the 9,155 – 9,159 range where a series of daily highs are situated. On the other hand, immediate support is located at the 8,363 – 8,392 area where the 14 and 21-day moving averages reside. South of that, stronger support at the 8,076 – 8,093 region is available to cap any further downside pressures.

S&P 500 Index: Trading outlook is similar to that of the Dow

As with the Dow, we have also revised our Wave Count for the S&P 500 (SPX Index) and we now believe that the current Wave 5 coupled with the string of higher highs and higher lows in its candlesticks should propel the S&P higher. The expanding bollinger bands and the centreline crossover within the MACD chart are similarly signaling that the underlying trend is bullish.

Key levels to note. Resistance is seen at the 1,001 – 1,007 area where a series of daily highs are situated. Meanwhile, immediate support is identified at the 905 – 910 range where a technical gap and the 14 & 21-day moving averages converge. Stronger support is also available at the 870 – 875 region as represented by the lower bollinger band and the 200-day moving average.

Technical Chart on STI and Dow

Very unpredictable... Straits Times Index (Strategy should be Sell first and wait for pullback)


Now that the Guppy ST-MAG (short-term moving averages group in white) has managed to cross above the LT-MAG (Long-term moving averages group in red). This has caught us by surprise. For a medium term perspective, we should stay neutral and adopt a trading stance for this summer.

Dow and S&P500 both bearish trend

Dow Jones Industrial Average: Trend is bearish but support is just around the corner

The Dow Jones Industrial Average (INDU Index) performed against our expectations and broke below our quoted support level at 8,213. While this also resultantly means that our forecasted 5-Wave Triangle consolidation pattern is no longer at play and that further downside should be forthcoming for the Dow as it rides on the current Wave 4, note that support which is just around the corner from present levels should serve to cap any additional downside. The bearish centreline crossover within the MACD chart is also painting a negative picture for the Dow.

Support at the 7,987 – 7,995 area is expected to be robust, as this is where the 61.8% fibonacci retracement of Wave 3 is seen. Furthermore, the 100-day moving average also resides in this region – we therefore expect this level to hold up against any further downside pressures. Resistance, on the other hand, is available at the 8,560 – 8,580 area where a series of daily highs are identified. Aggressive traders may try to buy a bounce off the support level to engage in some scalping.


S&P 500 Index: Further room to fall as compared to the Dow

More bearish than the Dow. Similar to the Dow, the 5-Wave Triangle Pattern that we have previously forecasted for the S&P 500 (SPX Index) is now invalid after price action during the previous week performed against our expectations. Note that, however, while the current Wave 4 is also expected to pull the S&P down, support to cap the potential bearishness is not available in the nearby vicinity as opposed to the Dow. The 14-day ADX that is moving upwards also signifies that the downtrend is picking up steam.

The S&P may continue to lose ground until the 847 – 851 support area where the 61.8% fibonacci retracement of Wave 3 and 100-day moving average is situated. Initial resistance, on the other hand, is seen at the 898 level where a series of daily highs are seen. Additional resistance is also available at the 927 – 931 range where another series of daily highs reside.

Dow medium term still pointing down

DJ INDU AVERAGE (Medium Term trend is still pointing down....So sell into any strength)

Dow - Guppy Chart Bearish Signal

Dow Jones Industrial Average - as you can see the ST Group of Moving Averages (White) has fallen below LT Group of Moving Averages (Red).....a clear SELL signal.

Dangerous if DJIA break below 8,250

Please take note that unlike other chartists, the 200DMA I used is a smoothen MA known as EMA. As such you may ask why my DJIA chart is below 200DMA compare to other which saw their DJIA above 200DMA.

DJIA - as you can see it is unable to cross my 200DMA line (Blue color) after many many attempts. The recent pullback has started to see another bearish signal, i.e the short term moving averages or STMA (group of lines in white) has penetrated the Long term moving averages or LTMA (group of red lines) as defined by Guppy as a Bearish signal. As you may know, once the STMA goes under the LTMA, a downtrend will be established

Dow and S&P500 technical chart view

Dow Jones Industrial Average: Consolidation expected by virtue of triangle formation

Performing as anticipated. We have previously wrote that we were expecting Wave 4 to drag the Dow Jones Industrial Average (INDU Index) to lower ground with support seen at the 8,165 – 8,246. Our forecasts turned out to be rather inline, given that the index lost more than 4% in a fortnight and attained a trading low of 8,259 which was just slightly above our support level.

Range trading expected. However, given the muted participation as evidenced by the decline in trading volume during the 361-point retreat in the Dow for the last two weeks, we believe that a 5-Wave Triangle pattern within the present Wave 4 is in the making. This indicates that the Dow may consolidate, further evidenced by the bollinger bands that have stopped expanding.

