US: TECHNICAL REBOUND EXPECTED ON DOW, MARKET STILL UNCERTAIN

The Dow Jones Industrial Average (DJI) is in a sideway correction mode with a slight upward bias. One month ago, I expected the DJI to test 9,500 points in a correction mode and the DJI that time was at 8,934. In one month, the DJI only managed to climb as high as 9,088 on 6th of January 2009 before falling for four consecutive days to the current level of 8,473.97 points. The US market is still full of uncertainty. Upward rallies are being resisted and a pullback ensued.

The current Israel offensive in Palestine have drawn many protests and criticism all around the world. The US, Israel's major ally have been supporting all the way may face product boycotts. It creates anxiety and concern in investors. The people in the US may not expect major changes in its policy towards Israel when the Barack Obama goes into the White House.

The DJI is currently at the short term up trend line support level. A technical rebound is expected to test the next resistance level. The US market to continue to drift sideways, with a bullish bias. This is beacuse the RSI indicator is still rising, but at a very slow pace. The next resistance is at 9,200 points. Support level remains at 8,100 points.


Daily DJI chart as at 12 January 2009 using NextVIEW Advisor. Click on chart for larger view.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
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MINOR CORRECTION EXPECTED ON THE PRICE OF CRUDE PALM OIL

In My previous article more than a month ago, I have mentioned that the price of Crude Palm Oil Futures is set to rally with a target of RM2,100 per metric ton. The price was RM1,740 that time. On the 7th of January, the price of FCPO went as high as RM2,058 before it pulled back to the current level of RM1,988.

The price is now above the short to long term 30 to 90 day moving averages. The long term 90 day average is currently at about RM1,800 and the trend can only be sustained if maintained above this level.

The momentum of the current up trend rally is strong and this is confirmed by momentum indicators like the Relative Strength Index and the Moving Average Convergence/Divergence (MACD) indicators. These indicators are rising with the price. Therefore there is a high chance that the price can stay bullish. Volume has been increasing as well. FCPO trading volume on the 7th of January 2009 was the highest since April last year at 17,145 contracts.

Technically, there are still potential upside to the price of FCPO and therefore the chances of the technical price target of RM2,400 to RM2,500 being achieved is high, as long as the price of FCPO maintains above RM1,800. This is an important level to watch.

In the mean time, expect the price to form a minor correction sideways with a downward bias after a strong bullish move in the past few weeks and the expected slowdown in exports in the coming weeks. Price is overbought in the short term. The daily stochastic indicator shows a reading of 76, which is still considered overbought (price relatively high in the short term). The reading was 97 (very overbought) when the price of FCPO went to a high of RM2,050.


Daily FCPO Chart chart as at 12 January 2009 using NextVIEW Advisor. Click on chart to view enlarged chart.

The current price does not warrant a low risk trade because it is relatively high. Although the potential profit target is high, the risk is equally high. A pull back on the price of FCPO may be a good time to buy. In other words, we buy on dips. Expect the price to test the RM1,800 level. The longer term target for FCPO is RM2,400 to RM2,500.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.

EXPECT PRICE OF GOLD TO RISE OR MOVE SIDEWAYS AT LEAST A COUPLE MORE DAYS...

Last week gold was sitting directly on a three week old trend line (not very strong). Since then the market has broken below that trend line but, as mentioned in last week’s analysis, the break of the trend line in this case is not a major signal to short, as long as nearby support at 831 holds.

The 831 level has been tested but at time of writing it is still holding and the market is moving upwards.

The trend line that was broken is now being tested by the market. A firm break above this level and especially above 888., will target the October high around 931. A drop below S1 will target 800 (around the lower rising trend line, as the first target, and around 740 as the next potential target.


Daily Gold chart as at 8 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

MACD – dropping.
Stochastic – below it’s 40 leave and currently showing some loss of downside momentum.

Despite the fact that 2 major indicators have turned down, I expect at least a couple of days of rising or sideways price action.

R1 – resistance at 890.50
R2 – 931
S1 – support at 831
S2 – 740.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Upcoming Workshop from Don Schellenberg:
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FOREX: HIGHER PROBABILITY FOR USD/CNY TO FALL

In last week’s column we noted that although the last few days had been up, the market would likely go down again before rising further. That is exactly what has happened and the pattern at this time has even clarified somewhat.

There is a possibility that the market will rise a little higher, to either 6.850 or 6.860, but a rise above 6.8810 is not expected at this time.

After a brief rally or more sideways motion, the highest probability is that the market will drop below the January 2nd low of 6.8029 to 6.770 or even lower to test the October 24th low of 6.7480.


Daily USD/CNY chart as at 7 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

Stochastic – rising
NextView RSI – flat at it’s 50 level
Bollinger Bands – constricting – implying that a near term rise to R1 or R2 on the chart will be relatively overbought, and that a drop to S1 will be relatively oversold. Following the tightening of the bands around the consolidating market, I expect a break out to the downside.

R1 – resistance at 6.8500
R2 – 6.8650
S1 – 6.8029
S2- 6.770
S3 – 6.7480

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Upcoming Workshop from Don Schellenberg:
Trade and Prosper in FOREX by Don Schellenberg | 17 - 18 Jan 2009 (Kuala Lumpur)

FOREX: VERY LIKELY WE WILL WITNESS SIDEWAYS ACTION FOR EUR/USD

The Euro has been much weaker against the US dollar than many might expect, especially after the dramatic rally of 2,245 pips that occurred between November 21- December 18/08.

Then, from the Dec. 18th high of 1.4722 to the retracement low on January 6/09, the EURUSD dropped 1.412 pips a loss from the previous gain of about 60%.

On the way down, the market easily broke through a zone of support between 1.3700-1.3600, and found stronger support near 1.3260 which I mentioned in last weeks’ column. The market is currently rebounding from this area.

Although the January 6 low of 1.3310 is an area of relatively strong support, there is no certainty that a strong base is in place that would support the market reaching to new highs. Very likely we will witness sideways action between 1.3310 and 1.4200 before market participants have the confidence and will to move the market to 1.4700 or higher.


Daily EUR/USD chart as at 7 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

MACD and RSI – both of the MACD and RSI indicate potential for upside movement but since they are derivatives of price, price remains the supreme indicator on the charts. Since the price pattern for a bullish move is not yet ideal, short term trades are probably safer than long term positions.

Pattern: at this moment the price pattern has taken the shape of a bullish flag. A strong move above the declining trend line of the flag, around 1.4000, will probably indicate that the correction is over and that a test of 1.4722 is underway.

Key support remains at 1.2802. A drop below this level could signal that a test of 1.2326 will soon be underway.

R1 – Nearby resistance at 1.3860
R2 – A zone of resistance between 1.4200-1.4400
S1- nearby support at 1.3310
S2 – 1.3079 – key support.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Upcoming Workshop from Don Schellenberg:
Trade and Prosper in FOREX by Don Schellenberg | 17 - 18 Jan 2009 (Kuala Lumpur)

AMERICA MARKET INDECISION

World markets started 2008 with the confirmation of long term head and shoulder chart patterns. These reliable chart patterns provided downside targets. With the America DOW Jones Index the target level was near 11,200. This target was achieved in 2008 July. These patterns provide minimum downside targets. In 2008 markets have exceeded these targets. The DOW Jones Index fell to 7600 before developing a recovery. This has developed a pattern of rally and retreat that points the way to indecision.

Just because the market has stopped falling does not mean a recovery will develop quickly. A market fall must first consolidate and then develop a pattern of recovery or trend reversal. Consolidation patterns include saucers, rounding bottoms, or extended periods of sideways movement where the index hovers near a support level. None of these patterns are developing in the DOW Jones Index.

The DOW Jones index has developed a symmetrical triangle. The pattern is created when two equally correct, but contradictory, trend lines can be plotted on the chart. The uptrend line in this pattern on the weekly chart starts from the low near 7600. The trend line shows buyers are more aggressively moving into the market. Buyers wait for falling price and when the bargain price is irresistible, they re-enter the market. The up sloping trend line shows some buyers are becoming more optimistic.

Many people have a different opinion. They are worried prices are going to continue to weaken. They are sellers in the market. This selling pressure is defined by the down trend line. The two trend lines define two equally correct, but exactly opposite opinions of the market. The symmetrical triangle captures indecision. The balance of probability favoring bulls or bears is evenly balanced. The market can develop a fast breakout in either direction.

The symmetrical triangle is used to calculate the target level for the breakouts. The base of the triangle pattern is measured and this value is projected up and down from the apex of the triangle pattern. The upside projection has a target near 10800. This is near to the strong resistance barrier set by the lower edge of the long term group of averages in the Guppy Multiple Moving Average indicator. The GMMA display shows downtrend pressure is very strong.

The downside target is near 6700. This is below the long term historical support level. A fall to this level suggests America is moving into a Depression. The next strong support is between 5300 and 5800.

The America market is in a dangerous condition. The upside is limited and it will take many months to develop a strong recovery. A fall below 7600 shows the market has significant problems.



To read more articles and commentaries from Daryl Guppy, click HERE

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Daryl Guppy, well-known international financial technical analysis expert. Appears regularly on CNBCAsia and is known as "The Chart Man". He is an equity and derivatives trader and author of books including Share Trading, Trend Trading and The 36 Strategies of The Chinese For Financial Traders. He has developed several leading technical indicators used by investors in many markets. His weekly analysis newsletters get favorable comment in Asia and Australia.