DJIA - critical juncture?

On the back of recent price activity, we feel the market has betrayed underlying bearish sentiment and we will begin picking up shorts on rallies going forward. The Dow Jones Industrial Average has crossed, and more importantly consolidated below MA20, all the while in adherence with the descending channel pictured below.



While the debate over Greek aid rages on, here at the flatbook we looked for any significant technical evidence that recent highs of 10733 (DJIA) and 1150 (S&P500) may represent the beginnings of a second leg down. Resistance/support level 10650 on the DJIA and price action around this level is most worthy of mention. Having tested and settled above this level in January, June and July '06, the DJIA continued to the upside for the best part of 15 months to October '07 highs. In Sept '08 we failed at this level and the bottom dropped out of the market until March of last year when we finally stemmed the tide at 6470 (DJIA). Ominously, we tested and failed at this level two weeks ago and have since settled decisively below it.



Thirdly the candlestick pattern that formed as we failed 2 weeks ago at 10650 is comparable to that, formed at Oct '07 highs.



Though it's not quite an evening star formation (there is not a gap between the first and second sticks, and the second and third sticks respectively), the sentiment of indecision is still manifest in both patterns.

To conclude then guys, we are sellers of rallies below 10650 on the DJIA. 2010 could be a very bumpy ride.

Though we've posted it a couple of months back, we'd like to draw your attention once more, to the following video detailing Robert Prechter's (Elliot Wave founder) long term views on equities:



Safe trading all!

"Millions saw the apple fall, but Newton asked why."
- Bernard M. Baruch

S&P 500: Descending channel established? Continued...

Following on from our post yesterday, we have executed a short position at 1103.6 yesterday citing the market's adherence to the descending channel as illustrated in the charts below. We were initially hesitant as the S&P 500 looked as if our descending channel may be the flag of bull flag; upon closer analysis however, the gradient of the flagpole was not anywhere near steep enough when compared with the typical bull flag formation manifest in US Equities:



Post-market close, we placed another sell order - filled at 1100 - on the apparent enduring nature of descending channel resistance. Perhaps more pivotal was yesterday's price action formed something of a bearish harami on the S&P 500 D1(daily). We understand that it didn't completely fit the harami criteria as it didn't open below the previous candlestick's close, but the net effect is not too dissimilar: market indecision. Please see below examples of similar formations, manifest in the S&P 500:







Even as I type this, the formation looks to be playing out better than we could have imagined! Unfortunately however, we exited ahead of MPC and ECB rate decisons at 1092.0 as we didn't want to get clipped in what we would be choppy waters! Next time, eh?

Going forward we have a potential trade on Fiber - EUR/USD on the back of a falling wedge formation this time, but the setup is on the brink of being taken as I type this:



We are long at 1.3790 with a tight stoploss at 1.3750. This level really is make or break for FIBER.

Remember NFP tomorrow, so be sure to check back in the morning ahead of the number!

Profitable trading Traders!

"Remember, I am neither a bear nor a bull, I am an agnostic opportunist. I want to make money short- and long-term. I want to find good situations and exploit them."

- Jim Cramer

S&P 500: Descending channel established? More to come......

Short executed at 1103.4; s/l moved to breakeven. More to come--->