Key levels to note. The Dow is forecasted to bounce within the quoted resistance and support levels with its trading range expected to contract further in the short-term. Resistance is identified at the 8,877 – 8,928 area, courtesy of the 100% fibonacci extension of Wave 1 and the upper bollinger band. On the other hand, support is positioned at the 8,221 – 8,259 region by virtue of the lower bollinger band and a series of daily lows.


S&P 500 Index: Range trading expected

Expected to turn in a performance similar to the Dow. We have previously mentioned that the move above the 100% fibonacci extension of Wave 1 at the 945 mark by the S&P 500 (SPX Index) had represented a false breakout as the latter eventually lost 28 points in a span of two weeks. We had also written that the S&P is expected to resume its usual trend of trading inline with the Dow – this view remains.

Consolidation in the pipeline. The 5-Wave Triangle pattern seen in the Dow is also expected to occur for the S&P as well while the bollinger bands similarly cease expansion. With the S&P forecasted to consolidate, resistance is identified at the 956 – 960 area as represented by the tip of Wave 3 and the upper bollinger band. Meanwhile, support is located at the 888 – 892 range as outlined by the lower bollinger band.

Dow at critical support and STI support levels

DJ INDU AVERAGE=8,504 (At critical support at 8,497 - yellowline 34SMA)

Renewed worries about the economy surfaced on news of a seventh monthly drop in industrial production, which overshadowed better-than-expected reports on home construction, building permits and inflation.

But most market watchers believed that the temporary pause (pullback) is necessary for the market to move higher later ? in fact, many said they would be alarmed if the market had continued to move up in an unbroken line as this would suggest indiscriminate buying.

Besides the mixed economic reports, the weaker USD and its impact on commodity prices and Treasury yields has become another of investors' main concerns.

For STI

Nevertheless, we can expect to see a retest of the same support, now at 2278, as our key support remains at 2194 (23.6% Fibonacci retracement of the recent surge from 1455 to 2424), which is also close to the lower Bollinger Band.

We peg the major support at 2053 (38.2% Fibonacci retracement of the same rally), which we think is unlikely to be tested.

On the sell-down has abated, we are still looking for the index to edge higher towards 2465, although 2400 may continue to pose as a stiff resistance.

Next Resistance level: 2465 (Double-bottom objective)
Immediate Resistance level: 2400 (Psychological cap)
STI Current: 2288.16 (Last close: -1.2%)
Immediate Support Level: 2194 (23.6% Fibonacci retracement of Mar rally)
Next Support Level: 2053 (38.2% Fibonacci retracement of Mar rally)

Technical Analysis on Global Indexes

Straits Times Index: Appearing toppish, now targeting 2,220

No longer bullish. Elliot Wave Count on the Straits Times Index (FSSTI Index) highly suggests that Wave 5 has been completed when the index hit a high of 2,424 as it is matching Wave 1 with utmost precision ( Elliot Wave principle suggests that Waves 5 usually travel the 100% of Waves 1 ). Furthermore, with the 14-day RSI still remaining in overbought territory, we do not recommend investors to engage in long positions at present levels.

The long-awaited correction could occur very soon, as the current Wave A is expected to translate into losses for the STI. Nevertheless, there is also the possibility that the STI could first enter a consolidation period before staging a move lower, as markets do not always move in a straight line. Initial support is identified at the 2,220 – 2,234 level, as outlined by the 61.8% fibonacci retracement of Wave 5 and a series of daily lows. Further support is also seen at the 2,094 mark where the 100% fibonacci retracement of Wave 5 and the lower bollinger band converge.

Meanwhile, although we do not foresee resistance at the 2,424 – 2,433 level to give way, additional resistance is nonetheless available at the 2,605 – 2,622 zone. This level signifies the 161.8% fibonacci extension of Wave 1 and a certain technical gap.

Shanghai Composite Index: Approaching inflexion point, trend to turn bearish

Bullish trend was inline with expectations. Price action of the Shanghai Composite Index (SHCOMP Index) was bullish as we had forecasted but overshot our target of 2,743. However, the current breakout move arising from the Symmetrical Triangle formation seems to have hit exhaustion while Wave Count suggests that Wave A may be kicking in very soon. We thus are no longer bullish on the index.

Reaching inflexion point. As Waves 5 usually travel the entire price length of Waves 1, the index may have already seen the completion of Wave 5 when it hit a high of 2,791 which is very close to its target at 2,808 ( Wave 1 = Wave 5 = 2100 – 1664 + 2372 ). Coupled with the 14-day RSI trading very close to overbought levels, we do not expect the index to break through this resistance mark. Nevertheless, should it occur otherwise, its next level of resistance is seen at around the 3,071 mark as represented by the 161.8% fibonacci extension of Wave 1 – the next most likely target for Waves 5.

Pullback to occur, initial price target at around 2,650. The impending downtrend in the form of Wave A should encounter its first support at the 2,635 – 2,668 area where a technical gap resides. Should this level fail to hold, additional support is identified at the 2,536 – 2,539 range as represented by the 61.8% fibonacci retracement of Wave 5 and the lower bollinger band.

Dow Jones Industrial Average: Resistance just around the corner, bullishness to subside

Current Wave 3 may end soon. We have broken down our Wave Count for the Dow Jones Industrial Average (INDU Index) into sub-waves and we now reckon that the index is presently riding on a Wave 3. With the 100% extension move of Waves 1 being one of the price targets for Waves 3, it is highly probable that the Dow may have limited upside left in the short term, given that resistance is just around the corner.

Should Wave 3 travel the 100% move of Wave 1, initial resistance is identified at 8,899 ( 7931 – 6469 + 7437 ). Given that the MACD chart is looking flat, however, we do not expect this level to be broken. Nevertheless, should events happen otherwise, the next resistance should beseen at the around the 9,794 – 9,803 area. This level represents the 161.8% fibonacci extension of Wave 1 and a certain daily high.

Should the index fail to take out the 8,899 mark as we have anticipated, price action could then turn bearish resultantly. Support, located at the 8,156 – 8,246 range as identified by the 50- day moving average, the lower bollinger band and a series of daily lows, would be expected to cap any downside pressures.

S&P 500 Index: An impending turnaround

As with the Dow, the S&P 500 (SPX Index) has also been broken down into sub-waves. While its Wave Count may be similar to that of its counterpart, note that the S&P could have already over-extended its run as its current Wave 3 has traveled slightly more than the 100% of Wave 1. Coupled with the flattening 14-day ADX which signals that the present trend is no longer gaining strength, it is thus possible that the S&P may turn down anytime soon.
Resistance just ahead. Initial resistance is situated at the 951 mark, courtesy of the end of Wave 3 and the upper bollinger band. Should price action appreciate above this level, further resistance is then available at the 1,044 – 1,047 region as represented by the 161.8% fibonacci extension of Wave 1 and a certain daily high. On the other hand, should the index turn bearish from present levels as we had forecast, support at the 878 – 881 area as outlined by a series of daily lows should serve to prevent any further declines.

Hang Seng Index: Not looking bullish

Not looking positive. The Hang Seng Index (HSI Index) has seemingly completed 5 waves up while the impending 3 waves down is expected to drag the index down to lower levels. With the present Wave A still in its infancy stage, we recommend investors to cash out before any additional downside unfolds. The MACD chart that is currently flattening out also signals that the HSI is no longer bullish.

Initial price target at 17,340. The present Wave A is expected to pull the HSI to the 17,340 – 17,347 support zone at the very least. Should this level be broken below, Wave A should then extend itself to the 16,334 mark to complete the full retracement of Wave 5. Meanwhile, we do not expect resistance at the 18,961 – 18,967 region as represented by the upper bollinger band and the end of Wave 5 to give way.

Global equity technicals - Hitting major resistance

HANG SENG INDEX (potentially a Bearish Engulfing)

The DJIA's rally past its 8,600 double-top resistance early this week was not supported by higher trading volume. This is not a good sign. The DJIA may complete one more upleg towards 8,800-8,900 sometime this week before a long-overdue correction kicks in. Early this week, the MSCI Asia ex-Japan Index reached the crucial 401pt 38.2% FR of the 2007-08 decline. Most regional equity indices have almost tested or surpassed their 38.2% FR over the past week and are overdue for a correction. Their pullback yesterday could be an early sign of more correction in June. We believe the wave "B" bear market rally is not over yet. Assuming Asian markets do retreat in June, it should build the base for a final wave "c" upleg probably sometime in 3Q09.

Long-overdue HK market correction deepens in afternoon, with HSI now down 2.8% at 18,355.78. JPMorgan believes HK market currently due for correction, as trading volume appears to be at unsustainably high levels; still, believe cash levels remain high, investment funds seeing further inflows; "we are expecting a correction in the order of 5%-10%, not 15%-20%," JPM says. Based on today's intraday peak of 18,916.61, 5%-10% retreat would put HSI correction target at roughly 17,000-18,000.

Our near-term view was that STI should pause for a breather at 2353-2400 and the pullback should be mild with support at 2180-2240 before resuming its up trend to 2560. No change in view, although the index rose slightly above 2400 intra-day on Monday. STI could re-test or edge slightly above Monday’s high of 2424 before pausing. For the Dow, the next level to watch is the 9030 that is the 38.2% upward retracement level. Still, we maintain a buy-on-pullback strategy as the recent slew of economic data across the globe continues to support the ‘green shoots’ theory.

