AAPL: A Possible Short Trade?

Apple (AAPL) is currently on the high end of investors' line of attraction. A picture of Marketwatch's overview of the company is pretty clear: 

 

Almost everyone is more or less bulish on the stock. While I do admit this fuels growth of the stock price, this is not a sustainable condition. Such an overly bullish sentiment may come as a huge warning sign from a contrarian perspective.

Since the beginning of 2012 the stock's price experienced an interesting move. After going rapidly to about $640 it fell with almost $100 down to $540 level for about a month. Since the second half of May 2012 it is again on the rise and now trying to reach its previous high. 

What seems like a hope-fueling mode although, could prove to be nothing more than a normal reaction of a correction when all the people who have left the previous uptrend are getting on the train with renewed hopes. Hence this could be a false move given the newcommers are not strong enough to sustain the demand in near- to long-term perspective. It has happened before, in all kinds of markets and shares and since it's connected with human behavior, this type of market movements will continue to happen.

Let's look at the charts and some sentiment tools.

 

This is the daily chart of AAPL. What's noticeable here is the lower volume the recent upward movement relies on. This is especially true for the price increase since the dividend day. On theory a lower volume combined with a price increase speaks of exhausted buyers. This is a technical warning sign. The stock might still see some upward movement close to the previous high at $640 but the low volume suggest  there would not be enough demand to go much farther.

Schaeffer's Research website gives an insight on the option players' mood concerning AAPL. Put/Call open interest ratio is close to the highest value in one year so this suggest prevailing pessimism toward the stock. Viewed as a contrarian indicator this would suggest a further increase in the AAPL stock price might be possible because of an overly pessimistic mood.  Such a mood however might be present only inside the option players because of the price reaching the previous high and seems to not be supported by neither the analysts recommendations, nor the general market participants as shown by the picture in the beginning of this article.

The short interest on the stock however has been falling since the second half of June 2012 which would partly explain the increase in price experienced since then. What that falling short interest would suggest is that there would be a smaller possibility for a price increase due to short covering.

The open interest configuration shows there is a concentration of put options around the $640-670 level which could serve as a resistance. The calls are concentrated in the $500-640 range.

With all those remarks a further strong increase of the Apple's stock price like the one we witnessed till the April 2012 could not be so probable in near term. 

In any case a suitable stop loss order would limit the possible loss on either side of the trade.

40 bits of trading wisdom

Here is another post aimed at spreading practical wisdom about trading. Similarly to the 38 steps to becoming a trader one, I found this again in my remarks. After some google-ing the original source link seems to point to Traders-Talk forums at http://www.traders-talk.com/mb2/index.php?showtopic=17232

Most of the items below are really valuable. The point is they have to be followed in real to bring value. Any comments are welcomed.

Forty Bits of Trading Wisdom
Condensed from Capitulation's 40 posts.

