Indices Review

TBS

Well-known member
385 0
Indices Review 15 April 2003

Ah, nothing like beating up a few rag-heads to give the markets a boost, now that things seem to be ‘calming down’ (famous last words) perhaps the true economics of the situation will start to bite.

Before we look at the charts my favourite quote from Blackadder:

George: You know, that's the thing I don't really understand about you, Cap. You're a professional soldier, and yet, sometimes you sound as though you bally well haven't enjoyed soldiering at all.

Edmund: Well, you see, George, I did like it, back in the old days when the prerequisite of a British campaign was that the enemy should under no circumstances carry guns -- even spears made us think twice. The kind of people we liked to fight were two feet tall and armed with dry grass.

George: Now, come off it, sir -- what about Mboto Gorge, for heaven's sake?

Edmund: Yes, that was a bit of a nasty one -- ten thousand Dwatushi warriors armed to the teeth with kiwi fruit and guava halves. After the battle, instead of taking prisoners, we simply made a huge fruit salad. No, when I joined up, I never imagined anything as awful as this war. I'd had fifteen years of military experience, perfecting the art of ordering a pink gin and saying "Do you do it doggy-doggy?" in Swahili, and then suddenly four-and-a-half million heavily armed Germans hove into view. That was a shock, I can tell you.”

Dow Jones Industrial

1 year Chart



Best described as drifting along between 7600 and 9100 – a pretty wide range, offering plenty of opportunity for those that choose to day trade the index. (9100 is the critical level at which Dow could be considered back into a bull market

4 year Chart



Currently flirting with the long-term down trend, again shows the importance of the 9100 level, a completion of the potential triple bottom here would give a target c 10700. 7500 remains key base support, whether we will see it again will depend on how well the reporting season goes and whether the unemployment queues start to shorten.

SP500

1 year Chart



Nearby downtrend is broken, pretty solid support c800 with resistance at 900 then 960. 960 remains the key to the upside, the current levels 860/880 continue to provide the area of indecision as shown by the 860/880 movements in the past week or so.

4 year Chart



Overall we are still lurking under the long term bear trend, currently c925. The range 960/800 is very apparent, an upside break of 960 gives us a target c1140/50.

FTSE100

1 year Chart



Well out of the nearby bear trend and stuck in the wide range 3600 – 4225. 400 provides the nearby resistance, followed by major resistance at 4225 – this is the key level to be broken before FTSE should be considered back into any form of bull market.

4 year Chart



A slightly different picture, the price action still well below the long term bear trend, currently c4450. We have seen 800 point rallies before and still maintaining the overall negative picture, whether the current rally ‘sticks’ or fails depends on the 4225/3600 levels.

Dax

1 year Chart



Probably the clearest short term reversal of all of the markets, the current break of 2800 should give a target around the top of the range at 3400, the main sticking point will be the psychological resistance at 3000. One to watch for the clarity of the movement.

4 year Chart



Longer term, Dax has taken such a beating that it could almost double in value from its lows and still remain under a long term bear trend. The 3500 and 2500 levels remain key to the market with the trend still sitting c4100.

Summary

In the shorter term the markets could best be described as range-bound. We seem to have got away from the perma-drops that were making the news and entered a period of stability (albeit with plenty of trading opportunities, hopefully). If any of the markets can break some decent overhead resistance it will be for the first time in something like 4 years, that takes a lot of ‘faith’ from the investing community.

From a personal perspective I’m not sure that we have seen ‘the bottom’ but as a TA am prepared to roll with the market. Having had several discussions on this topic recently, the concern is that the markets may just drift sideways for the summer now that the ‘War’ is won and assuming that nothing too nasty happens as a result.

In the words of Mr Clapton:

I'm drifting and drifting, just like a ship out on the sea.
I'm drifting and drifting, just like a ship out on the sea.
Well I ain't got nobody in this world to care for me.
 
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TBS

Well-known member
385 0
A quick spin through the indices charts, starting with the Europeans, I have covered 3 time frames for each index, 1 year (to get a nearby view of the price action), 4 year (to include the top of the current trend), 10 Year (to get the big picture view):

Dax

1 Year Chart



At this time scale we can see that the Dax has broken the immediate downtrend with what looks lie a fairly weak double bottom through 2700 form average lows c 2300, giving a target of 3100 which it has just about attempted although 3000 is acting as immediate resistance (psychological round number). Major resistance kicks in at 3200 and 3400. So to make much more significant upside there still needs to be a new, financial, catalyst to bolster the confidence of investors.

