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Markets are set to resume normal transmission this week as the headline hogging Olympic Games comes to an end. We can expect a renewed focus on Europe and concerns over US debt and the debt ceiling, which is becoming a factor again with the limit nearly breached, as it was in 2011.
Equities
Despite this, equities markets have proved buoyant. The US markets are pushing the March, 2012 highs and if these are broken they could sail towards the GFC highs, which fundamentally makes no sense when you consider the real, underlying economies. But markets sometimes do strange things and for me, trends and charts outweigh economic rationale. In the short-term, anyway.
The Australian SPI 200 is also on the move again and is holding above the 50% level of the most recent range. Chart 1 shows the 25% level of the range acting as resistance, based on last Friday’s trade. I have also included the milestones of the major range. When projected up, we see the 50% level of this major range (4,322) as a potential area for resistance if the current highs are broken.
Chart 1 – Daily Bar Chart SPI 200
click chart to enlarge
Commodities
The big story in the markets over the last four weeks has been the movements in the commodities space. The overall landscape of commodities has been bullish, highlighted by a weakening US dollar.
My major focus is on Crude Oil, which has seen a recent triple bottom confirmed, followed by some upside movement from there. My experience of double and triple bottom patterns tells me that the best ones are found when price-forecasting techniques also support the position. (The same applies to tops).
The recent lows showed the importance of lows resistance cards and ranges resistance cards. Chart 2 displays the ranges resistance card using the All-Time-Low and All-Time-High as the extremes and indicates how the 50% level was acting as support around the $78.51 level.
Chart 2 – Weekly Bar Chart Crude Oil
click chart to enlarge
Chart 3 displays a lows resistance card on Crude. If we take multiples of the $9.75 low and project upwards, the $78 region again looks prominent for support.
Chart 3 – Weekly Bar Chart Crude Oil
click chart to enlarge
Many are asking whether Crude can run to 200% of the lows, as per David Bowden’s discussion on double tops and bottoms. While all things are possible in the markets, a run to 200% would reach $147.27! The only way I can see that happening is by a rapid decline in the value of the US Dollar, rather than a relative shift in supply and demand.
Let’s wait and see.
Good Trading
Aaron Lynch
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