'Euro birds'

Antofagasta - gap at 950p

RUT 1000

FTSE 100 update

Using the 50x3 PF, a 78.6% retrace from the top (6050) to bottom (4800) comes out at 5,782, which is reasonably close). This assumes of course that we get a 'perfect' head and shoulder pattern.

On the daily, the FTSE 100 paid no respect to the 200 sma at 5,722.

FTSE 100; 15 min chart

No new higher high on the 15 min chart yet.

Dow/Gold on Bloomberg

Dow:Gold update

A challenge of the 200 day moving average at 7.82 looks plausible.

On this 10x3 PF the first target given by that breach of resistance at 645 is 780 (or 7.8 on the candle chart).

FTSE 100 update

In broad terms I still see the FTSE trending lower but in the short term, will we get a 'high pole' back up towards 5,800, similar to that seen in 2010? That is the question.
You can see the 'high pole' to the left of this 50x3 HL chart (4th column in with the 3 and in it - Mar, Apr). A big move up immediatley followed by a immediate 50% retrace which in this case became 100%. At present, the 6.150 target to the upside is still active and it can be seen that so far the index has not violated the 4,750 low from August. The rally we have seen in the last two days is a continnation of the recent pattern of sharp moves down, followed by quick rallies but the point to note is the lower highs and lower lows - bears are coming back in at lower levels and pushing the market down. This may not continue but it suggests the bears are in control. The move through 4,950 during the last sell off has activated 4,050.

If we strip out more noise, this 100x3 (100 points per box, 300 point move to reverse into a new colunm, we can see that here too the bears have been gaining ground. Initial reistance at 5,400, then new lows with each downward move. Both those targets to the downside are active but again, will we get some short term spike up to 5,800, keeping the symmetary of the pattern?

And here is a 50x3 chart using the 'closing price' method (ie the chart is plotted based on the closing market level only, not the intra day high low. It strips out the intra day volatility). This one is quite interesting because it shows the August closing low has been violated by the most recent sell off. There are currently no active targets to the upside there are active targets of 4,650 (not shown) and 4,450. I've circled the 'high pole' here in purple - the chart has a great symmetary about it so as the right shoulder forms, will we get another high pole. At present, the chart is saying no but that may of course change as it develops.

And using a more traditional candle chart, if this is a forming right shoulder, it lends itself to a higher level. As I calculated in a previous post using the 50x3 PF, a 78.6% retrace from the top (6050) to bottom (4800) comes out at 5,782, which is reasonably close). This assumes of course that we get a 'perfect' head and shoulder pattern.

So overall the PF charts are currently showing be bears still have it but watch out for a high pole.

TZA

Initial support at 32.5 and now at the higher 40. The move through 57.5 activated that target to the upside of 85. It could be achieved in one single column but noting the previous reversal at 67.5 (from that high column of X's off the bottom), we may see a three box reversal to the downside first. Needs keeping an eye on to see how the pattern develops, but 85 is the target.

World markets update

A lot of these patterns are developing faster than I can update them but here's the current read. These are all daily, high/low charts, so all 'bigger picture'.

Starting with the Dow (100x3) the 9,600 target is active and there is a target of 8,800 which is not active - need to see the index move below 10,500 to activate it. To the upside, the target of 12,700 is not active. We would need to see a three box reversal and a move up through the previous high of 11,300.

.The declines in the S&P 500 (10x3) since last Thursday have activated a new target to the downside of 920 and (as with the Dow). I still like the 1,040 target, as it was the first one given from the high. I can put an 'uber-bearish' target of 650 on the index, on the grounds that the index has breached the level where it previously found support. It may never be achieved (not all these targets are) but its a valid target nonetheless.

. The falls from last Thursday give a new active targert of 2,040 on the Nasdaq (20x3) but note the index is currently perched at a level where it found support on two previous occasions. No obvious targets to the upside.

.Both these targets on the RUT (10x3) are active.

.The Hong Kong (250x3) market continues to grind lower - so much for international diversification!

.Still looks like a forming head and shoulders on the FTSE 100 (50x3) chart. I missed in on the labelling but there is in fact a target to the upside of 6,000 on the index, given by the most recent columns of X's. It is not active - we would need to see the FTSE reverse higher and take out 5,350. To the downside, 4,500 is active, while 4,050 and 2,500 are not (unlike the Dow and SPX, it can be seen the FTSE has yet to make a lower low from the Aug sell off).

