The Nikkei's relentless bull-run has raised concerns if a correction is on the pipeline. Chart analysis, however, suggests otherwise.» Read More
It's just a few weeks since my last note on the euro-dollar but I think an update is appropriate given the continued battering of the single currency.
I mentioned in the previous chart analysis that the euro could fall quickly to $1.03 once the $1.19 mark (a particularly significant support level in 1998 and in 2003) has been breached, which happened on Monday.
The fall towards $1.03 may feel like a freefall plunge, but it is constrained by other technical features.
The euro is defined by a series of support and resistance bands. The positioning of these bands is important from an analytical perspective because it provides a method to project the future downside targets.
When the Australian dollar stumbles, it often stumbles badly. This makes the AUD/USD a difficult trading situation because when a collapse occurs, the AUD tumbles quickly.
Investors hoping for a rebound of the Aussie to beyond the $0.90 level may be disappointed. Chart analysis shows this is unlikely to happen for awhile.
The dollar's recent strength has been explained by most market analysts as a result of the euro weakness rather than any fundamental support for the greenback. In fact, a closer look at the dollar's chart - particularly the dollar index - suggests the currency may be primed for a collapse.
The dramatic dollar index rise from 81 to 87 in recent weeks shows the chart's developed a dramatic and possibly dangerous parabolic trend. This trend has four important features.
The rapid rise in gold prices has pushed the precious metal toward a target of $1,250/oz -- a level discussed on CNBC two weeks ago.
As gold moves towards this target, the momentum has begun to slow in the rapid breakout, indicating a higher probability of a trend reversal or the development of a consolidation pattern.
George Soros and other hedging masters must be rubbing their hands with glee. Statements like “we will do whatever it takes” to protect the euro is an open invitation to short. The relief rally in the euro following the $1 trillion emergency package announced by the EU and IMF is a collective exhalation. Still, it does not make the underlying problems disappear.
It is useful to step away from the clamor of fat finger errors on the Dow, Greek riots and the euro slide and focus for a bit on strategic analysis, which is as important as tactical responses to these events.
Walloped is a good old Australian word which defines a cowardly attack or beating. Originally it applied to a beating at the hands of the police, or ‘wallopers’ who were recruited from the ranks of ex-convicts during the 1850’s gold rushes. Their favorite targets were the small gold miners on Victorian gold fields.
The term has been given new currency, but with the same original meaning Sunday, when Australia's Prime Minister Kevin Rudd unveiled a 40 percent resource “super profits” tax that would take effect in 2012 and would give the country one of the highest mining tax rates in the world. This reflects the Australian tradition of persistent persecution of success and gives new meaning to the term ‘sovereign risk’ because the terms of business have been so radically altered by Government decision.
There are three questions of particular interest. First, did investors see this coming and is it shown in the price charts? Second, what are the immediate downside targets for any price retreat. Third, what are the chart conditions which suggest the immediate reaction is an over-reaction?
We use Rio Tinto Australia as a proxy for large Australian miners.
Samsung Electronics,world's top maker of memory chips and flat screen TVs, reported record quarterly results on Friday, giving its shares a nice boost.
But whether the results were going to be good, bad or indifferent, the stock was always going to continue it's uptrend, based on analysis of its stock chart.
The reason for this is the stock's inherent steady existing trend behavior.
When the bears are right, it could sometimes mean a great opportunity for the bulls. This seems to be the case for Goldman bulls, at least according to technical analysis.
Shares of General Electric have had a good run in recent months, tracking the overall uptrend on Wall Street. The stock was up 19.6% in the first quarter, with much of the increase coming in the last month, when the stock surged from $15.90 to $18.20, a possible signal of confidence by investors.
A check of its weekly stock chart suggest the company will continue to see gains going forward.
There are two important factors which suggest the earnings release will confirm the existing trend behavior in GE. The first is the pattern of price behavior and the second is the pattern of trend strength. (GE is the parent company of CNBC.)
One of the most dangerous market myths is that the market always rises over time.
Believers in this myth would trot out historical charts that have been reconstructed from the middle of the 18th century. And sure enough, the long term trend marches inexorably upwards. Even drammatic market crashes like that of 1929, 1987 and the tech wreck of 2000 all become just little blips in this overall magical rising trend.
To many investors, this underscores the buy-and-hold strategy. Just buy-and-hold and the market will bring you a windfall eventually. Right?
Wrong. Unfortunately, this is a pure myth and simply untrue.
The truth is that it's market index always rises, and not the market. The market index rises because the index only includes winners. This is called survivor-bias. The components of the index change on a regular basis, when market conditions warrant.
The Australia's S&P ASX 200 index, for example, is rebalanced every quarter by Standard and Poors' who compiles the index. Just in the last quarter, three stocks were dropped from the index because they were the worst performers. They were replaced by three others which were better performers.
When losers are dropped and winners added, it's no wonder that the market (index) always rises. Even blue chip stocks can be cut out from the list if they fail to perform. Too bad if you happen to own them and plan to keep them for the long haul.
Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia.