Evening all,
It seems like the long-awaited correction in equities has already begun. The last 2 weeks of trading was characterised by more selling pressure than buying pressure. For the local bourse (and Asia in general), the selling was quite intense. Whatever gains the STI made from the start of the year were totally erased in about two weeks of trading. The STI broke key support at 3300, and Friday’s close of 3184 is where the important 200-day MA is at.
First off, I want to reiterate my bullish stance. In my last post on general market sentiment – http://technicalanalysistalk.wordpress.com/2013/03/31/like-it-or-not-the-bulls-in-the-house/ - I said that I was leaning slightly on the bullish side since the short-term rally then was too strong. Now, I see this correction (and probably many other investors too) as a good time to get in. Of course, the present situation for the STI is that of “falling knife”. But, always monitor for the right signals to occur on the chart. Preferably, I am hoping to see a small reversal pattern of some sort. If not, it will be better to look at the constituent counters to trade.
Now, on to comments for US indices. I have charts of the S&P 500 and Nasdaq.
On both charts, I highlight a very obvious continuation pattern. Basically, we have a solid trend in place, then prices decline to a MA – in this case I have a 50-day MA for mid-term trends. What should happen next is renewed buying pressure to push the market off to higher highs. In the Nasdaq, we even have a pattern to work with – a bull flag. Nasdaq’s current correction gives form to a simple small downtrend channel. Indicators are not giving out bearish divergences of any kind, so I do not see any other reason for further significant decline in the market. The set-ups on US indices look too easy to be true, but I do not think it warrants being a contrarian for the sake of it.
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