Thursday, 15 August 2013

I nailed the downmove in the Dow and S&P500 in last night's post! ;-) 2013-08-15 1527 BST UK Time

This is my attempted learning experience in calling directions and targets in gold and the stock markets. I had some success today.

In last night's post, I forecast trouble for the Dow and S&P 500 coming imminently.

Well, I switched on today (in the afternoon - dear me, I am lazy) and there has been a decent fall in both indices, with both reaching or almost reaching their initial targets. The following chart shows the potential downside targets:

The first target zone on the Dow has already been reached at the red circle on the upsloping parallel. There is a second potential target at the lower parallel, which is drawn from the June low.

For the S&P, I drew in a red downtrend pitchfork and the price has nearly reached its lower parallel (top red circle). There is also a possibility of a target on a slightly lower upsloping parallel (middle circle), which soon meets the new downtrend channel. There is also a lower target on the bottom parallel (bottom red circle) which comes from the June low.

There is a possibility of a bounce from the first target in each case, which is close to where we are as I took the screen shot a few minutes ago.

A breakdown from the red downsloping trend channel in the S&P would be pretty bearish.

I could have drawn a similar downtrend channel on the Dow chart but the target for that would be somewhere near the one I have drawn anyway.

I have done this now. Interestingly the uptrend parallels and downtrend parallels meet at the point where the price has stopped. I think such a location marks a good target for a move:

It will be interesting to see if prices bounce from the bases of the red downtrends now. Perhaps there could be a modest bounce to the red centre lines and a further fall to the lower targets shown in the first chart?

Interestingly, both the Japanese Nikkei 225 and the US dollar / Japanese Yen exchange rate (USD/JPY) have similar head and shoulders that have broken down and are being back-tested at the neckline. The Nikkei and USD/JPY charts are practically identical: see some charts in an earlier post. USD/JPY goes down (Japanese Yen strengthens) and Nikkei goes down. I would love to have a figure for the correlation but it looks like it might be 95%!

As mentioned before, the ratio between the Nikkei (measured in JPY) and the 2x bearish Yen ETF (YCS) has been close to constant for the last 3 years. Type $NIKK:YCS into gallery view and see!

By the way, gold is doing nothing interesting today, nor silver. They have had a nice run up and maybe they need a rest.

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