Nymex oil may have a prolonged sideways consolidation between $38 and $48 but charts suggest that, long-term, it has further to fall.» Read More
The NYMEX oil price breakout above the resistance level near $58 failed to develop into a sustained uptrend.
Instead, the consolidation period saw oil move between $58 and $62. The fall below the new support level near $58 was rapid. The fall also moved quickly below the support level near $48, a rapid collapse of support that is a very bearish sign.
The downside target now is near $38, which will be along-term and sustained support level. This area, a major technical feature in the NYMEX oil chart, acted as support in 2004 and 2008 and as a resistance level in 2000 and 2003.
When oil collapsed from $110 it formed a double-bottom pattern near $45, a pattern that is often associated with a trend reversal.
Gold has dropped below its key support level near $1150, taking it to a new five-and-a-half-year low and setting the next support target near $980.
The historical support level for gold is near $1180 so when the price dropped below this level last November many traders expected the price to continue falling towards the next support level near $980. This did not develop and gold rallied and moved sideways.
Historical support near $1180 failed and a new support level developed near $1115, which created a strong support band between $1180 and $1115.
The euro-dollar has developed a broad consolidation between 1.05 and 1.14, a trend that is largely detached from the Greek crisis.
The consolidation within the trading band is defined by clear trend behavior. The reaction away from 1.14 has moved towards temporary support near 1.08. The downside target for this trend is a retest of longer-term support near 1.05.
Despite doomsayers' predictions that the S&P 500 index will collapse, the charts still don't support those warnings.
After the S&P index rallied 14.5 percent in 2014, many analysts worried about a drop, but the chart pattern didn't support that conclusion then and now, six months later, chart patterns aren't supporting new disaster warnings of an imminent collapse of the S&P, the Dow and the Nasdaq.
Eventually these markets will retreat, but any retreat will be foreshadowed by the development of end-of-trend chart pattern behavior. Rather than mindless quivering over a fear of heights, it makes more sense to understand the current patterns of behavior and understand how to recognize the potential end-of-trend patterns as they develop.
The euro zone is under pressure of disintegration, the Shanghai Index is falling and it is inevitable that US interest rates will rise and put pressure on the uptrend in the Dow.
It's a gloomy outlook and this is usually good for the gold price. But despite these factors, gold continues to move sideways and tests the new support level near $1150.
the move started in June 2013, and between then and January 2015 the sideways movement was below the long-term trend line. Then in January 2015 the price rally above $1220 moved above the long-term downtrend line. The breakout rally reached $1300, then the gold price fell and used the long term downtrend line as a support level.
The Shanghai Index has retreated dramatically and is moving toward the longer-term consolidation area between 3000 and 3400. The sell-off has been faster and more severe than expected.
These falls are exacerbated by four features of the Shanghai market that increase the volatility, severity and momentum of trends – both uptrend and downtrend.
1) The first feature is the application of limit-up and limit-down conditions. In big market moves stocks can be locked into limit-down just a few minutes after the opening of trade. The result is pent-up demand to sell. When the market opens the next day frustrated sellers flood it with lower prices in desperation to get out. The inability to exit the market feeds panic.
Technical analysis has signaled there is about to be a big change in the direction of China's key Shanghai Composite Index, with a high probability the market will next find support at 3400 points.
The Shanghai index has developed a significant change in the trend, with key support levels at 4600 and 4200 and 3800 failing.
The NYMEX oil price remains bullish and could be headed for $63, technical analysis shows.
It's developed a double bottom pattern near $45 as the downtrend consolidation developed. When the height of the double bottom is measured, this value is projected above the peak of the double bottom pattern near $53. This pattern is also called a W trend reversal pattern.
The upside target for the double bottom rebound is near $63. This target has not been achieved as the price has consolidated between $58 and $61.
But this remains a bullish chart pattern because support at $58 is consistent. The consolidation behavior is a pause in the full development of the double bottom pattern so the $63 target remains achievable.
The gold price has moved sideways for the two years to June.
Between June 2013 and January this year the sideways movement was below the long term trend line. In January the price move above $1,220 was also a move above the long term downtrend line. The first technical upside target was near $1,390. However the breakout rally reached $1,300 and then failed. The gold price fell and used the long term downtrend line as a support level.
There is not any evidence that a new uptrend can develop for gold. There is also a strong support band that has developed between $1,180 and $1,115.
The historical support level is near $1,180. When the price dropped below this level last November many traders expected the price to continue falling towards the next support level near $980. This did not develop and gold rebounded.
Again in March gold fell below $1,180 and traders waited for a further fall in price but it rebounded again.
The Shanghai Index has developed a new pattern of trend behavior.
It develops in a step-and-stairway trend pattern as shown by the thick black lines on the chart. This pattern is defined by trading bands that are all around the same width. This is around 400 index points.
The key feature of this pattern is how easily the market moves rapidly above the first resistance level – (4600 in the Shanghai index) and reaches the next resistance level (5000 in the Shanghai index). This is followed by a rapid retreat and rally consolidation that uses the full width of the trading band. It creates the first 'step' in the stairway pattern.
Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia.