Reflecting back on the past week, in last week's post I made the point that we would need to exercise caution with all the economic and political happenings playing out. And it was fairly choppy week all in all with some significant up and down moves. On balance, while the week officially ended in the green, looking at the weekly candle, we can see the choppiness reflected in a long wick and tail and with a forward looking view, the bears may still have it by virtue of that long wick. However the weekly stochastic is oversold (although not reversing yet) and the RSI has started to pip back upwards. Also as noted in last week's post, if the prior week low can hold, we could see some critical, much needed positive divergence being brought into play here.
So the weekly charts still remain mixed but if a solid positive candle can be formed in the week ahead, the bulls could just nose ahead on a medium-term basis.
On the daily chart, we can see how the breakout target area was met and the market then rallied fairly strongly before taking a pounding on Friday to close the week. The stochastic remains pointing to further upside in the near-term but should there be a bearish start to the new week, we could see a failed stochastic reversal coming into play. Also looking at the chart patterns, a weak start could see the T40 conforming to the draft rising wedge pattern marked up on the chart with potential downside towards the 43,000 level. Conversely a break above 45,000 would be needed to negate the wedge formation.
The daily closing support and resistance has not changed much since last week with range trades available between 45,300 and 42,400 or thereabouts.
So overall, my view is that things remain in a fine balance. With reduced liquidity in the market leading up to Xmas, caution should still be maintained with additional spreads being factored into risk and dynamic trade sizing. However, with us currently slap-bang in the trading range I'd feel comfortable letting positions run in either direction especially with the major volatility events out of the mix for the balance of the year (touch wood!) depending on whether the bulls or bears take an early lead, this bias may shift and I'll reflect that in the commentary section.
A solid bullish candle, albeit relatively tight on reduced liquidity, to start the week is seeing the daily stochastic maintaining a good shape. This momentum now needs to be maintained in the days ahead in order for the bulls to get the santa rally going. 45,300 remains the hurdle to overcome.
ReplyDeleteAnother solid T40 day as we approach the 45,300 hurdle level. The stochastic is still bullish and not overbought yet but now its important that we punch through the top of the potential wedge as a daily stochastic topping out here could result in a short-term negative divergence being brought into play.
ReplyDeleteAnd a huge surge on the day has seen the T40 break through the 45,300 - negating the rising wedge formation. The daily stochastic is now overbought but still pointing firmly upwards. A move above 47,000 is now needed to negate potential negative divergence although short-term consolidation and a throwback to 45,300 as a support level would not be the most bearish medium-term outcome at the moment. In the absence of this, next target levels could be around 46,900/47,000 where there is also an interesting confluence of overhead resistance and a 61.8% retracement of the major downtrend from the ATH close on 04 November to the swing low on 14 December.
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