Monday, April 19, 2010

Top40 - end of the day recap for week ending on April 18th

During last week we welcomed back some volatility to our market. Wednesday’s and Friday’s daily range on Top40 was around 500 points and ATR started to show some signs of life again. Friday was especially interesting day - after making new year-to-date high on Thursday and after closing on the highest level since July 2008, market opened lower and then tried to run and test Thursday’s highs, but after failing to do so, it started to drift lower. Big surprise came in last hour of trading when news from US broke about civil-fraud charges against Goldman Sachs. That sent markets into free fall and Top40 closed 489 points lower. This was first weekly loss since the end for February 2010.

Close on Tuesday also pointed to weakness in the market. Top40 closed below 10ema for the first time since February 26th, but it managed to bounce back and close above it again on Wednesday. On Thursday market managed to stay above 10ema, but again on Friday market dropped and 10 ema was breeched as the market closed.

RSI is in the weakest state of all three indicators we follow, as it made three lower lows and lower highs in last two weeks, even as the market was making new highs. Stochastic oscillator is showing negative divergences, while MACD rolled over signal line on Friday. These negative divergences are showing us that market is not as strong as it was three weeks ago.

There is obvious channel on Top40 which started in March 2009 and there is small trend line currently around 25850. By checking shorter time frames one can see well defined trading range between 26000 and 26500. Watch for break of 26000 as it could take us down to 25500. After that support could be found around 25000 where 89 simple moving average is. On the upside, obvious test and break of 26500 might take us all the way up to that long term trend line, which is around 28000.

If you wish to check broad markets I would recommend the use of futures heat map from FinViz which shows how the GS-related selling kicked off a general divestment of risk assets, with stocks, metals and energy being lower; bonds pointing down; JPY and USD heading higher, while EUR and AUD retreated. This could turn very ugly for South African markets and Rand. Last time when divestment of risk assets started Top40 and ZAR were punished big time.

Moving averages, which help us to determine long, medium and short-term trends:

• long-term (200sma) - UP

• intermediate (89sma) - UP

• short-term (10ema) - DOWN

Trade with trend!

No comments: