Bounce back - what next

The bounce-back - now what?
Technically: markets were oversold, the fall overnight, when the Dow futures were down by 600 points, was low participation and by the time Europe opened the relief rally was underway.
2000 points loss on the dow in less than a week.

some charts and possible paths for the rally
WATCH THE VOLUME ON THE BOUNCE - LOW VOLUME WILL BE A WARNING THAT ALL IS NOT RIGHT!!

DOW daily
The fall overnight pierced the 200 DMA - for some that is a KEY LEVEL, so it looks like the PPT may have stepped in to prevent a crash on Tuesday morning
so a stick save - but where to now?
The "managed" fall tagged the lower upper trend line - so if the bull trend is in force then the rally should head to the upper trend line if this rally is only a correction of this fall likely target is 62 % retrace (marked in red)

Nasdaq daily

Looks like the fall also tagged the rising trend line so BULL market still intact

However, the fall was characterised by a few gaps down so it is possible that an attempt to fill the gaps will happen.

marked on chart at 7640

Long 3 months...

The move off the lows in December caught a lot off guard by the strength and relentlessness of the rally, me included. 
So pretty much watching this the last couple of months.

Some interesting things to watch and to note now the rally seems to be lng in the tooth (FLW)  - with the Nasdaq 29 % up from the lows in December.

Reasons:  Fed has reversed course - after jaw-boning about raising rates this year - it looks like they have succumbed to the Trump "pressure".

The trade deal with China (though the reality is that it will only be a band aid on a BIGGER problem)

European Central bank also looks to be on course to keeping the easy money flowing.

BUT will it help?  - Think Japan..

Interesting Europe has underperformed the US, Germany up only about 12 %

Nasdaq daily chart

Looks like a rising wedge , and a classic throwover
overbought (but can remain like that)

After such an extended move - the probabilities increase that the next multi-day (multi-week) move will be down.

BIG question : will it just correct this move up, and then rally to new highs?
OR will it be the start of the next down leg and break to new lows?

watch this space..

What about behaviour?
Well this rally has definitely got everyone talking about new highs and that the bull market is back.  TV pundits declared that the bear market has finished.

So this is the longest bull market in history (2008) - is a three month bear market really it?
Are companies forecasts at the end of 2018  of slowing sales and difficult conditions , already improved?  (FED EX)
If not then valuations especially in the US market look rich.
The market has been led higher by increasingly smaller group of stocks FAANG and Boeing, while banks are struggling

So the BEAR market scenario

In a bear market the classic scenario is a wave 2 rally that sucks in the crowd amid declarations that the initial fall is over and good times are back - CHECK

Bear market rallies are violent and sharp - CHECK

What about the alternative scenario? BULLISH

The rally from December is a Wave 1
A wave 2 down will do the opposite of the bearish scenario i.e. suck in the bears and may look like the start of a new leg down..
BUT if bullish and wave count correct, the next move up would be a WAVE 3
which SHOULD take the market to new HIGHS.

other markets in the next post

Nasdaq monthly chart  - similarities with 1999/2000
March 2000 -May 2000 37 % fall
May to Sept 36 % rally

2018 -2019   fall of 25 % , followed by rally of 29%

Markets don't necessarily repeat themselves over time but they do rhyme
Human behaviour doesn't change - emotions are still the same

Still waiting for resolution

Bulls are cheering and the talking heads have declared the bear market has ended.  read Jim Cramer article here.

Has it?

Well admittedly the rally has lasted about 12 days...

does that mean a BULL market has started?

look at some charts

DOW daily

So far down trend is still intact
clear classic rising wedge  (usually bearish) shows - more often than not there is a throw over (a rally above the upper boundary) which is quickly retraced

Nasdaq daily

bearish wedge
short term trend is up
but down trend still intact
could target 6750-6800

would need a break above 6880-6900 and follow through to start trend change

DAX and FTSE similar

DAX key upside level 11520
FTSE 7131  - Brexit vote  may have an effect

Finally - a rally - but is it a trend change?

Finally Friday's action looks like seller stepped back and markets had a decent rally.  Is this a change of trend?  Or just a correction?

Last post looked at the monthly charts, now zooming in to look at the weekly charts.

First the headline index  Dow Jones Industrial
Remember the downtrend on the monthly shows it in perspective - the odds favour a deeper correction.

