Thursday, October 11, 2012

DOW, S&P, Germany, forecast 10-11-2012

This 4 month rally in the U.S. has already brought 16% gains. An unexpected strength since the 11% correction happened last April and May. We also notified that Germany and other European indices are the ones leading the rally. But 2 weeks ago, U.S. and Europe somewhat departed their ways, U.S. led to new fresh highs, and Germany(Europe) did not, instead corrected below when hitting their 5yr downtrend resistances.

Currently, we will just focus on the U.S., and short term, uptrend is still intact, but gaining momentum on the downside. The 4 month rally has been so strong that we haven’t had a correction of more than 5%. I think, now is the time we might expect this to happen.

Looking on the uptrend line of the DOW, it was pretty straightforward of a typical bull run, huge rally then small selloff to warm the RSI and MACD. But looking into Elliot Wave count, we might had the Minor I of Major Wave 3 of Primary Wave III Bull Market, or possibly Major Wave 3 of Primary Wave III Bull Market. Which takes into consideration that, after a Minor I or Major Wave 3, a pullback of 4-12% is normally in range, and with this steep uptrend, an estimate of breaking down into this short term uptrend,will make the economy more healthy. You know what I mean-you cant take them all in 1 rally.

If market breaks down, we expect DOW to hold support near 12900, and suggest to slowly buy into the market, as Europe GDP isn’t good still.

Europe Q2 GDP is nearing its release, and a continued contraction could easily bring DAX down to 6600 levels. First uptrend support of Germany is at 7000. I am still putting a HOLD/LIGHTEN strategy to any European Index, until a viable growth is seen. And wait till a good correction from their 25% rally since June.

U.S.
Short Term: Uptrend, but weakening. Negative Divergence on MACD and RSI. NASDAQ in downtrend.
Medium TerM: Uptrend line support now at 12800.
Long Term: Uptrend. Uptrend line since 2009 has a support now at 12500.

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