"All human activities have three distinctive features: pattern, time and ratio - all of which observe the Fibonacci Summation Series" (R.N. Elliott - "Nature's Law - the Secret of the Universe" - 1946)

Saturday, April 27, 2013

Stock Markets Outlook; still interesting Zurich, London and Tokyo

The technical situation of the World's stock markets is contrasted.

In the U.S., the major stock indices show diverging dynamics; below an update after the structural analysis made ​​in the post of April 06.

The DJIA does not seem to have reached the Cycle's Top, nor Primary or Intermediate, but only a Minor top (wave a) ; the daily chart shows the expected start of a sideways correction, wave b  flat or three type, which should last a few more weeks, with potential targets in the area of ​​14,400 or 14,000.

The SPX, in the other hand, shows a darker pattern , more difficult to interpret,   that does not exclude the possibility that has already been reached the Cycle Top with the start of a long-term downtrend; this scenario requires however some confirmations such as, at least, the breakdown of the MM 50 dd and the fall below 1,530 , which have not yet occurred.

The alternate scenario considers the continuation of the current uptrend, after the end of this congestion, labeled as Alt:(x) .

The NASDAQ index is the weakest of the three major U.S. indexes, even for negative drag determined by Apple that has lost 40% from their highs; the last bullish movement has not been able to overcome the previous top, due to the pressure applied by resistance band between 2,860 and 2,880.
The preferred scenario is bullish: we could be in wave 2 of 5 of (c)

Whatever happens, the U.S. stock exchanges are not far away from a Cycle Top, then prudence is, more than ever, a must.
In Asia , from few months, the driving stock market is the Japanese one.

Nikkei index, in the medium-long term, is in the bullish impulsive wave [C] Primary of wave B Cycle of wave [IV] SuperCycle; in the short-term is in wave 3 minor of (3) Intermediate in completion, which will be followed by a correction in wave 4 , like a sideways pattern (flat/three or triangle), that should be carefully monitored in order to open (or increase) a long position on wave 5 if there will be a valid and clear bullish setup.

In Europe , the main stock market, the German stock exchange, is in retreat.

DAX index is the only index of the old continent that has tested its highs as SPX;

my main long-term scenario is bearish , because it would have already reached the Cycle Top of wave D , starting the last wave E of a triangular wave [IV] of SuperCycle degree.
the first alternate long-term scenario is bullish; the wave Alt:E has already reached and now we are at the beginning of a new SuperCycle Bull market; we are inside the Alt:[1] Primary, where wave  Alt:(2) of intermediate degree is underway and then will start the bullish wave Alt:(3) .

For now I don't see an interesting pattern setup.

The FTSE 100 index of the London Stock Exchange has a similar settings but it seems to still be able to go higher.

In the medium term, the main scenario is bullish because it was not yet reached the Cycle Top (wave D); we could be in wave  [C] Primary with wave (2) Intermediate in progress; for a potential long setup, wait for the completion of b and c minor waves, preferably like a flat and not below 6,200.

However, is the Swiss stock market the one that presents the best setting; the SMI index is in a powerful uptrend.

The weekly chart shows a potential Running Triangle pattern in wave [IV] of SuperCycle degree, with wave [C] Primary of D Cycle in completion.
The daily chart shows a wave 4 minor of (3) Intermediate in progress, with targets in 7,300 - 7,500 area; a potential bullish setup is close.

Finally a look at the Italian stock market index, the FTSEMIB , that is not going bad at all (like the negative situation of fundamentals, confirmed by Moody's, let assume).

 Preferred scenario: FTSEMIB is in wave [C]/[Y] Primary of second X wave Cycle of SuperCycle wave [IV] .
The daily chart shows a minor uptrend in progress, labeled wave x minor of (b)/(x) Intermediate, which after a break of one or two week, could bring the index to test the highs of January 2013.
In a future post, we will focus on the analysis of the BRIC and others Emerging stock markets that in perspective, will almost certainly be the most promising markets of the next multi-year bull market Cycle.


My 5 P.S. :

1) "The trend is your friend until the end".
I follow a trend-following approach; generally, I open long on the sideways breakout of a previus uptrend, occasionally on a controlled pullback, never on a reversal , that is counter-trend (short otherwise);

2) for a profitable trading, a strict money management and a disciplined psychological and behavioral approach are much more important than any model based on fundamental and/or technical analysis;

3) at least 50% of losing trades (or not winning) have a culprit: the trader, who has committed an incorrect analysisa wrong header for excessive ego, a failure to compliance with its rules or stops, etc ...; always reflect on trades made​​, remembering, however, that the market, in the end, does what it wants and is always right;

4) in trading there are neither Gurus nor the Holy Grail; no certainty, only humility, hard work, perseverance, patience and discipline;

5) pray (for believers) or hope (for atheists and agnostics) not to run in the Black Swan; who had been long on Wall Street in September 11, 2001 would not have stood a chance ... and in trading, as in life, good or bad luck are crucial!





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