Overall: Neutral

4 Year Chart



This shows a different picture completely, the index is still some 1000 points away from threatening the overall bear trend. This really shows the weakness of the main Euroland index over the past 3 years. When we consider that the index recovered some 2000 points from 911 and then fell over 3000 points before hitting the current lows, it puts the currnet rise of some 700 points in perspective. We can plainly see that the levels 3400/3500 are key to any signs of sustainable recovery.

Overall: Bear

10 Year Chart



The overall picture of the Dax is just horrible. The main bull and bear trends are apparent and there is a huge head and shoulders formation which would suggest that the Eurozone is in danger of going bust - which may actually not be too far from the truth. If this was the chart of a company, rather than an index I would be more than a little nervous about it!

Overall: Bear

FTSE100

1 Year Chart



Much the same patterns as the Dax, arguably the double bottom in the Dax is a Head and Shoulders reversal in FTSE. This dubious patterns has broken through a neckline c 3800 from lows c 3400 (treating the 3300 low as no more than a panic spike), giving a target of c4200. Currently we are experiencing the same ‘round numberitis’ as Dax, but stuck at 4000 rather than 3000. The good news is that the immediate downtrend is broken and there is considerable support at 3800 and 3600 below the market. Although 4000 is now establishing itself as major immediate resistance, the key to a really sustainable rise is the break of 4225/4250. This area provided the major resistance to the markets at the tail of 2002.

Overall: Neutral.

4 Year Chart



Again, this shows a completely different picture, although we are seeing a good rise from the current lows there is still a huge amount of confidence required to get close to the overall bear trend at 4400, never mind conquering the resistance levels at 400 and 4225. to be fair, the index is heading in the right direction, and those that bought through February and March are probably seeing some good returns, but I would continue to remain cautious.

Overall: Bear

10 Year Chart



The spectre of the longterm head and shoulder pattern still exists whilst the bear trend remains intact. In the case of FTSE the target remains c2400 and as yet there is no evidence to suggest that the pattern has been compromised in any way.

Overall: Bear

DJIA

1 Year Chart



Although similar to the European indices in many ways (after all they are supposed to be the drivers!), the US markets did not go through the process of making new lows in mid March – whether this was a flurry of ‘war patriotism’ as we have seen from the exuberance of the US investors on more than one occasion, or actually has some roots in tangible corporate recovery is yet to be seen. Key resistance levels in the chart are at 8900 and 9100. 9100 is key to a return to a bull trend.

Overall: Neutral

4 Year Chart



Here we have a different picture to the European indices. The fall in the Dow has been smoothed when compared to the Euro indices, as a result the price action is now breaking through the major down trend started once the post 911 rally had broken. Of course, the problem with the Dow is the way in which the index is calculated and the constituents themselves (if faith is lost in them then everything else would be rubble anyway!). However, the key level remains 9100, a break here and it would complete a triple bottom patterns with a target c 10,600, the peaks reached after 911.

Overall: Neutral

10 Year Chart



The big potential H&S reversal still holds sway over the long term view of the Dow, however, it has not fully formed, so still remains in doubt. If 7400/7500 goes again, then 3500 looks to be on the cards, but currently this area has remained well supported.

Overall: Bear

SP500

1 Year Chart



Now we get to the main driver of the world stock markets. 780 providing base support, 870 as a pivotal level and 960 as the key to the whole complex. Unlike all the other markets the SP has a more purposeful ‘stride’ about it as it moves towards the key 960 level, the next few sessions will be very important in deciding whether this is just another bear rally or the start of something with more substance behind it.

Overall: Neutral
4 Year Chart




What is more encouraging in the SP than in any other indices is the break of the major bear trend, no other market is close to such a significant move at the moment. This is mixed blessings as to confirm the move we really need to see some form of confirmation of the move across the indices (Dow Theory – Confirmation of the Averages), however, it highlights 960 as a key level in the chart.

Overall: Neutral

10 Year Chart



The big H&S reversal was first spotted in the SP quite a while ago, giving a target of something like 350. The validity of the pattern is still intact, but starting to look under pressure as the price action nears the 960 level.


Summary

The SP is the only market showing signs of breaking really significant levels at the moment. The Eurozone continues to look very ugly indeed and FTSE is sitting somewhere in the middle (nothing unusual there then!). I think that the next few weeks are going to be incredibly important in deciding the next ‘big’ move in the markets, the problem may be that the next big move is sideways into a summer stupor whilst the big reporting companies have another quarter to try and produce something worthwhile.

What the next catalyst will be I don’t know, to the upside it really has to come from good corporate results, I’m not sure that something like the capture of Saddam would really produce the kind of sustainable move that the markets need and the ‘war’ card has been played out. To the downside, more corporate scandal – doubtful, you would have thought anything would have been buried by now, terrorist attacks, perhaps, SARS in the US?