1.  Bear market rallies are usually very strong rallies
2. The chart shows the down trend within a channel - prices reached the lower boundary - so the market was ripe for a reversal
3.  The action (so far) is still contained within that channel
5. There is still room to the upside to reach the top of the channel.
6 if this is just a short term bear market rally then I would expect prices to turn down again NEAR the top channel
7 A significant break above that channel and we may visit 24236 (see previous post)

May have been premature in discarding the 24236 target
Stopped out of all short positions on Friday - for profits
flat and watching 
expect rally to continue to at least top of channel and possible larger correction in which case 24236 on the cards

What about the other markets? 
DAX weekly

Similar channel
DAX has been showing relative strength vs US markets - has come close to the 10220 target (10275 low)
shaded areas show potential Fibonacci targets for a correction of down trend
Elliott wave - could be starting a wave 4 (up/sideways )  4's can be very difficult to trade - lots of whipsaw

FTSE weekly

Also in a channel
last post highlighted that it was reaching obvious trend line support

Nasdaq 100 weekly

Also in a down trend - but nearer to breaking out
if it does targets next trend line 6750 ish
a turn back down here likely sees new lows

CONCLUSIONS

Markets still in down trends but all rallied near bottom of the channels
May be a sign of short term trend change  to up (6-7 days)
Anything larger may mean bigger upward move
Be nimble and don't get married to short side
Volatility will still be present

The week begins with a BANG

At a crossroads now, looks like the bears have started the week in force..
BUT  ...it needs to follow through for the bear scenario to play out

Dow at a key level, above could be very bullish and below very bearish
weekly chart shows that now breaking below the trend line again - this tome could be decisive -despite it being a holiday week in the US (Thanksgiving).

in favour of the BULL

seasonality (Santa Claus rally)
still above trend line despite the brief break below


in favour of the BEARS

break below trend line - warning signal
negative divergence on longer term charts
all the talk on financial media is of "buy the dip" - especially CNBC and ironically the "Santa" rally
The reasons for the fall in October are still there:

1. rising rates
2. Future outlook for major companies uncertain
3. trade wear worries
4. European markets have been relatively weak

If follow through to the downside this week then the first test will be the October low;  At present it looks like the DOW could get to 23500-minimum - can change depending on the near term behaviour.

NASDAQ monthly
some perspective...
"What goes up must come down " - the question is "HOW far?"

Apple succumbs to gravity

Quick look at Apple Inc.

Huge stock for the market due to it's weighting in indices and as a company; a bell-weather for tech stocks.

What does the recent fall do to prospects for the future?
The monthly chart puts it into perspective - a HUGE rally, which is now correcting BIG question is where to?

Looking at the weekly for a closer look
Highlighted areas are horizontal price supports
Close to the first one and the up trend line, (the steeper one).  This is probably good for a short term bounce.

Now zoom in to the daily
A little more to the downside to really test the horizontal support at 180 approximately

NASDAQ 100 possible had and shoulders target 5400

A year on (more or less)....

S&P cash index and Nasdaq 100 cash

Classic break of bearish rising wedge?

Time will tell.

Small short now
Add to short on retest of broken trend line
if falls off the cliff look at short term charts for short-able bounces

Buy or sell? DAX, FTSE. DOW, NDX

Follow up on previous post  with FTSE DOW and NDX thrown in for good measure
Long? tighten stops
Short? stops are close by, and be ready to reverse on confirmed break higher...

Markets are poised for a break out higher..but will it be after another shake out??
Where's the crystal ball?

Monthly charts for LONG term investors

DAX

OK ! We may be about to break resistance and head to the highs around 8,000 BUT each time we have entered the highlighted area there has been a severe setback for the DOW.  Will history repeat itself ? (or at least rhyme?)

FTSE

Also approaching a resistance band may be quite tough getting through. If it does, then can probability increases for a min test of the highs at 7,000

DOW

Clear up trend.   A break above recent highs should see test of all time high at 14k.  

NDX

Monthly shows clear up trend with recent weakness testing support and rallying.  a rally should go to new highs above 3,000.
Very dependent on AAPL

AAPL DAILY chart


Oversold rally from around 505 level.  Another sell off almost testing the lows.  watch for
either a new low and rally, with RSI diverging (ie no new low in RSI)
or a move from here above 558 for signs that bottom is in.

Today

Bad news out of Europe and bears get sucked in again !

FTSE 30 minute chart

possible inverse head and shoulders neckline 5920 target 6000

NDX daily chart
The Nasdaq has been a leader in the equity rally.
Looking at past rallies on the daily chart we can see that we are either nearing a top (UNLIKELY)  or (MORE LIKELY) a minor correction of 5-7 % before the rally continues up

Especially as we have come out of a LARGE consolidation lasting almost 8 months.  A 5 % correction would retest the break out level.

Strategy: take profits on longs, wait correction for re-entry
Nimble : short on strength, for short term trade

nasdaq

Finally a break through the uptrend since March lows...now will it follow through...??

1/3 correction 1306

1/2 correction 1239

Nasdaq leading the market...longer view

Nasdaq weekly chart....

alternative scenario in red....
either way ..7 weeks up...probabilities are INCREASING for the next significant move to be DOWN...
a higher low would put us in the red scenario. Then possible for rally to that long term down trend line