Short term bounce, before moving to $40-$37...?

Crude Oil West Texas Intermediate($49.62) Oil has dropped over 67% in just 4 months. See the inlaid daily chart; the fall was confined to perfect falling parallel channel drawn from the top.

The recent low is quite close on the lower end of the channel, indicates a respite for the Oil bulls in the near future, provided holds $47.5/$48 area. On the upside $53 is critical & if able to sustain above it then could flare up to $60-$63 in the next few weeks. However, the medium to long term picture continued to remains bearish. See the inlaid monthly chart. Since 1990, $37-$40 has acted as a good resistance while moving up; now the same will act as a "support" for the medium term. To conclude, I am looking for a relief rally if holds $47.5/$48 mark; while the upside is caped at $60-$63 range; & then a likely failure towards the long term support zone. Let see.

Trading close to reversal points!

Strait Times(1662) Near term trend: Negative/Pending reversal

In the review dated 4th Nov(1864) I had anticipated the absolute reversal in the trend, at least till the year end, near 1680-1620 area. Accordingly STI fallen into anticipated area, however, in the last review I had suspected "expanding" triangle(daily chart) & as a precaution argued in favor of continuation of bearish trend, with "buying stop" placed at 1770-1785. However, in the last trading sessions, STI has bounced from 0.80% retracement of leg "b", Second, a & b leg had consumed 9 trading sessions, and so far leg c has also taken exactly 9 days. This price as well as time relationship indicates a possibility of end of "c", here, with an up move in sight provided a quick up move above 1785 in the next few days.

Traditional SAR (Volatility) system also indicates a reversal in the short term trend provided STI "closes" above 1820 i.e. buying stop for the bulls. {Sar- Stop and reverse system / the dotted line indicates a moving stop for the bears, where the original sell signal came at 3129 level on 9th June}. On the weekly charts, after moving in a perfect falling equi-distance parallel channel, since the top, the index got supported exactly on the lower end of the parallel channel on 27th Oct at 1473. Since then it had gained more than 31% before attempting to retest the lows. Quick upmove posting weekly close above 1865 is what required for the bulls to end the 28 weeks loosing streak(since 9th june), with conservative target price near 2k, i.e. value of the middle channel. On the monthly charts, STI is continued its struggle near (1780) to its 10 year support (rising trendline drawn since Sep 98 lows). In the last month it has briefly breached the support, but managed to close well above the trendline. For the current month, bulls need to push the index >1780 to remain in the game.

Holding "October" low..Reversal is in sight..

World Index(294) (In house-based on 44 active indices of the world)

Last 3-4 weeks, I am arguing for a "recovery" in the global stock markets, based on 'macro' level technical analysis of this 'in house' World Index (WI). This week, I maintaining my pending bullish reversal stance, despite of a 15% drop since the beginning of the month. The current month, so far, has not created a fresh low visa-a-vis the month of October (see inlaid monthly chart). As such there is a possibility of "double bottom" formation, here, provided we should not see a fresh "down move" from the present level. Further the index is almost there at previous consolidation zone (Jan-May 2005), normally such crucial zones created in the up move acts as "support" zones in subsequent down moves. On the weekly chart, the price moves are still intact in the falling parallel channel (3rd) & a move beyond 329 (value for the coming week) i.e. break above the upper end of the channel is required for the first stage confirmation of reversal in the trend.

On the daily charts, I am suspecting a "triangle'"(14 Oct is a starting point) with "a" wave ending at 286 (27th Oct); wave "b" retracing 80% of wave "a"; & the current fall could be wave "c". The wave 'c' has unfolded exactly within the falling parallel channel, and a move beyond the upper end of the channel can confirm the end of the wave "c", thereby opening wave "d" on the upside. Even if we assume the end of the wave "c" is still away, notice that the last 2 trading sessions are very close to the lower end of the parallel channel, which in anyways suggests an up move at least till the upper end of the channel. In short, the WI is at very crucial point, as far as all the 3 time frames(Monthly/weekly/Daily) are concerned; holding the Oct low (i.e. 27th Oct) would lead to 'significant' up move in the next few weeks/months. Let see how the things unfolds.

Global Markets & performance of BRIC

World Index Vs BRIC

In the World Index (WI) analysis we have seen that WI has retraced back to the April 2005 level. The "Developed" economies had significantly lost the value in the current financial turmoil, with many indices retraced as much as to 2003 levels(DOW,Nikkei,FTSE,CAC40) with only one participation form emerging economies, Taiwan. However from the BRIC group, Brazil, India & China has manged to stay afloat above April 2005 lows, with Russia going down slightly below April 2005. (See respective charts). Few others economies like Chile (SASE), Indonesia(JSX), Mexico (MXSE),PERU(LIMA),S.Africa (JSE All), S.Korea(KOSPI),Venezuela (IBC) are trading at higher levels than there respective April 2005 lows. Brazil IBovespa

Russia MOS Times India-Sensex China-SSE Composite

KLSE -downward bias

KLSE Composite(877) Near term trend:Negative Similar to many Asian markets, KLSE is also showing "expanding" bias on the down move, which could lead to more down side may be retesting of its previous low. Stop 900.