1. If you want to stay in this business, leave "hope" at the door and stick to your stops.
2. When you get into a trade, start looking for signs right away that you are wrong. If you see them, then get out before your stop is hit.
3. Trading should be boring, like factory work. If there is one guarantee in trading, it is that "thrill seekers" get their accounts grinded into nothing.
4. It helps to just follow a handful of stocks on any given day. Don’t jump on the “next hot thing.” Develop your plan and stick to your plan.
5. You are trading other traders, not the actual stock. You have to be aware of the psychology and emotions behind trading.
6. Be very aware of your own emotions. Irrational behavior is every trader's downfall. If you are yelling at your computer screen, imploring your stocks to move in your direction, you have to ask yourself, "Is this rational?" Ease in. Ease out. Keep your stops. No yelling.
7. Watch yourself if you get too excited—excitement increases risk because it clouds judgment.
8. Don’t overtrade—be patient and wait for 3-5 good trades.
9. If you come into trading with the idea of making “big money,” you are doomed. This mindset is responsible for most accounts being blown out.
10. Don’t focus on the money. Focus on executing trades well. If you are getting in and out of trades rationally, the money will take care of itself.
11. If you focus on the money, you will start to impose your will upon the market in order to meet your financial needs. There is only one outcome to this scenario: you will hand over all of your money to traders who are focused on protecting their risk and letting their winners run.
12. The best way to minimize risk is to not trade. This is especially true during the low-volume “chop and slop” found during the afternoon trading session. If your stocks are not acting right, then don't trade them. Just sit and watch them and try to learn something. By doing this you are being pro-active in reducing your risk and protecting your capital.
13. There is no need to trade 5 days per week. Trade 4 days per week and you will be sharper during the actual time you are trading.
14. Refuse to damage your capital. This means sticking to your stops and sometimes staying out of the market.
15. Stay relaxed. Place a trade and set a stop. If you get stopped out, who really cares? You are doing your job. You are actively protecting your capital. Professional traders actively take small losses. Amateurs resort to hope and sometimes prayer to save their trade. In life, hope is a powerful and positive thing. In executing a trade, hope is a virus that can infect and destroy.
16. Be right on day one or get out. Don’t take a “red” position home overnight.
17. Keep winners as long as they are moving your way. Let the market take you out on a trailed stop.
18. Money management is the secret to success. Don’t overweight your trades. The more you overweight a trade, the more “hope” comes into play when it goes against you. Hope is to trading as acid is to skin. The longer you leave it in place, the more painful the outcome will be.
19. There is no logical reason to hesitate in taking a stop. Re-entry is only a commission away.
20. Professional traders take losses. Being wrong and not taking a loss does damage to your equity and your mind.
21. Once you take a loss you forget about the trade and move on anyway, especially if it is a small one. Do yourself a favor and take advantage of any opportunity to clear your head by taking a small loss.
22. Never let one position go against you by more than 2% of your account equity. The larger the position, the tighter the stop.
23. Use daily charts to get an idea of the 30-day trend, hourly charts to get an idea of the 1-day trend, and 5-minute charts to establish your entry points.
24. If you are hesitating to take a position, that indicates a lack of confidence that is not necessary. Just get into the position and place a stop. Traders lose money in positions everyday. Keep them small. The confidence you need is not in whether or not you are right, the confidence you need is in knowing you will stick to your stop no matter what. Therefore you can actually alleviate this hesitancy to “pull the trigger” by continually sticking to your stops and reinforcing this behavior.
25. Averaging down on a position is like a sinking ship deliberately taking on more water.
26. Build up to a full position as it goes your way.
27. Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.
28. Look for opportunities not to trade.
29. Most of the time, you want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point—which is typically where you will set your stop when you buy a breakout. Greed comes into play when the stock breaks out again, and the momentum players are forced to chase it and “pay up” for the stock. Be aware of how trends are established and use that to your advantage to enter and exit positions.
30. Embracing your opinion leads to financial ruin. When you find yourself rationalizing or justifying a decline by saying things like, “They are just shaking out weak hands here,” or “The market makers are just dropping the bid here,” then you are embracing your opinion. Don’t hang onto a loser. Cut your losses. You can always get back in.
31. Unfortunately, discipline is typically not learned until you have wiped out a trading account. Until you have wiped out an account, you typically think it cannot happen to you. It is precisely that attitude that makes you hold onto losers and rationalize them all the way into the ground.
32. Siphoning out your trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business, and your business should generate profits on a monthly basis.
33. "Professional traders only place a small portion of their assets into 1 position. Or if they take on a large position, then they strictly limit their risk to 1-2% of their current equity. Amateurs typically place a large portion of their assets into 1 position, and they give it "room to move" in case they are actually right. This type of situation creates emotions that ruin accounts, while professionals are able to make decisions and cut losses because they strictly define their risk."

More pro and amateur differences…


34. Professional traders focus on limiting risk and protecting capital. Amateur traders focus on how much money they can make on each trade. Professionals always take money away from amateurs."
35. Don't be a hero…
    In the stock market, heroes get crushed. Averaging down on a losing position is a “heroic move.” The stock market is not about blind courage. It is about finesse. Don't be a hero.
36. School of hard knocks in the only way...
    Sadly, traders never learn the importance of “the rules” until they have blown their account out of the water. Until you “lose it all” it never seems that important to have to follow the basics of professional trading. (Cut your losses, let your profits run, etc).
37. The market reinforces bad habits…
    The market reinforces bad habits. If early on you held onto a loser that went against you by 20%, and you were able to get out for breakeven, you are doomed. The market has reinforced a bad habit. The next time you let a stock go against you by 20%, you will hang on because you have been taught that you can get out for breakeven if you are just patient and hang on long enough. It doesn’t matter if the stock has just been upgraded or had a favorable write up in Forbes. You still need to protect your capital. In reality, today’s price is the true indication of the value of the stock, as it is the price people are willing to pay. Instead of rationalizing, control your risk by sticking to your stops.
38. Who is accountable for your trades?
    The true mark of an amateur trader who is never going to make it in this business is one who continually blames everything but his or herself for the outcome of a bad trade. This includes, but is not limited to, saying things like:
    
    • The analysts are crooks
    • The market makers were fishing for stops.
    • I was on the phone and it collapsed on me.
    • My neighbor gave me a bad tip.
    • The message boards caused this one to pump and dump.
    • The specialists are playing games.
    The mark of a professional, however, sounds like this:
    • It is my fault because I traded this position too large for my account size.
    • It is my fault because I didn’t stick to my own risk parameters.
    • It is my fault because I really don’t know how to trade.
    • It is my fault because I know the market makers can legally take some of my money, and I knew that going into this.
    • It is my fault because I know there are risks in trading, and I didn’t fully comprehend them when I took this trade.
    The obvious difference here is accountability. For amateurs, everything having to do with the market is “outside their control.” That is not reasonable thinking, and really just points to an individual who has, probably for the first time, had to confront their “real self” as opposed to the perfect self or idealized self they have constructed in their mind. This is also known as “living in a fog.” A person can drift around through life in their own private world, where they are pretty special and can do no wrong. Unfortunately, trading rips off this mask, because you cannot dispute what has happened to your account. This is also known as “confronting reality.” For many people, when they start trading they are suddenly confronting reality for the first time in their lives. Just to see the world as it really is requires a lifetime of training, and for many people trading the stock market is their first real step in this journey. Some people say that traders are born, not made. Not so. If you choose to see the world as it is, then you can start trading successfully tomorrow.
39. Pro vs. amateur trader difference…
    Amateur traders always think, “How much money can I make on this trade!” Professional traders always think, “How much money can I lose on this trade?” The trader who controls his or her risk takes money from the trader whose head is in the clouds.
    CONTROL YOUR RISK
40. Focus on controlling risk...
    At some point traders realize that no one can tell you exactly what is going to happen next in the market, and that you can never know how much you are going to make on a trade. Thus the only thing left to do is to determine how much risk you are willing to take in order to find out if you are right or not. The key to trading success is to focus on how much money is at risk, not how much you can make.

And yes folks, that concludes the 40 bits of trading wisdom. I hope everyone enjoyed them and most importantly, I hope one person out there has taken these bits to heart and that they have made a difference with someone.
To summarize the important points:

• Control your risk by setting your parameters BEFORE you get in the trade.
• Have a plan with each and every trade and stick to your plan.
• Stick to your stops.
• Don't blame others when a trade goes bad, but rather learn from it so it hopefully won't happy again.
• Don't bet the farm! Allocate only a small percentage of your capital to each trade.
• Set a stop with each and every trade.
• Leave hope at the door and stick to your stops.
• Never add to a losing position....averaging down is like a sinking ship deliberately taking on more water.
• Do not yell at your screen trying to "will" the markets in your direction. Be calm, ease in, ease out, no yelling.
• Trading should be boring like factory work. If you are looking for excitement then trading is not for you because you will wipe out your trading account.
• If you get stopped out, so what? Professional traders actively take small losses all the time...it's part of the game. Re-entry is only a commission away.
• Once you are in a trade, immediately begin looking for signs that you are wrong. If something doesn't look right or the reasons that you entered the trade have changed GET OUT before your stop is hit.

Originally posted by Capitulation

EURUSD currency pair on the brink

Despite some expectations EURUSD currency pair remained relatively stable during the recent market turmoils. As the equities and commodities were drown, one should expect the US Dollar to gain strength as it has almost always did in history. Instead the pair remained range bound.

Let's look at the graphs. You may click on them for a bigger version.

EURUSD Monthly Chart

EURUSD Weekly Chart

On the monthly graph we can see the long term trend hasn't changed. The Euro is still in an upward mode against USD. The bullish divergence seen between the MACD indicator and the currency value seems still valid. Usually the pair has to go above its previous high which hasn't happened till now. The Moving Averages are still pointing upward and MACD is on a positive side.

When will the pair break out of the range seems to be the question now.
Maybe tomorrow's speech of Bernanke would give us a key. Or maybe not. We'll wait and see.

Another factor which could trigger the movement is an improvement in the situation in Europe in the form of more political will to cooperate and occurrence of structural changes like common fiscal policies.

What is interesting is that on the weekly graph (graph below) is seen a clear triangle formation. This could signal a continuation of the previous trend and is in line with the bigger time-frame graph.

Anyway, given this breakout occurs in the next months we could see a value of at least 1.53 for EURUSD pair.

A movement in the pair would be a signal for commodities (mostly crude) to rise again on the hopes of improving economies as such a scenario most probably would be accompanied by stronger equities.

==Update Aug 26, 2011==

Some important events took place today.

Date	(GMT)	Country	Event	Actual	Cons.	Previous
Aug 26	08:00	EMU	M3 Money Supply (3m)	2.1%	2.3%	2.0%
Aug 26	08:00	EMU	M3 Money Supply (YoY)	2.0%	2.2%	2.1%
Aug 26	08:30	UK	Gross Domestic Product (QoQ)	0.2%		0.5%
Aug 26	08:30	UK	Gross Domestic Product (YoY)	0.7%		1.6%
Aug 26	08:30	UK	Index of Services (3M/3M)	0.5%	0.6%	1.2%
Aug 26	12:30	US	Gross Domestic Product Annualized	1.0%	1.1%	0.4%
Aug 26	12:30	US	Gross Domestic Purchases Price Index	3.3%	2.3%	3.9%
Aug 26	12:30	US	Real Personal Consumption Expenditures (QoQ)	2.2%	0.2%	2.1%
Aug 26	13:55	US	Reuters/Michigan Consumer Sentiment Index	55.7	56.3	63.7

M3 money supply in European Monetary Union (EMU) decreased a bit on annual basis which would mean the probability of higher inflation in EU is getting smaller. Hence the pressure on ECB to lift interest rates in order to fight any higher inflation decreases.

In the same time in US the Gross Domestic Purchase Price Index (GDPPI) is lower than previous reading although still far above the consensus. The inflationary pressure in US is getting weaker but not as fast as economists expected. Looking at that index the FED could rest assured its promise to keep the rates low does not induce higher inflation. For now.

Reuters/Michigan index value could signal a further decline in consumer spending. It however does not measure the real money spent. An expectations sometimes differ than reality.

On a quarterly basis the Real Consumer Expenditures grew and the current reading is far above the consensus.What this could signal is a widening gap between consumers' expectations and their real spending. Their spending might be more not because they are willing to spend more but just because prices got higher. Which gets us back to the GDPPI which does not fall as much as economists expect.

If inflation kicks in the consumers will have to spend more no matter if they are expecting it or no.

Bernanke's speech didn't reveal anything new in particular which itself is an interesting hint. FED's chairman continues to believe the markets impact economy and not that markets reflect economy in advance. Like he said they are actually on a stand-by.

FOREX markets reacted as sending down the Frank (CHF) both against US Dollar and the Euro (more than 2%). The one currency that has moved steadily up during the current crisis. Till a couple of weeks ago. At first after Bernanke's speech both currencies appreciated against the Frank. At the end of day only the Euro continued to advance. What is interesting is that it advances against the US Dollar also. Is the Euro breaking out of the triangle in line?...

