Strongerhead Weekly Financial Market Analysis 7 Jan 2013

The bounced happened last week. Bulls came back with a vengeance. But right after the spike, a lot of profit taking, and prices kind of failed to stay above its high of the week. Good sign? Bad sign? Let’s take a look at the chart to check out the outlook for next trading week.

As per my last week’s post, I am watching the red line on the RSI reading for the struggle between bulls and bears. As soon as the RSI reading touches the red line, it bounced, making the red line as a form of support. The rocket has launched off from its ground. There is some room to move up further until the top of the envelop. RSI reading also supports that view as it is not in its overbought state yet.

But two things to note.
1) Prices are too near its previous high. Just be careful of a double top.
2) From the two years chart, the price once made a run (indicated by longer green arrow), hit the top of its envelop at the same time RSI near overbought zone (indicated by the red circle), retreat and bounced back up (indicated by shorter green arrow) to top of its envelop again (indicated by red circle), prices went southwards.

I am cautiously bullish due to the 2 factors above. If prices hits the top of the envelop, and RSI reach the start of overbought zone, just watch your step. Don’t let profit turn losses.

On the daily chart, prices hit its peak, and went sideways. Probably to cool off from its overbought condition, and profit taking going on. Good news is prices have been staying near its high of the week. I will take S&P 1450 as the new support level now. And let’s keep our eye on the rocket to ensure we are not on board if it starts to make its way down to 1450 after its launch.

VIX (Fear index) on the weekly, went from up to down trend. Which is not uncommon for VIX behaviour. Fear is often short term, which is why spikes are mostly short lived, and tide will turn.

On the daily, price gapped down below two of its support level. VIX is now in its oversold zone on the daily.


Mid term view:
Trend is still UP. I’m a cautious bull. But not going to fight the trend.

Short term view:
VIX is in oversold mode. Dow and S&P in overbought mode. Not surprised with pull backs if it happen next week. But nothing more than 1450 on the S&P. Or this up run is merely a bounce with no momentum to go higher.

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