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Sunil Sharma
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I am an independent trader and technical analyst. I have been following the forex and equity markets for over 15 years. I am a discretionary trader. My investment philosophy includes a blend of fundamental and technical analysis. Prior to taking up full time trading, I was an entrepreneurial... More
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Cerebral Works, Inc,
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Market Remarks
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  • Dollar Is Falling And Euro Is Bouncing – Is Fed Responsible For This?

    Dollar index has been falling ever since it made a 15 year high of 121.29 in July 2001. Subsequently, it made an all-time low of 71.05 in April, 2008 - a 41% decline from the high. In between, it bounced off around 80, which acted as a support zone in earlier years too - in '91, '92 and '95. After making the all-time low, dollar has traded within a symmetrical triangle on monthly timeframe, crisscrossing the 80-level. The center line from the projected apex of the triangle is within this zone. Dollar index is again fallen within this zone.

    After facing resistance around 83.63 - the high made on August 23, 2010 - dollar index made a double top in May-July 2012. It broke below the neck line of the double top in late August and is now on its way to the measured target of 78.75.

    On the other hand, EUR/USD has had a terrible time in the first few months of 2012. However, on monthly timeframe it is maintaining a long term up trend. Note: prior to 2000, EUR/USD is constructed as a composite of euro's various national currencies.

    On weekly timeframe, EUR/USD is marching towards the downtrend line, which touches the May-2011 and the August-2011 highs, after making a Trend Channel Line Overshoot (TCLOS) chart formation and overcoming couple of strong resistance levels. Now, another resistance level is approaching - near 1.2975.

    Click here to read more...

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Sep 13 8:18 AM | Link | Comment!
  • Roadblocks Hit: Daily Remarks – Friday August 24, 2012

    Thursday: Stocks Ease So Does Volume

    Early Thursday morning - New York time - the US futures were heading higher from the decline of Wednesday. YM, the DJIA mini futures, was even threatening to form an inverse head-&-shoulder pattern. However, the US unemployment claims report punctured the optimism and the futures lost their steam. For rest of the day, not much positive happened for the markets and YM did not complete the inverse H&S pattern.

    Greece and the Eurozone crisis again crept back into the limelight - vacation season must be over for the Europeans. Seems like the vacation did not improve the moods of Germans and they were back to blowing-hot-blowing-cold - here, here and here. The mutterings coming from Greece is also not purifying the muddy waters.

    The bottom line is that global equity markets remained in a funk on Thursday and the gloom spilled over to Asian session on Friday. Major US indices have completed the short-term reversal patterns and are now moving down looking for support levels. If their up-down upward moving pattern since early June holds - current summer rally - then the support level may come at around 12890 for DJIA, 1376 for S&P 500 and 2975 for NASDAQ within next 7-10 days. However, September has been the worst month for all major indices for over 60 years so the probability of this pullback to last longer and deeper is significant.

    (click to enlarge)

    Dow Jones Industrial Averages declined by -0.9%, S&P 500 by -0.8%, NASDAQ Composite by -0.7%, Russell 2K by -0.8% and Dow Jones Transportation Average by -1.5%. The volume decreased across the board. Declining stocks led the advancing stocks by more than 2-to-1 margin.

    Overnight Action: Chinese Overhang

    The Asian session too did not bring any respite to the global markets. In fact, news about Chinese economy exacerbated the problems. The New York Times reported on China's manufacturing slow down and mountains of unsold goods. Dallas Fed also released a report saying that China's slowdown may be worse than official data suggest. This was also a fine time for investors to revert back to fretting about the prospects for central bank action. Bottom line - Asian investors sold off commodity and technology shares, which had powered the recent advance.

    Shanghai Composite fell by -1.0%, Nikkei 225 by -1.2%, Hang Seng by -1.3%, Kospi by -1.2%, S&P/ASX 200 by -0.8%, SENSEX by -0.4% and Jakarta Composite by -0.4%. Not a good way to end the week for Asian markets.

    The Shanghai Composite is having a very tough time. On Friday, it made a fresh low since the week of March 9, 2009. The low is close to the 78.6% Fibonacci level of the advance from financial crisis low to 2009 high. Even during the recovery, Shanghai Composite could retrace only to 38.2% of the sharp 2007-2008 decline. During this time, S&P 500 recovered more than 78.6% of the decline and the Mexican stock market made all time high. These two indices are near the highs whereas the Chinese index is near the lows of the recovery period.

