Wednesday, 1 August 2012

Time has come to start a new trend

We have witnessed for almost two months now a sideways movement in S&P and DJIA. The markets have retraced more than 61.8% of the April-May decline and I think August will be a very important month for the determination of our next targets.

As mentioned many times before in our analysis in this blog, the rise from early June is overlapping and has no clear impulsive characteristic. August 1st was our marked date for a change in trend. Our most probable scenario remains the expected decline to new lows. However market intervention by government officials in Europe and in the US might avert such decline. Even if the market is to continue higher, a downward correction towards the lower channel support, as depicted in both charts is expected. This overlapping  structure from early June could unfold into an impulsive upward wave, but the chances are that it is only a correction and that the downtrend from April-May will resume in August. 

Two days ago when DJIA was reaching 13000 and S&P 1385 I was posting my doubts that this rally will continue. Both markets seem like the have been rejected at their resistances and are pulling back down. I think August 1st will be a day that will provide us with the necessary info to as to where the market is heading and if bears will prevail as expected by our preferred scenario. Either way traders should always respect the resistance and support levels and use them as stop reverse triggers.

Thank you for taking the time to read my thoughts and feel free to comment.

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