AORD broken stop..watch 3400! Else..

All Ordinaries Index(3483) Near term trend:Negative

In the last review I had argued in favor of corrective rally by year end; also mentioned 3.9k as near term stop for the bulls. The index failed to move upward as anticipated & also broken the stop in quick time. In fact AORD was the only major index to break below the recent October low, indicating continuations of the downtrend contrary to our views.

Observe the inlaid weekly chart. The prices are near to its lower end(3400) of the parallel channel (dotted), suggesting possible respite in the extremely near future. However if broken downward then the index is likely to fall into steeper falling parallel channel (marked in blue) where the lowest value of the lower end trend line is near 3k.

On the monthly chart, the index is near to its critical long term support line, the value is also near 3400; below that 3k.

HangSeng ..suspected expanding triangle..

China-HangSeng(12815) Near term trend:Negative I said "I am expecting a pause in the uptrend with suspecting" ending" triangle formation where "b" leg is likely to be ended near 14.6/14.7k and "c" leg will open downward with target price of 12300-11650; which can provide excellent opportunity to buy for a medium term rise".

HangSeng moved down exactly as per expectation. However an anticipated "ending" triangle is likely to be turned out as "expanding" triangle which may lead to a serious downfall , may be retesting of previous lows. On the upside, a weekly close above 14.3k will compel us to abandon the 'bearish' view on the index.

Bullish only if trades > 9k!

Nikkei 225(8273) Near term trend:Negative

I said "Nikkei has fair chance to comeback with corrective rally, at lasting till the year end, based on observations on weekly/daily charts ; on the upside close above 9601 is important". However the last few trading sessions the Index has shown "confused" trading signals and is barely able to float above the 0.50%-0.618% fib retracement levels (8260-7961) mentioned as supports in the previous updates. I withdrew the "corrective" rally call, and will turn bullish only if it able post weekly close above 9k. On the downside once 7960 is taken, the index may retest the recent lows.

Expanding Triangle .? Heading towards new low.?

Straits Times(1665) Near term trend: Negative

In the last review I said "Considering the observations on weekly/monthly charts the possibility of significant bottom formation at recent low of 1475 is bright; However in the near term the existing rally is likely to be terminated anywhere between 1900-2000 with possibility of retesting 1680-1620".

As expected, the STI topped out at 1933 & fallen within the anticipated range. But the major difference is that, earlier I was expecting a confirmation for major reversal in 1680-1620 range. However looking at the daily price structure, expanding triangle formation (with "b" leg of the triangle has retraced 0.618% of "a" leg; the current fall could be "c" leg, which may retest the recent low) the possibility of bullish implication is ruled out, at least till seen close above 1770-1785.

On the weekly charts, value of the lower end of the parallel channel stands around 1400-1370 for the next 1-3 weeks. Will it test? If the "expanding" triangle scenario unfolds then "Yes". Lets see.

Failed to suprass 4325! New low?

FTSE 100(3999) Near term trend: Negative

In the last review, I have argued in favor of 'corrective rally' saying that " the recent fall from 4.6k is a part of overall "recovery" attempts rather than fresh fall; On the upside close above 4375 is required to add strength in the recovery attempt; whereas stop is placed near 0.618% fib level".

However, today's break of 0.618% retracement level is "significant" development and has jeopardize the interest of bulls, completely. On the weekly charts, the lower end of the parallel channel is the next price level to watch i.e. 3.6k. Whereas on the daily charts, the expanding shape will continue to have negative implication for the index, as long as it remains below 4.3k. In short the "trend" is still down in absence of 1) Trading above crucial level of 4325 2) Break of 0.618% Fib level. On the downside I am open for 'anything' in the medium term & 3.6k in the extreme short term, provided we remain below 4.3k.

Corrective rally is on...

FTSE 100(4169) Near term trend: Positive

After creating "double top" bearish formation at 6150 in Oct 07, FTSE tanked more than 45% in "global equity meltdown". Two weeks back the index recovered "exactly" from the lower end of the "equi-distance" parallel channel, thereby providing excellent opportunity for the bulls to fight back.

Since then i.e. from low of 3665(27th Oct), FTSE has gained over 26% with a high of 4639, before correcting downward. However this down move is likely to be a part of overall "recover" atttempts rather than fresh "fall". This bullish argument is also "in line" with overall bullish view discribed under "World index" analysis. On the daily chart, FTSE has formed suspected "expanding" triangle formation and the last leg is likely to end anytime, may be near 4k. On the upside "close" above 4375 will add much require strength in the medium term uptrend, eying 4.6-4.8k in the next few weeks, or may be by year end. Stop 4k.

Dragaon retaliating....indeed. Now 2.2k is crucial!

China-SSE Composite(1927) Near term trend: Positive

I argued in favor of pending "bullish reversal" in Shanghai Index, in the last review dt 23 Oct, with anticipating strong support near 1740-1780, based on observations noted on "monthly" chart. The index consolidated almost exactly there (tolerance of 2-3%) in the support zone, before retaliating. Remember that the so-called 'fundamental' good new flown into the market much later, but prices have already made a 'base' near the historic support zone. Now, expect continuation of the swift up move, with 'stop' placed at 1740-1780. On the upside the upper end of the parallel channel is the 'trend' deciding factor, for the current month the value of the highest point is around 2157(say 2.2k); good if it breaks, in this month itself, else "trading" range between 2.1k-1.7k till the year end.

Seen anticipated recovery efforts....

World Index(333) (In house- based on 44 active indices of the world) Near term trend: Positive

In the last review (21st Oct) I had argued in favor of "Bullish reversal" at least in the short to medium term, in the World index, based on a)Possible halt in the furious fall at fib 0.618 retracement of entire bull run (2003-2007) b) Importance of October time cycle in economic cycles. See the inlaid monthly "close" chart, the month of "October" has ended almost exactly on 0.618 fib level, thereby making an attempt to halt the unprecedented fall in the global markets, at least in near term.

Further, I had also illustrated 3 downward parallel channels on the weekly chart in the previous review. As anticipated the lower end of the 3rd channel (Blue) has successfully supported the fall, causing recovery across the global markets.

Now expect a continuation in the "recovery efforts" , in the next 4-7 weeks, or may be till the year end, provided the index "pierce" the "important" hindrance of the "upper end' of the 3rd (blue) parallel channel.

AORD at long term support....!

All Ordinaries Index (4006) Near term trend: Positive (stop 3.9k)

AORD lost 46% since its all time high(6873 Nov 07) i.e. worst than 1987 fall. However, along with anticipated global stock market recovery (see world index analysis), we are heading for a corrective rally based on following "Technical" observations. See the inlaid "Quarterly" chart. The index has been supported "exactly" on the trendline drawn from 1991 low of 1275.

Considering the magnitude of the fall (46% in just 12 months), & the earlier excellent supports (Dec92, Mar03) provided by this long standing trendline of 17 years, expectations of the "rally" are justified. But is it complete "reversal" of the trend? Lets see how the trend evolves in the next few weeks/months.

On the extreme near term (daily) charts, the recent fall (from 4291) has given fib 0.618% retracement of the entire rally (3693-4291), now expect 3921 as a good support for the bulls in the near term (near Stop). On the upside, once taken 4.3k expect a steady build up towards 4.4-4.5k in the next few weeks, or by the year end.

Nikkei- Double Bottom..?

Nikkei 225 (8583) Near Term trend: Bullish (Stop 7.9k)

In a recent turmoil Nikkei had created a 26 years low at 6994, the value last seen in Dec 1982. The "primary" bearish trend, started at 38957(Dec89), has seen 82% value erosion, so far. Since recent high of 18.3k(July07) we lost almost 62%, i.e. same magnitude of the fall seen across all "emerging markets" & not "Developed markets". However, in short to medium term, the Nikkei will recover, depicting the anticipated recovery in the global equity markets (see World index analysis). See the inlaid weekly chart. The index has shown "Double bottom" formation on "close "charts. The earlier bottom was 7699 (April 03) & the recent one at 7649(Oct08) (tolerance level of less than 1%), with the implication of quick up move, which is what happened. Further,the down move from July 07 has formed "expanding" triangle with the possibility of "e' wave ending near the recent low.

Both the observations indicate a short to medium term uptrend, within the overall "primary" downtrend. As far as "reversing" the primary bearish trend, we need to observe how the things unfold in the next 2-3 quarters.

On the daily charts, the index has corrected 0.50% fib retracement (at 8266) of the recent rally from 6994. The cluster area of fib 0.618% and 0.50% retracement levels i.e. 7961-8266 will act as a strong support to the index in ensuing corrective rally. On the upside "close" above 9601 is important for a quick up move towards 10.7k -10.9k in the next few weeks.

Argentina : Biggest rally since May 08

MERVAL BUENOS AIRES (1123) In the last review (21st Oct-1216) I said "Index is poised for a recovery provided able to close above 1216 i.e. first indication of strength; if this is done it could move to 1349, preferably by Oct end". The index "tanked" very next day (& also negated a reversal possibility with 1216 remained untouched) and overshoted the downside target (of 1.1k) by wide margins.

However, despite of "selling climax" where prices tends to move beyond the "technically" important levels, the index has closed exactly on 0.618% retracement level (of entire rise from 193 -Nov01 to 2354-Oct07) on monthly close chart. Therefore now the possibility of Index sustaining above 1k, at least till year end, is bright. Apart from that (index bouncing back from 1k i.e. 0.618% Fibonacci no) here is another reason for my "pending" medium term "bullish" argument. See the inlaid "Daily" chart. The ongoing rally is so far the "biggest" rally since (over 37% since low of 819) May 2008(2257), indicating much required "strength" in the bulls camp. However the "flipside" is that we are still trading well below the important trigger of "1216". In the near short term expect a weakening of the prices if Index failed to close above 1150 or the important 1216. In such eventuality, expect a swift down move retesting the important zone of 1k, which could be provide a signal of "confirmation" for medium term reversal.

Straits Times- Bottoming out..?

Straits Times (1864) Near term trend: Sideways (Pending reversal)

Since Oct 07(3942) STI had lost over 62%, mimicking the trend witnessed in all the leading global stock markets. In the last week the Index has taken a good support near the long term trend line drawn by joining the respective lows of 1998 and 2003. (see the following monthly chart).

The "dotted" line indicates 98 & 2003 lows on "close i.e. line" chart; whereas the "solid" line indicates 98 & 2003 absolute lows on "Candlestick" charts.

Second, on the weekly chart, the entire fall was within perfect parallel falling channel with recent low of 1473 taken a good support exactly on the lower end of the channel, and also given the biggest rally of over 28% since May 2008(3269). After considering these observations on weekly/monthly charts, the possibility of significant bottom formation, here at recent low of 1475, is bright. In the extreme short term, the ongoing rally is likely to be terminated anywhere between 1.9k-2k area with possibility of retesting 1680-1620 before confirming the "absolute" reversal in the trend, at least till the year end i.e. Dec 2008.

HangSeng-Swift down move on cards!

China - Hang Seng 14375 Near term trend: Sideways.

In the last review I had argued in favor of "possible bullish reversal" in Hang Seng based on a)20 years parallel channel support near 13k b) 0.618 Fibonacci retracement level (13k) of entire rise since 1987 & mentioned that a quick price move beyond 15325-15425 will provide required confirmation.

We had seen the Index taking support near the 13k level, as argued. However at the same time it had went below the critical level (13k) which is a normal phenomena witnessed in typical "Selling climax" where prices tends to overshoot the target with "emotional selling" pressure. So far so good, the index recovered over 39% in just 5 trading sessions. The low of 10676 was exactly on the lower end of the parallel channel (drawn on daily charts). Subsequently this channel was broken upward confirming the much required strength in the index. However, 15325-15425 remained untouched. Further, the recent rise has given 0.618% retracement (at 14683) of the previous leg of the fall i.e. from 17141 to 10676(a leg), indicating a possibility of "pause" in the trend with suspected "triangle" formation where the current rise is "b" leg of the triangle & possibility of "c" leg opening downward.

If the "b" leg has ended near the 14.6/14.7k level, then expect a down move up to 12300-11650, which could be the "c" leg of the suspected triangle. In short the anticipated fall could be a part of "ending formation" for the entire fall (as argued based on quarterly chart) & as such can provide excellent opportunity to buy for a medium term rise ....may be till the year end(2008).

Dow -Hesitating near 9.4k!

Dow Jones Industrial Average (9360) Near term trend: Sideways

In last week's analysis, we had argued in 'favor' of recovery (at least time being) & shown how Dow is close to critical support zone of 7.7-7.9k based on a)200 months moving average b) lower end support of perfect falling channel. And also mentioned importance of a week based on Fibonacci time cycle - 55th week since absolute top.

The Dow gained over 11% during the week & thereby successfully "arrested" the downfall of the last few weeks. However after initial gains, the bulls are making "hesitant" moves near 9.3-9.4k mark. Failure to sustain above it could potentially lead to "retest" of 8.8-8.6k area(most expected) where expect a renewed buying interest by "strong hands". On the other hand, bullish possibility (only) exist if posted fresh gains above 9.4k, which may lead to 10k or higher(least expected). In nutshell, the downfall is arrested, however, after initial up move expect a shakeout in the 'range' (8.6k-9.4k) before unfolding benign up move lasting 5-7 weeks.