Sunday, June 12, 2011

Six weeks on the downside

Six consecutive weeks on the downside! Wow! I can't remember when was the last time I saw this kind of "performance". With weekly DMI clearly negative, market has more room to fell down. However, on a shorter time frame we may see a bounce up. Is not only the fact that SPX had its worse strike in 10 years it's also the daily DMI that has reached a pretty high level that makes me think we are going to see a move on the upside this week or at worse a flat week but overall, on longer time frames,  the bearish downtrend is more likely to continue.

 You know that my favorite pair of EMAs on 60 minute chart are EMA 25-EMA 50, with SMA 120 as confirmation. The same pair of EMAs works pretty well on daily chart as well. According to this pair of EMAs we have already a "sell" signal since they are crossing right now. However, one should notice that this pair of EMAs gave 3 small whip-saw since March 2009 bottom. That's not too bad but we can easily get rid of this whip-saws by increasing the value of both EMAs. If I am correct the lowest pair of EMAs that gets rid of the 3 whip-saws is EMA 32-EMA 64 on daily chart. Rounding up we can say EMA 35-EMA 70 is the best pair.

Looking at the weekly chart I noticed that market is 2009-2011 uptrend line.

 SMA 50 is pointing down right now for the first time in a year. SMA 200 is very close, just 10 points bellow the current level. Going bellow SMA 200 is going to be a big deal so expect at least some support around that area. 

Have a nice evening!

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