Sunday, October 7, 2012

DJIA and Nasdaq 100

For the week starting 8-Oct-2012

We mentioned 13350 pts. is the critical level for Dow, closing below 13350 pts. shall confirm bearish sentiment.

Last Monday 1/10/12: DJIA opens at 13447.80 pts., wen to the lowest point 13,425.30 on Tuesday 2/10 and close at 13610.15 pts. on Friday.

Market didn’t turn bearish, and didn’t turn bullish yet –previous easing has push up the stocks and commodity prices.

Year 2008, when Fed announced QE in late November, market drives up by 400 pts. in a day and then spurred a month-long rally.
(buying $600 billion MBS)

Year 2010, Fed announces QE2, in November, 3/4 Nov 2010, market drives up 217 pts. in a day, continues to move up higher but tumbled 400 pts. in the following week.
(buying $600 billion Treasury Shares)
Year 2012, Fed announces QE3 in September, 13 Sep 2012, market drives up by 185 pts. in a day
(buying $40 billion of MBS per month, with no limit, open ended = no ending date)

Quantitative Easing (QE) Infinity (rumors called it) has bring market up, but capped below 13700 pts.
What we might want to know is:
1. Whether market has reached the top and
2. Whether market would tumble as investors digest this information
Its hard to tell as the election is on its way and I suspect market shall continue to trade sideways above 13350, testing 13700.

Technical Forecast

I use weekly chart to identify major support resistance and the same is plotted into daily chart.

Daily Chart: Market is supported above 13350, and if market tumbled and closed below 13300, it shall plunge to 13050 pts.

Elections, elections, elections, market is still in a major up trend, and lets say DJIA manage to break up above this overhead resistance level 13700, then it is likely to shoot up to 14000.

It shall take time, but generally we have to be patient to wait for the breakup / breakdown. Market is trading sideways as profit taking is happening.

4 Hour Chart: Bull – Bear Tug of War, market was trading below EMA50 last week of Sep 12, and stayed above EMA50 last week.

We suspect the sideways movement to continue and stay patience for the next big moves.

However, for intraday trade, we favour picking Long near EMA50 (4H) 13500 pts. SL 13450 TG 13650 pts.


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