Wednesday, April 28, 2010

US markets due for correction?

The US markets look set for a correction. A look at the main indices- DJIA , S&P500 and Nasdaq Composite- reveal a sharp drop in RSI & a sharp rise in -ve DMI. MACD for all three indices, which have not done a negative crossunder, may do so on further weakness. These 3 indicators gave similar reading just before the correction in June-July 2009 & in January-February 2010 (demoted as 'A' & 'B').


Chart 1: DJIA's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)


Chart 2: S&P500's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)


Chart 3: Nasdaq's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)

We shall note that the SSEC index has failed to recover from the bearish downside breakout of its triangle. A correction in the US markets (if it panned out), coupled with the ongoing turmoil in Europe and the bearish outlook in China, could deal a severe blow to the global equity markets, which look ripe for some correction after a long rally.


Chart 4: SSEC's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)
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4 comments:

  1. Voyager8Wednesday, April 28, 2010 4:19:00 PM

    So should we sell in May and get away?

    ReplyDelete
  2. Alex LuWednesday, April 28, 2010 4:55:00 PM

    Hi Voyager8,

    It may well be a case of "Sell Before May & Go Away". Who knows? Investors & traders are only human. They will try their best to get ahead by being just a little bit earlier than the next guy. Soon or later, this market adage will lose its effect.

    ReplyDelete
  3. IvanWednesday, April 28, 2010 5:07:00 PM

    sell before worldcup coming too. .

    ReplyDelete
  4. Alex LuWednesday, April 28, 2010 5:43:00 PM

    Hi Ivan,

    We may lose some punters to that 'market'. Without their presence, the market liquidity may drop a few notches.

    ReplyDelete