    (click to enlarge)

    One glimmer of hope is that the index is making a collapsing wedge and a break above the upper limit will be a strong reversal. Another hopeful sign is that FXI, the ISHAREs FTSE China 25 Index, is not following in the footstep of the Shanghai Composite. FXI made a low in October 2011. Since then it has formed a symmetrical triangle. The broader market is facing stronger downtrend than the big-caps. If big-caps assert the leadership then the index would turn around too - big if.

    (click to enlarge)

    Currencies - Confounding Yen

    Despite high national debt, Japan's currency has remained strong during the financial crisis. Japan is facing its own terrible fiscal cliff and legislation needed to sell bond is languishing in the Diet, suggesting that the government could run out of money by the end of October. So who would have 'thunk' that Yen will get stronger? But that is what it is doing.

    After breaking above an upward sloping flag, the USD/JPY - a contrarian move - USD/JPY has fallen back into the flag and is now knocking at the lower bound.

    (click to enlarge)

    A similar thing is happening to AUD/JPY too. It had broken above a horizontal channel and was on its way to the measured target of 85.60, when the idiosyncratic Yen struck. Now the pair is back in the channel. It is at the 50-day SMA but a break below it will increase a likelihood of testing the 79.50 support level.

    (click to enlarge)

    Commodities - Gold Strikes

    The reinvigoration of the expectations for QE3 by the FOMC meeting minutes has enabled gold to overcome two downtrend lines in past few days. The end of the week price action may have injected some vacillation on parts of the gold-bugs but the current bias still remains upward.

    (click to enlarge)

    After hitting couple of measured move targets - double bottom and horizontal channel - NYMEX crude oil hit a resistance zone of 61.8% Fibonacci retracement level and a down trend line. On Thursday, crude made a bearish engulfing candlestick formation and is ripe for some pullback. If the support level near 92.94 - a broken resistance - holds then it can climb back up to the 78.6% Fib level near 103.

    (click to enlarge)

    Bonds - Topping Patterns Revived?

    Like AUD/JPY, 30-year US Treasury Bond had broken out of a horizontal channel (down in case of bonds) and like FX-pair, it too has come back within the channel, nullifying the downward target. (click to enlarge)

    Pullback Continues

    Overall assessment is that all capital markets - equities, commodities, bonds and forex - are indicating a short term pullback in favor of the risk-averse traders.

    Key Levels for the Day:

     

     

     DowS&P500NASDAQDJTRARussell 2KFTSEDAXVIX
    Previous13,1731,4133,0745,1948135,7747,03115.11
    Open13,1711,4133,0665,1688125,7747,06615.00
    High13,1711,4133,0705,1688125,8097,08116.45
    Low13,0471,4013,0465,0918045,7646,92315.00
    Close13,0581,4023,0535,1158065,7776,95015.96
    Change %(0.9)%(0.8)%(0.7)%(1.5)%(0.8)%0.0%(1.2)%5.6%
    Change(115.26)(11.41)(20.27)(78.71)(6.56)2.40(81.93)0.85
    Close (vs. MidPoint)LowLowLowLowLowLowLowHi
    TR %1.0%0.9%0.9%2.0%1.0%0.8%2.2%9.6%
    Resistance 213,2171,4183,0815,2028155,8297,14217.25
    Resistance 113,1371,4103,0675,1598105,8037,04616.61
    Pivot13,0921,4053,0565,1258075,7836,98415.80
    Support 113,0121,3973,0435,0818035,7576,88815.16
    Support 212,8871,3843,0185,0047955,7126,73013.71

    Aug 24 9:46 AM | Link | Comment!
  • Clouds Not Disappearing: Daily Remarks - Thursday August 23, 2012

    Wednesday's Recap - Fed To Rescue?

    Wednesday was the FOMC meeting minutes release day and that kept the markets on tenterhooks for most of the day. The overnight action from Tuesday's close was stifled by some disappointing news from Japan and Australia along with the apprehension about the FOMC meeting minutes. US futures were under pressure since mid-Tuesday and remained so well into the early New York session on Wednesday. Then the minutes were released and they showed that policy makers are thinking about taking further action fairly soon if substantial and sustainable improvement in recovery do not become evident.

    Couple of hours before the FOMC minute release, eMini had started a turnaround - around noon EDT - by making a 'Trend Channel Line Overshoot' pattern (on 30 min time frame) that Al Brooks calls a good setup. Sure enough, when the price settled above the overshot candle - 12:30 PM candle - the eMini raced up 10 points from the low of the day to an hour before the New York close.

    (click to enlarge)

    Not Enough:

    Still, not all is clear. The chart action on Wednesday was mixed but the clouds hanging over the short-term rally have not disappeared.

    Dow Jones Industrial Average followed up the long bearish engulfing of Tuesday with another down candle. This was the confirmation of the bearish pattern. Though there is short term support immediately below, the chance of a 2.7%-to-3.5% decline is still there.

    Other major US indices - S&P 500, NASDAQ, Russell 2K, NYSE Composite, and Dow Transport - made similar patterns. Dow Transportation Average continues to indicate that the Dow Theory is not very sure of the rally.

    (click to enlarge)

    Overnight Action:

    Futures continued to drift upwards after the FOMC event and are delicately placed. eMini has retraced the 61.2% of the decline from Tuesday high to Wednesday's low. NQ (NASDAQ futures) is near 78.6% level and YM (DJIA) is near 50%. Interestingly, YM (September contract) is making an inverse head-&-shoulder pattern on 30-min timeframe. If it closes above the right shoulder - above 13200 - then the upward target of the pattern would be near 13300.

    (click to enlarge)

    Asia - Data is For Contrarians

    China's manufacturing data was weak but investors countered that with increased expectations of a stimulus package. Asian markets generally closed higher recouping some of the losses of previous day. Nikkei 225 closed up +0.5%, Shanghai Composite +0.3%, Hang Seng +1.2%, S&P/ASX 200 +0.2%, Kospi +0.4% and SENSEX unchanged.

    Shanghai Composite if hovering at the three-year lows. A successful bounce will create a double bottom pattern with a target near 2360. But, it is way too optimistic at the moment. A longer sustained bounce is needed for this pattern to become real.

    Most major Asian markets are maintaining their upward bias, though some are at crucial resistance levels. Nikkei 225 is trying to go over the hump - neckline of a double bottom and a gap-down in May. Successful overcoming of this resistance will open up the path to a measured target near 10000.

    (click to enlarge)

    US Dollar Precariously Positioned:

    The FOMC meeting minutes are seemingly going to strike a blow to the dollar index. DX, the continuous contract, is at a major support level. It has reached the measured target of a broken bearish flag. A break below the support of 81.40 will bring in to play an un-even head-&-shoulder pattern with a measured target near 78.75 coinciding with another support level.

    (click to enlarge)

    Dr. Copper Showing Some Life:

    The summer rally since early June did not see the participation of Dr. Copper. It has been languishing in a trading zone for more than three months. Now, it seems that it may be slumbering back into life. On Monday it completed a pattern, which resembles an inverse head-&-shoulder pattern. We say it resembles because a classic inverse H&S occurs at the end of down trend. As copper is in the middle of a trading range, the pattern is not a classic one. Nevertheless, it has some potential as the red metal has also broken a downtrend line beginning from the April high. The measured move target is near 363. The next resistance is the upper bound of a symmetrical triangle.

    (click to enlarge)

    Bonds Are Not Sure:

    The FOMC meeting minutes have created some confusion in the bond market. 30-year US Treasury bond had broken below a horizontal channel and was on its way to a rendezvous with the measure move target near 143. However, a strange thing happened and now it is trying to go back to the high. A close above August 13 high will negate the channel-break target.

    (click to enlarge)

    Key Levels for the Day:

     

     

     DowS&P500NASDAQDJTRARussell 2KFTSEDAXVIX
    Previous13,2041,4133,0675,1948155,8587,08915.02
    Open13,1981,4133,0605,1918155,8677,06615.32
    High13,2051,4163,0815,2248155,8577,08115.52
    Low13,1201,4073,0535,1818105,7717,01814.75
    Close13,1731,4133,0745,1948135,7747,03115.11
    Change %(0.2)%0.0%0.2%0.0%(0.3)%(1.4)%(0.8)%0.6%
    Change(30.82)0.326.410.00(2.80)(83.32)(57.82)0.09
    Close (vs. MidPoint)HiHiHiLowHiLowLowLow
    TR %0.6%0.7%0.9%0.8%0.7%1.5%1.0%5.1%
    Resistance 213,2511,4213,0975,2438185,8877,10615.90
    Resistance 113,2121,4173,0855,2198155,8317,06915.50
    Pivot13,1661,4123,0695,2008125,8017,04315.13
    Support 113,1271,4083,0585,1758105,7447,00614.73
    Support 213,0421,3993,0315,1328045,6586,94313.96

    Tags: DIA, TLT, SPY, UUP
    Aug 23 7:59 AM | Link | Comment!
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