Foreigners are starting to purchase private homes in Singapore, this according to consultancy firm DTZ Research. A total of 117 caveats were lodged by foreign buyers in April compared to 174 for the 3 months during 1Q09. The 1Q figure is already an 11.5% increase from the 156 caveats that foreigners lodged in 4Q last year.

Singapore’s PMI expanded for the 1st time in 8 months as the index rose to 51.2. Electronics output, which had already bounced back into growth territory in April, maintained its strength, expanding for a second month in a row. The electronics PMI posted a reading of 52.9, up from 51.6 in April. Apart from Singapore, China and India have also recorded positive expansion in their PMIs. But the US PMI remains in contraction, although it shrank by less than expected last month, according to figures released on Monday.

What if Dow go above 200DMA and how about STI?

DJ INDU AVERAGE (Surprise may be on the upside if DJIA going for 200DMA)


After a 1.3% loss yesterday, the STI rebounded strongly, taking cue from the strong overnight US market close to rally past its recent 2009 high of 2283 at midday close. Should the index close convincingly above this key resistance level, we could see more upside recovery in the days ahead.

Dow and STI - Bear is coming to town?

DJ INDU AVERAGE, fell below the greenline night before, further pullback to 8,070 yellowline is possible. By the way, US market is below 200DMA (8,923) unlike Asia markets, US markets is still in a Bear market territory. So for STI, you may see it is being channeled downward.

Technical Analysis on Dow and STI

DJ INDU AVERAGE=8,426 (The breakout of the trendline was confirmed by a higher high after 3 trading days)


The stronger Wall Street close is likely to further ignite the already buoyant local sentiment further, as more signs point towards the US economy reaching a bottom.

The STI shot up nearly 6% yesterday to end at 2028.71, its first close above the 2000 level since 15 Oct 2008.

While the daily technical indicators have reverted to a slightly more positive tone, the risk-reward at current levels have dropped significantly; the STI has already risen by more than 39% since bottoming out at 1455 in March, with >12% of gains coming from the last three sessions.

Moreover, we note that most houses currently have an upside target of just 2,100 for the STI, suggesting that the market is nearing "fair value" in terms of valuations; of course we do not rule out an upgrade should there be concrete signs that the global economy has started to recover.

In the near-term, we see 2100 (psychological resistance as well) as the key hurdle. Should it convincingly clear that hurdle, the next key resistance is at 2390 (38.2% Fibonacci retracement level), although it may face some intermediate hurdle at 2102-2128 (minor gap in Oct '08).

On the downside, we expect the initial support at 1863 (centre line of Bollinger Band), ahead of 1808 (30-day moving average).

Dow breakout from trendline?

DJ INDU AVERAGE (Looks like a breakout from trendline resistance...wait for confirmation)

Dow could not break trendline

DJ INDU AVERAGE=8,016 (Still could not breakout the trendline resistance, chances of pulling back to 7,500 is high)

Dow coming down more?

DJ INDU AVERAGE (getting into the range with support at 23% retracement)

Becareful for Dow

DJ INDU AVERAGE=8,131, still unable to clear the trendline resistance and 100D MA....Cautious!

Dow heading to 9000?

The channel is constructed by connecting peak to low as lower line and the upper line is a parallel line, which isdrawn on the most outside peak. The rationale of this way of construction is to filter the noise of a primarytrendline. A convincing breakout of a channel is needed to signal a change in downtrend.

One interesting observation can be obtained from percentage change in every rally and plunge residing in thechannel. For rallies, the percentage increase is steadily rising, specifically from 8.8%, 7.5%, 12.0% and 21.6%.For downswing, the decline in percentage is slowing down, from -14.6%, -15.9%, -31.7% to -26.5%. In otherwords, rallies are getting stronger while downswings are getting weaker.

From our weekly chart, we believe DOW is expected to retrace 38.2% to 9000 points. Nevertheless, theunderlying pattern for it to reach 9000 may take numerous forms.

From the daily chart, the upper resistance (in yellow circle) must be respected as there are total 3 failed attemptsof breakout.

Two scenarios may play out. Firstly, a decline to 7476 before a channel breakout will take place. Secondly, adirect channel breakout without major decline.

We believe the probability is skewed toward second scenario as the swings in smaller time frame (5 periods) hasbeen in line with one month time frame (18 periods), unlike the previous rallies in the channel where we canobserve swings in smaller time frame. Therefore, a direct breakout of the channel would occur soon withoutmajor retracement despite the strong resistance.