Expected Short Term Peak, Correction ongoing, Germany, Dow Jones 8-24-2012

Our timeline for August has been pretty much in line with our forecasts. Germany hit 7100 level, slightly above our target resistance of 7000 for the 2 year downtrend resistance, Germany released its GDP numbers last August 14, 2012. And the anticipated wall of worry will resume after Germany hitting near 7000 level. All eyes in Germany for predicting future movements on U.S. Markets. I chose to lighten and sell risky positions when it started to get into 6900-7000 levels, to avoid absorbing the flactuations of the market.

This correction can be minimal or even a resumption of sell-offs in Global Markets. 3 scenario can happen.

     1. Correction of 5-10% after hitting 7000, good support at 6500 levels. Then into sideways market. (60% chance)

     2. Resumption of selloffs, another round of European Crisis will hurt the markets , if 6500 doesn’t hold, Germany can selloff to as low as 5500-5600 levels, or even 5000 level that we met last 2011. (30% chance)

3.   3. Correction of 3-5%,and resumption of rally, breaking out of 7000 2 yr resistance line, and eventually hit 7400. (10% chance)

U.S. Markets followed through when Germany rallied 18% from June selloffs. Dow Jones rallied 10.3% from its lows. SPX hit new yr highs into 1427, but Dow didn’t. Not bad for a trading range.

Dow Jones hit 13300 levels 3x for the past 6 months, and didn’t pierce above. Seems this could be the wall to break to trend higher. Dow is still in uptrend short term,but must hold into 12800 pivot point to be said as uptrend, there is weak support though at 13000. A breakbelow that level would possibly lead to 12500, or even 12000 level.

Elliot Wave analysis suggests that we are in minor wave 4 correction of Major 3 of Primary Wave III.

Short Term: Corrective pattern seen, 13,000 weak support, then 12,800. Still in uptrend. But European status worrisome.

Medium Term: Uptrend

Long Term: Uptrend. Long term uptrend support raised to 12,000.

VIx, Germany, NyAD and Gold 8-17-2012

VIX went to an oversold state, reaching almost equal to March 2012’s low at 13.66. MACD and RSI hit oversold, and VIX went to our 12-16 range for “TOO Bullish” sentiment by the public.

QoQ GDP Growth for Q2 2012:

Germany – 0.3%

France – 0.0%

Italy -  -0.9%

UK -  -0.7%

VIX showing Public is still Too Bullish even though European GDP Numbers are flat growth and even contracting economy (3 quarters in a row). Although European GDPs beat estimates, they aren’t good enough to be said Bullish. Something really weird could happen soon.

NYAD on the other hand hits fresh new highs, but MACD and RSI showing negative divergence on the daily charts. Showing signs that anything could turnaround also soon.

Germany’s GDP expanded 0.3% , beat the 0.2% estimates, continued to get near 7000 level. We have been monitoring this level for the past 1 month or so. And still recommending to “lighten” and even “sell” when Germany approaches 7000 level, its 2 yr downtrend resistance. Next resistance is 7400 level, 4yr downtrend resistance since 2008, and I’m not expecting we could reach that level if economy is still stagnant. Currently, the RSI hit overbought levels, but MACD showing negative divergence, sign of anything could also turnaround soon.

Overall, things are really just weird, no clear good developments, but markets continue to rally and our indicators all giving a hint on the negative divergence forming. It might be safe to stay in the sidelines, and wait for good correction or better economic numbers before getting back into the market. The only good thing happening is that, US Bonds are selling off from the fresh new peaks- what’s the implication of this? 1. Public is going to risky assets. 2. Bond selloff is just a correction, and will resume soon. Let’s see in the coming weeks.

Gold is currently in a trade the range pattern. Current trade seen is from 1575 to 1625

The Larger trend shows trade the range pattern also from 1550 to 1775. Overall Pattern for gold is sideways. No clear indication yet where to go.

Germany paused near 7000 level, may have peaked short-medium term 8-12-2012

We are still anticipating a possible peak short term, bellwether for current Global Market is Germany.

We issued a 2 yr resistance at 7000 since 2 weeks ago, and we may have reached that level. Triggering a "warning" signal. RSI was also negative divergence, MACD didnt.

August 14 will tell wether it will edge higher into 4 yr resistance at 7400, or resume its downtrend.

 

SPX on the other hand gets a little bit choppy, waiting for more news, I still believe this could be possibly a trap.

We are expecting a positive GDP for Germany, but who knows if it releases a surprising negative GDP that will trigger selloff, or a small chance to release more than 1% QoQ GDP Growth that may trigger a rally.

Current Holdings:
DOLLAR:
I have completed my selling on Equity positions, especially in Hong Kong and AU last  August 9, 2012. I may be wrong or right in this decision, but cash is king right now.

70% - cash
30% - high yield bonds

PESO:
80% - cash
20% - Philippine Stocks

Germany slightly toppish, others may follow, waiting for Aug 14 Germany GDP 8-7-2012

Last week's post, we are anticipating a strong rally this week, and approximate to hit near 7000 or 7000 for the Germany. It may have already hit our targets at 6944, or may hit higher into near 7000 level anytime this week to next week.

Few things alarming me that we may see strong resistances/pullback anytime.

1. RSI of Germany index (DAX) is in negative divergence

2. 6944 is very near the 7000 (2 year resistance level).

3. Deepening Recession in London,Italy, Spain and UK.

4. Elliot Wave count seems like a 5 valid upward count. Or seems to be a valid A-B-C pattern, which means correction is likely high to happen anytime.

5. Italy GDP Forecast at -0.9%, deepening. Due this week(need to confirm).

 Short Term: Weak RSI, near the 7000 resistance
Medium Term: Downtrend 2yr channel
Long Term: Sideways

 

Our SPX projections is taking into shape as well, although SPX is hard to label based on Elliot Wave Patterns, I tentatively indicated that  Minute wave iii could be underway or could have ended at 1400. 

There could be 2 possible uptrend channel forming, 1st one with a resistance of 1400 in red. and 2nd one at 1420 in blue and it coincide with this Bull Cycle highs at 1422.

Short Term: Uptrend channel intact, but looking into upper trading channels. Slightly overbought and Germany slightly peakish short term

Medium Term: Sideways to Uptrend

Long Term: Uptrend at 1280 SPX.

Hong Kong is sluggish but with a good tradable range, 20,000 target achieved and can now be shorter temporarily.

Short Term: Uptrend channel reached. and 20,000 resistance reached.
Medium Term: 2-year downtrend resistance at 20,500 coming.
Long Term: 4yr Bull Market Uptrend line intact, but increasing at 18,500.

THE BAD and WEAK SIDE. China.

All throughout this Ball Game, im not sure why China is so sluggish, and if their market really proves 7.6% GDP is still strong, or possibly China Economy reflects on Hang Seng index?

Anyway,lets discuss the possibilities and its current status.

China is now at 21xx, a very low level, compared to 1600 last 2008 recession bottom.

What concerns me is that, Germany is peakish, but China is bottomish, which market to follow?????

The red uptrend channel may also broke down. Its the 4yr uptrend line since 2008. The last line defence of the bulls, but it seems the sell-off was triggered when it went below that line.

I am still trying to figure out China index' role in this Global Economy. If its a Catalyst, or a trap or maybe a Bullish sign of this market.