Strongerhead Weekly Financial Market Analysis 22 Oct 2012

Market might have trapped the bulls who longed during the initial rally of the week. Last Friday’s action caused Index to read near the previous week’s closing. Has the market changed its tide? What does it suggest about next week’s price action?

The EMA on the Dow and the S&P 500 had crossed on the weekly to confirm the downward move. But it has not penetrated below key support level yet (DOW 13250; S&P 1425). RSI has not hit below 40. Beware of a false downside bear trap. Which means theirs is still a possibility of a dip in the uptrend. Have your short position stop loss ready should EMA failed to widen its channel.

On the daily, both DOW and the S&P 500 are in the lower zone of its side way trend. Still some room to go lower if the market wish to do so. MACDH is showing sign of weakness among the bulls. The initial rally failed to push MACDH above 0, and is heading deeper into the negative zone again. It is still unsure if this is a relief rally from the price behaviour reading.

VIX (Fear index) weekly chart, EMA crossed to confirmed upward movement. MACD has ticked above 0. VIX is now near the top of its range.

VIX (fear index) daily chart, you can see that it pulled back from its high of last week, made a higher low, and rallied big time closing at its resistance level in a day (Fri).

If the fear has legs, it will break this resistance and rally to $19 – $20 range. If it breaks above $20 and stays above that price, very bearish outlook.


Mid Term View:
EMA has crossed to signed the possible start of the downtrend, but be wary as it could be a dip in the downtrend unless RSI dips below 40.

Short Term View:
Last Fri price action brought prices down to near its support level. We need to see if the support level can hold to determine the power of bulls. If it does not hold, bears are in control. If it holds, we are still in the side way trend on the daily.

Likewise, see if VIX can break above its current price.

NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.