Who knows, you could visit a host of reasons for both bull and bear – but at the end of the day corporates have to earn, dole queues shorten and life in general become easier to live for investors confidence to come back into the stock markets.

In the meantime we are at a very delicate juncture, personally I hope that it is a volatile one rather than a summer damp squib.
 

Helenqu

Established member
841 3
Super post as ever :)
 

payneg01

Member
83 1
TBS
Come on M8, we all know you are only trying to impress Helen and Skimbles. :)

Excelent post.

Good luck
Greg
 

TBS

Well-known member
385 0
A couple more for good measure!


CAC40

1 Year Chart



Immediate downtrend broken, struggling with the 3000 level (round number). Key levels 3300 and 3600. Having not looked at the CAC for a while, I was expecting something very similar to the Dax, however, the CAC seems to have weathered the storm much better, highlighting what a state Germany has managed to get into.

Overall: Neutral

4 Year Chart



A much smother decline than the Dax – and FTSE for that matter! The major down trend is sitting around 3200. The chart shows 3600 as a major resistance level.

Overall: Bear

10 Year Chart



The omni-present Head and Shoulders pattern, with a more defined sloping neckline, giving a final target of something like 500 (European fiscal meltdown). I suppose if ‘The Shrub’ had his way……………

Overall: Bear

DJ Eurostoxx50

1 Year Chart



Up against initial resistance at 2400, 2700 and 2900 key resistance levels, 2100 major support.

Overall: Neutral

4 Year Chart




Major down trend c 2700, 2900 is highlighted as the major resistance point which must be overcome to give a bullish tome to the bigger picture.

Overall: Bear

10 Year Chart



H&S reversal – target 200!

Overall: Bear
 
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Helenqu

Established member
841 3
Tell me about it the ESTXs neutrality at the moment driving me totally batty. Thanks for the posts :)
 

ianshep

Junior member
17 0
Sandy,

It looks like the Nas might give the earliest indications of the next move. It's sitting right at the key level of 1160 (NDX) while the main US indices have a little room to rise yet.

The once-mighty Nas is the conspicuous absentee from your (very impressive) grand tour of the indices. Do you think that it's not of much importance any more?
 

TBS

Well-known member
385 0
Hi Ian,

Comp do you? - I've kept away from the Nasdaq markets for a while as it has become a relatively small sector in the overall scheme of things, but for those scalping (Nas!) probably a very rich hunting ground at the moment. Certainly Trenchrat over in Florida has been having some fun with it (www.trenchrat.com)

Nasdaq Comp

1Year Chart



Breaking to the upside, the closes above 1525 have put the comp back on a bull footing. As much as technology was blamed for getting us into this mess, perhaps it will also show the way forward. The Head & Shoulder/Double Bottomy type thingy (not a great pattern!) gives an indication of a target c 1900. Immediate support at 1500 then 1450 and 1350. base distribution line at 1325.

Overall: Bull

4 Year Chart



Crawling from the wreckage? Perhaps, certainly there is more sign of life in this sector than most at the moment. The question is if it is because the sector as a whole got shafted so hard during the drop, therefore it has a greater range for recovery than perhaps the other markets. It must also be born in mind that the big players in the Comp, are also present in the higher echelons of SP and Dow, so a decent recovery in the tech sector will aid the whole complex. I would expect to really see money flow into the market if it can regain the psychological 2000 level. At the moment it has a fairly classic flat distribution line and is at a delecate stage of initial recovery

Overall: Neutral/Bullish

10 Year Chart



More a story of what happened – a great double top through 3000 and a very impressive decline in confidence by the investing public, which is why the current bounce – although very welcome, needs a bit of cautious attention. The highlight is the resistance across the market at 2000.

Overall: Neutral

Summary

Having been the worst of a good bunch it is now probably the best of a bad bunch. It has to be remembered that Nasdaq is a sector – sure a market in it’s own right, but a fairly specific sector – and one that has gone through an overall drop of 80%. There are definite signs of recovery, especially in the nearby chart, but I would want to see some broader recovery in the headline markets before pronouncing the patient ready to leave the hospital..
 

ianshep

Junior member
17 0
Sandy,

The 'coobs', as we say in Cambridgeshire, is one of the instruments I have an interest in, but I'm at the opposite end to the scalpers. I trade on EOD only.

We're clearly at a major turning point for the S&P and therefore the financial world. I must say that I'm not looking forward to any of the alternative outcomes!

If The Great H&S plays out then there must be some great disaster to accompany it - a new plague, a nuclear war or a global depression perhaps. If it doesn't then THE biggest, most prominent chart pattern in history will have failed and my faith in TA will be shattered!
 
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