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Charting Asia with Daryl Guppy

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  Tuesday, 21 Oct 2014 | 7:02 PM ET

Nikkei rally to falter after Monday's massive session

Posted By: Daryl Guppy
A pedestrian walks past an electronic stock board displaying the figure of the Nikkei 225 Stock Average.
Kiyoshi Ota | Bloomberg | Getty Images
A pedestrian walks past an electronic stock board displaying the figure of the Nikkei 225 Stock Average.

Japan's Nikkei had a huge day on Monday, surging 4 percent to stage its biggest rally in 16 months, as investors scooped up bargains after a rout last week caused a 5 percent slump in the index.

The market also rallied on news that Japan's Government Pension Investment Fund, the world's largest public pension fund with some $1.21 trillion in assets, is working on raising its portfolio allocation devoted to domestic stocks to around 25 percent.

But is the positive momentum for the market, which has lost some 10 percent since its year-to-date highs in September, here to stay?

Read MoreAre Japan stocks a bargain yet?

If the charts would have their way, the answer would be no.

The Nikkei is dominated by a series of historical support and resistance lines. The placement of these areas is calculated by projecting the width of the historical trading band. This method of trading band projection has been very useful in defining targets during the uptrend. It will also help define the support targets for any market retreat.

The critical lower level is 14000. This area was tested as support several times between February and May this year. The rebound comes off a fall towards this historical support level.

»Read more
  Monday, 13 Oct 2014 | 7:43 PM ET

Dow correction has more room to move

Posted By: Daryl Guppy
Adam Jeffery | CNBC

U.S. stocks on Monday fell for a third session, with the S&P 500 closing below its 200-day moving average and the Nasdaq Composite off 8.6 percent from its September record, leading traders to warn of a deeper correction, but charts suggest a potential buying opportunity.

The U.S. market has been running hot for months. It's a well-established and long-term sustainable trend propelled by 'funny money' available at virtually no interest. Fundamentally, its suspect, but technically this has been a trading opportunity not to be missed.

I have been calling the DOW, S&P 500 and NASDAQ higher for months in CNBC columns. I have also warned that these markets will pull back and that a 10 percent correction is a buying opportunity.

»Read more
  Monday, 6 Oct 2014 | 10:53 PM ET

Oil prices face further downside: Charts

Posted By: Daryl Guppy
Getty Images

Nymex crude oil fell below $90 per barrel for the first time in 17 month last week amid signs of a supply glut, and charts suggest further downside.

Prices dropped amid signs that supply will outpace slowing demand from China and Europe. In September, the International Energy Agency (IEA) cut its 2015 oil demand forecast by 165,000 barrels per day. Meanwhile, the IEA forecast U.S. oil production to reach its highest level since 1970 next year, while Saudi Arabia, the world's biggest oil exporter, cut prices for its crude oil last week amid slack demand.

Nymex oil has been trading in a broad band between $88 and $110. The weekly chart shows an uptrend starting June 2012 – trend line A, which starts near $81. Trend line A connects the lows in November 2012 and the low in April 2013 – three anchor points for the uptrend line. The rebound in 2014 January confirms the position of trend line A, which is a steady, slow-moving uptrend.

Read MoreWhy the crude oil crush could accelerate

»Read more
  Monday, 29 Sep 2014 | 11:23 PM ET

US dollar index to repeat rally-retreat: Charts

Posted By: Daryl Guppy
Ziquiu | IStock/360 | Getty Images

Expectations that the Federal Reserve will raise interest rates in early 2015 coupled with growth headwinds in Europe have pushed the U.S. dollar index higher, but charts suggest that upside is limited.

The monthly U.S. dollar index chart puts the recent rally into a broader context.

From November 2011 to August 2014 the U.S. dollar index traded in a sideways consolidation band between $0.79 and $0.84. The width of this band is projected above long-term resistance near $0.84 to give an upside target near $0.89. There is a strong probability that the current rally will reach this target.

»Read more
  Monday, 15 Sep 2014 | 6:31 PM ET

Consolidation looms for Shanghai Composite

Posted By: Daryl Guppy

Chinese stocks stormed higher in recent months on the back of stronger economic data, easy monetary conditions and supportive policies from Beijing, recently touching an over one-year high, but charts indicate they may face a period of consolidation.

The Shanghai Index has developed a powerful rally that reached the longer-term targets near 2330 that we set several weeks ago. The pattern is very bullish; this is part of a long-term fan pattern trend-reversal breakout similar to the pattern in 2006. The typhoon flag pattern has been confirmed; the upper edge of the typhoon flag provides the first support level for a retreat from the resistance level upside target near 2330.

Read More 'Perfect storm' to hit China economy in 2016

Current index activity is contained between the long-term resistance level near 2330 and the value of the upper edge of the typhoon flag pattern near 2278. There is a high probability the Shanghai index will retreat from resistance and consolidate between 2278 and 2330. This consolidation activity has the characteristics of an up-sloping triangle pattern. This is a bullish chart pattern.

»Read more
  Monday, 8 Sep 2014 | 6:32 PM ET

As silver tests support, gold traders take heed

Posted By: Daryl Guppy
A one kilogram gold bar sits on top of silver bars.
Simon Dawson | Bloomberg | Getty Images
A one kilogram gold bar sits on top of silver bars.

Gold fell to its lowest level in nearly three months last week on concerns that a strong U.S. dollar and improving U.S. economy could damp demand, and silver charts suggest that bullion may not regain upward momentum anytime soon.

The downtrend in COMEX silver – shown in cents on the weekly chart – is well-established and prolonged. Technically silver is pounding out a support base near $18.70 and although there has been a reduction in downward momentum there is no technical or chart evidence of a developing rebound and reversal.

