Seeking Alpha

Sunil Sharma's  Instablog

Sunil Sharma
Send Message
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
My company:
Cerebral Works, Inc,
My blog:
Market Remarks
  • Clouds Not Disappearing: Daily Remarks - Thursday August 23, 2012 0 comments
    Aug 23, 2012 7:59 AM | about stocks: DIA, TLT, SPY, UUP

    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:



    Change %(0.2)%0.0%0.2%0.0%(0.3)%(1.4)%(0.8)%0.6%
    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
    Support 113,1271,4083,0585,1758105,7447,00614.73
    Support 213,0421,3993,0315,1328045,6586,94313.96

    Stocks: DIA, TLT, SPY, UUP
Back To Sunil Sharma's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.