As usual on a Sunday Night, I wanted to look at the Indexes and get a view on where things are most likely to go in coming Weeks. Obviously the horrific events in Paris on Friday could have an impact on the Markets, particularly the French CAC40 and perhaps the German DAX. However, because the attacks happened out of Market Hours and with a Weekend for reflection, we might not get the kind of panic selling which probably would occur if this kind of Terrorist attack occurred whilst Markets were open.
As ever, I want to start with a Longer Term Chart and the ShareScope screenshot below shows the FTSE100 going back to 2009. Please note the Red Parallel Lines which denote the 5 year uptrend and then my Blue Arrow points to how the Price Action in the last 3 months ish has been mainly outside of this Uptrend - not a good thing.
The Red Sloping Line from the Peaks back in May mark a Downtrend Line which is still dominating. My Green Arrow points to where the Price Action in recent weeks broke out of the Red Downtrend Line but it was a ‘False Breakout’ and the Price has fallen back inside the Downtrend. If we are to make real progress (and to get the fabled and highly desired Santa Rally), then the Price has to get back outside that Downtrend Line.
My Black Circle envelops the Daily Candlestick which was produced on Friday 13th November and there are 2 slightly positive elements. Firstly it is sat on the Bottom Blue Uptrend Line - so maybe it can find Support here and move up, and secondly there is a bit of a ‘Tail’ pointing downwards which shows that the Price recovered a bit Intraday from its Low Point on Friday. Sadly the latter is not hugely reliable as a predictor - we would ideally want a larger Hammer with a Long Tail downwards. Another positive is that Friday was quite a sell off - Markets usually reverse Up once there has been a ‘Capitulation’ move where Weak Holders finally give up and throw in the towel - it felt a bit like that.
Note there is a lot of Horizontal Support just below where we are now particularly at 6000, 5900 - it is likely we can get a bounce off these levels. Whatever happens it is UTTERLY CRITICAL that the Black China Monday Low of 5768 holds - if that fails, we are TOAST.
It seems likely that the DAX could get impacted by the Paris events - but let’s just check out how things were looking before those awful atrocities took place.
The Chart below is the Long Term Picture and shows the Uptrend firmly in place - this is very bullish.
My Black Circle encloses a Hammer Candle - this is a positive development and often the Market can rally from this - unclear if this will happen in the light of the Paris Shootings.
The chart below shows the Long Term uptrend in the S&P500 - please ignore the numbers at the top right hand corner. This is a Bullish Uptrend.
My Black Circle shows the Candle generated on Friday which is an ugly big down thing - never good. However, note how it is sat pretty much on the Red Downtrend Line and this former Resistance, may now act as Support and we might bounce from here.
My Blue Arrow is pointing at the Blue Wiggly Line which is the 50 Day Moving Average. Note how it is not far from the current Price and it might act as Support - this would be around 2010 ish or just below. Also note that the 50 Day MA has turned up - this might be a positive thing.
Right, that’s it - a pretty mixed bunch with nothing really conclusive. Things look pretty weak so my guess would be a bit more Downside early in the coming week and then we start to recover. At the moment I have no Short Positions on and I can’t see much point in doing so - I think any downside now is limited and this is historically the most bullish time of the year so Shorting could be very dangerous.
The UK Stockmarket Almanac shows the coming week as pretty flat usually - it is saying Up 50% of Years with an Average Loss of 0.1% - so the past is not leading me to expect much. It also says that Thursday in the coming week is historically the 7th Weakest Market Day - we shall see.
Happy Hunting, WD