Monday, May 31, 2010

Monday Market Alert

Not too much action on Europe today, Germany up a little bit, Spain down, France, Holland and Swiss market practically unchanged. However, it looks like the Chinese market is slipping out of the current 20% correction. EMA50 managed to climb above EMA100 on 30 minutes chart, which is the buying signal for me. I am now waiting for a confirmation of the trend change coming from the two EMAs crossing on 60 minutes charts. Five day simple moving average is not declining anymore but we need to see it raising soon. On daily chart I am seeing a breakout above a declining trend line. A new uptrend line is forming, there is already a higher low and I can also see two higher highs (cyan arrows). Long term players should be very cautious since overall Chinese market remains in the bear market, the index is now 6% bellow a declining SMA200 (very bearish) but a savvy investor can take advantage of what it looks to be an upcoming rally at least on short and intermediary time frames.

Keep an eye on coal, materials and steel stocks, WLT, CLF, AKS, that already gave the buy signal or X that looks very close to give one. Aluminium stocks are also very close to give a buy signal, look at CENX, AA.

Let's wait for tomorrow and the rest of the week to see if we are getting a buy signal on SPX. We need a 25-30 points rally for this to happen.

P.S. After a passionate discussion with my friends on Market Watch board I added another FXI chart, on 60 minutes time frame because I wanted to go further back. I did adjusted EMAs to 25 and 50. Since the beginning on March until today I've got one buy signal at the end of February, a sell signal on April 19 and another buy signal today. I've got a false sell signal in between, the system is not perfect and I get occasionally whipsawed but overall I think my timing method is pretty good.


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