Read MoreWhy Goldman's gold man recommends shorting gold

Upside targets remain limited, while technical downside targets have yet to be tested by a fall below support near $18.70. Analysis of Silver is useful because the price behavior of silver has led gold prices since 2011. Understanding silver gives traders a leading advantage when it comes to anticipating the behavior of gold.

The significant feature in the silver chart is the retreat and retest of the support level near $18.70. A successful fourth retest of support near $18.70 would confirm a long-term sideways consolidation.

Read MoreWhy the crisis in Ukraine isn't saving gold

Silver has strong long-term resistance near $26.00. Resistance also developed near $24.00, which is the first target for any successful breakout above the upper edge of the long-term group of moving averages where the value is currently near $21.80.

»Read more
  Monday, 1 Sep 2014 | 8:42 PM ET

With ECB in focus, euro downtrend looks strong

Posted By: Daryl Guppy
The European Central Bank in Frankfurt, Germany
Getty Images
The European Central Bank in Frankfurt, Germany

Charts suggest that the downtrend in the euro/dollar is firm ahead of the European Central Bank's (ECB) policy meeting on Thursday.

A decline in euro zone inflation to a five-year low in August amplified dovish comments by ECB president Mario Draghi at the Jackson Hole central bankers' meeting. Draghi acknowledged that inflation expectations have been falling at the August meeting and said the ECB, "within its mandate, will use all of the available instruments needed to ensure price stability over the medium term."

The developments fueled speculation that the ECB will consider easing action as early as Thursday with some analysts arguing that a quantitative easing – or bond buying – is on the horizon.

»Read more
  Monday, 25 Aug 2014 | 8:39 PM ET

Don't lose faith, the Dow uptrend is intact

Posted By: Daryl Guppy

The Dow Jones Industrial Average posted its largest annual gain since 1995 last year and while momentum has slowed the index touched an all-time high in July and is up 3 percent year-to-date. Investors are questioning whether the rise has run its course but charts suggest the uptrend is intact.

The Dow's recent decline from 17,151 to 16,333 was only a minor retreat and is part of the trend consolidation pattern along the upper edge of a long-term trading channel. The index fell 4.8 percent; a technical correction is a fall of over 10 percent.

Read MoreAre Aussie dollar bears right?

Upward momentum has slowed a bit and consolidation is developing around the value of the uptrend line. There are two significant trend features on the Dow chart.

»Read more
  Monday, 18 Aug 2014 | 9:44 PM ET

Are Aussie dollar bears right?

Posted By: Daryl Guppy
peterfz30 | iStock/360 | Getty Images

As the war of words between Australian dollar bears and bulls continues charts indicate that the bears may have the right call in the short term.

Comments from Reserve Bank of Australia (RBA) Governor Glenn Stevens late last year that he would like to see the AUD trading at $0.85 against the U.S. dollar raised expectations that it would weaken significantly this year after. However, expectations for continued loose monetary policy by global central banks and continued Chinese reserve diversification limited downside momentum.

Read MoreWhy this carry trade remains 'best in the world'

Yet, growing expectations that the RBA may cut interest rates before year end to tackle the stubbornly high currency could see near-term downside.

The AUD is developing a long-term uptrend breakout pattern, but the breakout is not developing at this time. The weekly chart shows the classic Guppy Multiple Moving Average (GMMA) trend change breakout pattern. This starts with a test of the lower edge of the long-term group of averages in the GMMA Indicator. The breakout pattern is flowed by a retest of the upper edge of the long-term GMMA and completed with a breakout above the upper edge of the long-term GMMA. This signals the start of a new uptrend.

»Read more
  Monday, 11 Aug 2014 | 10:50 PM ET

Why more upside is in store for the S&P 500

Posted By: Daryl Guppy
Traders work on the floor of the New York Stock Exchange in New York.
Getty Images
Traders work on the floor of the New York Stock Exchange in New York.

Investors are beginning to question whether the S&P 500 can sustain its upward momentum amid worries that the rally in U.S. stocks may be testing its limits coupled with unease over geopolitical tension between Russia and the West, but chart analysis suggests that no trend change is imminent.

The S&P weekly chart shows a well-established habit of behavior. Starting with the uptrend development in September, 2010 the S&P 500 has consistently moved up in a series of trading bands.

Read MoreS&P 500 ends little changed near two-month low

This continues to be a strong uptrend with each upthrust target defined by the width of the trading bands. The market broke above the top of the consolidation band around 1850 and the trading band calculation set a target near 1990. This target level was achieved and is followed by the S&P 500's typical habitual behavior. Each time the upper edge of a trading band its reached the S&P 500 retreats to the upper edge of the long-term Guppy Multiple Moving Average (GMMA). And then the S&P 500 develops a strong rebound rally that moves above the upper edge of the trading band.

When the S&P 500 was near 1700 many analysts said the market would fall. Instead the index developed a rally breakout and moved to the next projected target near 1850. Again, at this level, many analysts said the market would fall but the index rallied above this level and went on to reach the next projected target. This is the habit with the S&P 500 index.

Read MoreWorst weekly drop for S&P 500 in more than two years

The key factor to look for is the consistent strength of the long-term GMMA. This is shown by the steady degree of separation. When the market does develop a dip it uses the long-term GMMA as a support level. The dips in June and October of 2013 and February 2014 all touched the top of the long-term GMMA before developing a new rally and breakout above resistance. The long-term GMMA did not show any signs of compression.

»Read more

About Charting Asia with Daryl Guppy

  • Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia. He runs training, analysis and resource workshops for retail and professional financial market traders involved in stocks, CFDs, warrants, derivatives, futures and commodities in China, Malaysia, Singapore and Australia. He has his own trading company, guppytraders.com.

 

  • Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia.

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