.The CAC 40 (50x3) has an active target to the downside of 2,350 (2,950 from the high was met) and there is currently a target to the upside of 3,750 which is not active. The bulls would need to push the index through 3,050, where it has recently met resistance on two occasions.

.And finally, on a slightly more positive note. the DAX (100x3) seems to have found some short term support at 5,000 and there is an active target to the upside of 6,800. A reversal and move through 5,800 would lend support to this target, as we would then have higher highs, higher lows (ie a double top with a rising bottom and also a triple top buy signal).

Standard Chartered (STAN.L)

Standard Chartered is arguably one of the 'better' banks listed on the LSE. The main focus of its business is towards the growth markets of Far East Asia (where it has its origins). It was sucked down with the other banks in the 2008 financial crisis despite having no great exposure to sub prime mortgages and more recently has been at pains to state it has negligible exposure to PIIG sovereign debt!

But once again it finds itself guilty by association, dragged down with the sector and clearly susceptible to a slow down in the Far East. Having reached a high of 1975p in late 2010, the shares have moved progressively lower and today achieved that 1225p price target from the high (a decline of 38%). The recent price action suggests the pace of decline has slowed a tad (ie falls of around 125p before the bulls come back in and reverse the column) but for now the bears have control. But that's not all............

..........what is also interesting/surprising/shocking/depressing is not one of the 34 analysts who cover the stock has placed a sell recommendation on the stock, at any time in the last 18 months!

BHP Billiton (BLT.L)

These patterns need a bit more time to develop but in general terms the most obvious observation here is that BLT is sitting right on its long term support.

On the 25x3 HL chart, we do actually have a new lower low (denoted by the red 0). There is an active target to the downside of 1575p and a new targert of 1050p, activated by this move below the previous column of 0's.

The reason for wanting to see the patterns develop is because the 50x3 chart has not confirmed a new lower low itself yet - it can be seen that at current levels the stock is right on two lines of previous support. A decisive move below this would activate that 900p price target - the 1450p target is already active.

.To the upside there is a target of 2150p but this is not active. We would need to see a three box reversal to the upside and the new column of X's take out the previous high of 1850p.

By the way, RBS published a research note on BLT today, giving the stock a long term (12 month) 'buy' recommendation and price target of 2725p.

FCX

Support currently at 31 on this 1x3 HL chart. The target to the upside of 46 is NOT active. It would require a 3 box reversal to the upside and for the price to take out the high of the previous colunm to activate it, in other words a move through 37.

The bears have had the ball and been advancing down-field. The target of 36 given by the first column of 0's from the high was achieved and was triggered by a triple bottom sell signal. The target of 14 was also given by a triple bottom sell signal and is active.

Need to see how the pattern develops from here as it could be a potential H&S. If so, may get support here and ultimately a move back up to 45-46.

USA yesterday (and Hong Kong today)

The US indices are not all conforming at this time although they do all have (red) bearish resistance lines. But here is the current 'big picture'

I'm using a 100 point box size on the Dow to strip out a lot of the recent 'noise'. The initial reversal from the August sell off gave a target to the upside of 12,200, which was activated but never achieved. The index got as high as 11,700 then reversed lower. The target of 9,600 was formed by that column of 0's from the high and was activated when the index moved below 11,000 - its still active. The most recent action has been supportative to the bears, in that the index has reversed lower at lower levels and reversed higher at lower levels (ie lower highs, lower lows). See for example how it got to 11,500 before reversing down, then most recently reversed lower at 11,300. The 12,700 target to the upside is not active - we would need to see another three box reversal then for the index to move above 11,400, taking out the previous high. Finally, I have put that target of 6,700 on the chart on the basis that the previous support at 10,700 did not hold during the last sell off (the index filled the 10,600 prior to reversing - remember where you saw it first!!!)

Again, i'm using a larger box size here (ie 10 points to fill each box) to strip out the recent noise. Technically the target of 1,380 to the upside is still active as the index has not moved below its base of 1,120 yet. Note the resistance at 1,220 and as with the Dow, it can be seen that the bears have managed to come back in and reverse the index at lower levels most recently. The 990 target is active, the targets of 1,330 and 920 are not. We'd need to see the index move through 1,200 to active the 1,330 and below 1,110 to bring 920 in to play.

Unlike the Dow, the Russell (10x3) has so far found support from that large sell off in August (at the 645 level). That said, on balance this chart looks more bearish in my view. See the levels of resistance at 730, 710 and 690 - trending lower. The index found support three times at 670 but the persistance of the bears finally paid off and we got a triple bottom sell signal, activating that 550 target which remains in play. To the upside, that 790 target is not active, We would need to see the current column of 0's reverse in to a new up column of X's and for the index to pass through 700. It would then need to take out those resistance levels mentioned above to strengthen the bullish case. It can be done, we'll just have to wait and see.

The Nasdaq (20x3) is slightly harder to call because at a glance, this chart had been looking more bullish. Clear support for the index at 2,340 and the higher 2,440. The target of 2,760 remains active but has not so far been met. The bears have had success more recently, coming back in and pushing the index down from lower highs (we had an initial reversal at 2,640 and then at the lower level of 2,580. But 2,440 support is clearly a line in the sand at present that the bears will have to overcome and in doing so, activate that target to the downside of 2,040.

And as the Western world capitulates, can we look for good portfolio diversification by investing in the Far East, whose economies are surely in a relatively better state of health?

Well, the Hang Seng Index (250x3) is currently suggesting an emphatic 'no' to international diversification. The index did more than double from its 2009 low and got to 24,750 before reversing lower. That level has never been recapture nor surpassed.

The target to the downside given by that initial reversal (18,000) was recently achieved. The blue horizontal lines are all levels of support that have eventually cracked as the bears have regained control. As things currently stand, there are no obvious targets to the upside and the target of 14,000 is active.

Dow/Gold relationship

We often read about how the Dow peaked in 'nominal terms' back in 1999 and how since then in 'real terms' (if priced in gold for example), it has been a lost decade for the Dow. I guess its a valid point to a degree but one must not lose sight of the fact that we can 'price relative' anything we want to.

Anyway, post the recent decline in gold, this relationship appears to have put in a bottom, even if it proves to be temporary.

On this 10x3 P&F it can be seen that the ratio found some resistance at the 640 level (0r 6.4 based on the candle chart) - on no less than four occasions, but that has now been taken out, giving two targets to the upside of 780 and 750 (note the current 200 day mva on the candle chart is 7.9 (or 790 in the context of this P&F). So if this target is to be met, we can assume that one of the following will happen:

- The Dow will rise and gold will fall/stay unchanged

- Both will rise but the Dow will rise faster than gold

- Both will fall but the Dow will fall less than gold

Take your pick!

Dow update: low pole down, back at bearish resistance line

The column of 0's that preceeded the current column of x's gave a 'low pole', where it moved 3 boxes below the previous column of 0's. Today's rally has brought the Dow back to the (red) bearish resistance line.

There is an active target of 9,600 in place but i'd be looking for the current column of X's to reverse imminently. If it did reverse here, the current column of X's would give an (inactive) target to the upside of 12,700 - we'd then need to see a move up through 11,400 to activate it.

FTSE 100 further HS update

I should have added this weekly candle chart to the update I did yesterday. I can't rule out the possibility that the right shoulder will complete up where the (larger) left shoulder topped. If I work it out on the P&F chart, a 78.6% retrace from top (6050) to bottom (4800) comes out at 5,782, which is reasonably close.

The top of the left shoulder shows up much better on the candle chart compared to the P&F, which shows a high pole up then a very swift reversal.

The alternative would be some sort of bear flag and a move lower.

FTSE 100: H&S update

This was the FTSE 100 back in August (12) where I flagged up the potential formation of a large head and shoulders pattern.

And here is the current position. Last week's sell off formed a triple bottom sell signal and activated that target of 4,500 to the downside. But we have now had a 150 point (3 box) reversal and we have a forming column of X's which should (based on recent action) push the index back up towards 5,300 - 5,400. It can be seen that the index found support at 4,950 on two occasions in recent weeks (where the column of 0's reversed in to a new column of X's).

The target of 4,050 is currently not active - we need to see a three box reversal to the downside and a move below 4,950 to bring that in to play.

P&F charts are not time sensitive, in that the y-axis does not plot time like other charts. For example if the index rose continually for a year without reversing, it would form just one column of X's on the chart. But the numbers shown in some of the X and 0 columns denote months of the year, so it is possible to guage the time it has taken this pattern to form. It took about a year for the left shoulder to form, and so far the right shoulder has formed over just six weeks (Aug through Sept).

Incidentally, the 2,500 target to the downside (!) has not been activated but is a valid (inactive) target for now! The 6,150 target to the upside is also still active in my view, as the index has yet to fall below 4,850, the base of that column of X's. Until it does, that remains a valid target.

UHS: 1x3

SPX update

1,040 and 990 are both active targets. But note the previous support at 1,110 (saying that look at the decline that preceeded it - 23 boxes, 230 points on this chart without a reversal)

FTSE update (2) - triple bottom sell signal

That 5,050 support didn't hold for long! The break through 5,050 now brings 4,500 in to play - an active target to the downside.

The pattern still looks like a forming right shoulder to me and noting the support that the FTSE has had previously at this level, it is possible that the shoulder will continue to develop and the market will reverse higher, up to 5,300.

The other alternative is the shoulder breaks now and we get a 'hard down' progressive drop down through 4,800 (a previous level of support) through 4,500 and down towards 4,100.

FTSE - support?

Based on recent action, the FTSE should find support here (famous last words!) If it breaks below 5,050, it forms a triple bottom sell signal and 4,500 comes in to play.

Gold - potential targets

On the 10x3 H/L chart, the first target down from the recent (all time) high is 1,550. See how the price reversed lower, then on each subsequent revesal higher, the bears have come back in selling at lower levels. The move through 1,800 confirms the triple bottom sell signal and activates the target.

There is a minor bullish support line to push through. The longer term line is still very much in tact and has not been challenged since early 2011.



The 25x3 chart shows just how parabolic gold has gone the last 2 years. The recent action has given a double bottom sell signal and an active target of 1,600. I haven't labelled it but there is also an unactivated target to the upside of 2,250 but we would need to see a move above 1,900 for this to be activated.

FTSE battle lines

Here are the current lines in the sand. The FTSE reached 5,399 intra day this morning but the bulls were unable to push it through 5,400. Conversely, we know the bears are coming back in at this level, as it can clearly be seen that we have already had two reversals and sell off's down to 5,100. But the bears have not been able to get through that level.

So thats the range - 5,100 - 5,400. For this recent pattern to continue, the market should sell off from here.

FTSE update

A move below 5,050 activates that 4,500 target to the downside. I just wonder if the bulls and bears will continue to fight between 4,950 and 5,400 for a bit longer. If this was a forming right shoulder, i'd expect a few more columns of X's and 0's prior to breaking lower. Either way, a move through 5,050 activates the target.

SPX update

A move through 1,140 activates the 990 target.

SPX - can it hold 1,150?

This 10x3 shows the recent battle between bulls and bears. The forming triangle failed a couple of weeks ago. I still like the look of 1,040, the target given by the first column of 0's from the May high (11 x 10 x 3 = 330 points. Then 1,370 - 330 = 1,040.) Lets see.

SPX 10x3 - forming triangle

There is a triangle forming on this 10x3 HL PF - it needs 5 columns to complete. There is an active target in place of 1,040, given by the first column of 0's from the top. We now have two un-activated targets - one to the upside of 1,380, which would get the SPX to a new high and one to the downside of 990, which would get SPX close to a previous support level.

To activate the target to the upside, the index needs to pass through 1,210. To activate 990, the index needs to reverse and move through 1,120 and ideally 1,110.

The index pushed through the long term blue bullish support line at 1,170 and is currently in a state of bearish resistance, as denoted by the red line. Unfortunately I won't be around to see how this resolves, i'm off on holiday after tomorrow!

Greece - yields still rising!

It's all gone a bit quiet on the Greek front but I suspect for not much longer - the last €12bn of the 'first' EU bailout was approved in June but will be gone by the end of August. The 'new' €120bn bailout will be issued in tranches but is dependent on Greece demonstrating it is implementing draconain austerity measures while growing its economy!! These bond yield suggest non compliance!