Tuesday, July 24, 2012

Just before all hell breaks loose - Market Analysis for July 24th 2012 by Singaporeseeds

It’s been more than a month since I last wrote my market analysis. I went to Myanmar, got to know some really good friends, met up with many old ones and in the process, got to know myself a lot better. I was told this year will be a year of opportunities for me, but I would prefer to say that this is the year I broke my own limitations and realised there were actually nothing stopping me except for those in my own head. From the long cold journey to catch the aurora borealis in March to planning a retail outlet in Myanmar, all these were unimaginable 2 years back when I can barely go out of my house for more than an hour before I started feeling giddy and weak. Just last week, I recovered from gastric flu after a good night’s sleep when usually it would have taken me a week to do so.

As for the one month hiatus, it happened because I had to travel to Myanmar and without the readily available internet connection; I had to exit all my positions. But I was so busy over the next few weeks that I did not have time to look at the market until now. And luckily I did.

Monthly chart for S&P

The monthly chart for the market rarely forms bearish divergences but when it does, it goes down in a bad way. As you can see from the yellow trendlines on MACD, it had happened twice since 1996 and both times the market dropped for more than a year. Just based on chart symmetry, I can say that we will be going down to around 600 on the S&P in within a year’s time from now. Right now, the MACD histogram is shortening and when the month ends in a down red histogram, it will be the signal for the start of this year-long downtrend.

I’ve spent the whole of last week arranging to sell off all my stock certificates, unit trusts and accumulating cash on the sidelines. When the drop happens, property will also be hit and I’m waiting to scoop up at least one property in UK when that happens.

Anyway be prepared for another round of global recession. We are now halfway through a major 20 year sideways cycle that will end in 2019. 

Daily chart for S&P

Daily chart for Dow

Daily chart for NASDAQ

On daily charts, all three indexes are showing a bearish divergence. However we are now at a range of support levels and I’m looking for follow through after 2 down days. We should be around 1,286 by end of this week.

Daily chart for the Dollar

There is a bearish divergence for both dollar index futures and UUP. The dollar usually moves in the opposite direction of the market and with the very bearish outlook of the markets, I believe it should rally very soon. So I’ll be looking out for failure signal for this bearish divergence.

Daily chart for Gold

Gold seems to be forming a base around 1550 for a year now. I have a wedge pattern on daily with volatility decreasing. Whichever way it breaks out from, it’s going to be a big movement.   

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