Hello to all who take an occational look at this sorry excuse of a blog, I must again apologise for not posting anything here is such a long time. University life has been quite overwhelming lately, the Libertarian Party is having a candidate stand in St Albans and I have been helping out with the campaign organisation/management...
anyway, I will try and make posts more frequently, but with only the ability to have daily/weekly/monthly charts, I think I will only post when there has been some significant development.
And so here are my 2 charts for FTSE and the Dow Jones. I chose not to do SPX because it is pretty identical to the Dow Jones in structure (as is obviously expected).
Looking at the FTSE chart above, I must first say that I have a small short of this market as of Monday this week. Last time I posted this FTSE chart I was very bearish and the market just shot up slightly higher taking me out, I have since re-entered a short position and am now pretty much on break even considering my previous loss.
Now there are quite a few reasons for my bearishness... I’ll start with the waves.
According to my count we are looking at a wave 4 of a big A down... now for this count to stick, this wave 4 cannot overlap the low of my wave 1 (5350). As you can see on the chart there is a bold red line marking this wave 1 low. This area has seemed to have worked as great resistance, with several doji candles and no real progression of the market. The FTSE has seemed to have rallied stronger than the Dow and SPX in the sense that the other 2 are not anywhere near their respective wave 1 lows. But so far the count still holds.
The second factor is that the market has stuck between the 162% Fibonacci projection (purple) and the 62% retracement into wave 3 (blue). If you look at my waves “a-b-c” structure since the march rally, you will see that “b” retraced perfectly into “a” by 38% before moving further on up. This is a very clean retracement and projection, and it seems to be working rather well as it clusters quite closely with the wave 3 retracement.
A third factor to consider is the “Counter trend channel” that seems to have formed. This supports the analysis that the overall trend is still down and that this rally is corrective.
And finally take a look at the MACD. There has been some real divergence of this indicator for AGES! (to my annoyance). This really suggests that this market has been overbought for quite a while, but if you look what it has done recently, you can see that it is breaking out of its “wedge” range, this is VERY bearish.
So as a conclusion, in short term, I think we may have a small bounce to make a small wave 2 before we fall further. Medium term the trend is down, Long term the trend is down.
NOTE: The above chart does not show FTSE activity today. It is currently down around 80 pips, at its low so far it was down nearly 100.
Looking at the Dow Jones, the first thing to mention is that it is in an upwards wedge formation. This works as a counter trend pattern and again supports the analysis that the rally we have seen since march is corrective and not impulsive.
Now you can see that the Dow has not rallied as far as the FTSE in relation to its wave structure. Looking at the “a-b-c” formation here, there is something that this chart does not show but it could be of significance. The running flat I have for wave “b” actually hits the 27% retracement into wave “a”. Now this IS a fib retracement level, but not one of the more well know ones (38%, 50%, 62%).
With this in mind, we can see that the market has rallied slightly past the projection and just above the 50% retracement of wave 3. This area has however caused some serious resistance to emerge and the market has dipped off the highs made and has not managed to hold the magic (psychological) 10,000 mark.
If you look at the MACD indicator for this market, you can also see that the Dow MACD has actually broken out already and has just retested the MACD channel. This is something the FTSE has not yet done, but none the less it is a bearish sign that this market may be ready to start breaking down soon.
Like the FTSE this market has also had a lot of MACD divergence for a while, but it has just gone up and up and up... it still suggests that this market is overbought.
Short term trend, again as with FTSE there might be a slight bounce coming. Medium and Long term the trend is down.
With both of these markets, I am calling a top. An accelerated breakdown will of course confirm this.
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