US stocks indexes advance a bit for the day also. Do the market participants bet on higher inflation?

If markets continue in this direction Bernanke's waiting would come to be justified. Even if he'd did it for different reasons.

Global YEN Intervention After the Earthquake

The Japan earthquake took the YEN to its highest level against US Dollar in the post-war era. Today G7 group intervened on the FOREX market selling YENs. The selling was started by BOJ and is reported to be followed by other members of the group. The YEN lost about 2.9% for a day. This could be only the start of it. Let's get technical.

The monthly graph shows the YEN is on a strong support level (shown by the blue horizontal line). The level sustained for several months as seen on the graph. The more important thing seen on the graph are the bullish divergences between the price and MACD indicator. The same type of divergences are seen during 1993-1995 years. Divergences of such magnitude could result in a multiyear downtrend for the YEN against the US Dollar. That would have positive effect on the Japan export economy, could result in even greater Japan dominance on the world markets of goods and eventually get the country again on the rapid development road.

EURUSD possible trade on the sale side

During the day the EURUSD pair has generally been up for the Euro with its value going twice to 1.3665. Still it was unable to break or even reach the barrier at 1.3680. But the more upward it goes the more favorable the risk/reward ratio seems measured toward that level. The longer time-frame graphs suggest there could be an upward movement of the US Dollar soon of roughly 100 pips or even more.

If entered on the sell side at the current level of 1.3645 with a stop at 1.3685 and a first target 1.3600, the risk/reward is slightly above 1 which is not very profitable. However the higher the pair goes toward 1.3670/80 area, the more profitable and less risky the R/R ratio gets.

EURUSD on the hour

The EURUSD pair ended the hour at 1.3778 - 50 pips below the possible entry level at 1.3830. Still there is some room for a fast drop to 1.3750 or even to 1.3730/20 (50% of the Fibo retracement). Depending on the client risk attitude the short USD trade could be closed now. Another strategy is to put a stop at 1.3780 in order to preserve the profits till now.

EURUSD Short-term possible trade

The upward movement of the Euro shows some signs of exhaustion and a possible retreat to 1.3750/60 could be formed. The European currency failed twice for the last hour to break above the 1.3845 level and there is a bearish hidden divergence formed on both the 15m i 30m graphs. An entry at the moment (at 1.3830) has a positive risk/reward ratio of 0.42 which translates to a twice bigger gains than the possible losses. An even more favorable entry could be formed at the 1.3845 level if the pair gets there again before dropping down.

EURUSD Short-term Technical Analysis

The technical EURUSD (Euro / USD) picture for the day and current situation (15min graph) is as follows:

• main direction (daily) - Up (Euro rises as US Dollar falls)
• current situation - on the edge, possible reversal in the way following a last upward movement.

 The 15 min graph shows the EURUSD pair is in the middle of its upward movement. The danger presented by the negative MACD values could be temporarily offset by the oversold condition (shown by the lower values of Stochastic at the moment). This could lead the pair to new highs above the previous high at 1.3836. The negative MACD however could signal the end of such upward movement and a fail to probe strongly that level would prove such possibility. At that point the Stochastic might well be in overbought condition and further ease the going down.

The great danger to any continuation of the upward movement of the Euro are the negative MACD divergences seen on the 1h and 4h graphs. Still there is a space to go up and any down movement could be followed by a strong reversal.

Having in mind the above conditions a fall to at least 1.3790 is to be expected soon. Having that level broken, 1.3770 is the next target.

A Warning Sign for the Euro Bulls

The rise up of the Euro against the Dollar has been in place for the last months. Now the time for a change may be near. Take a look at the daily EUR/USD graph (click on it to see it big):

Here we have a bit of a worring picture. The value of Euro has continued to rise despite the MACD recorded lower values. The Stochastic followed the MACD but still the MAs are on the positive side. That explains the volatile movements we are seeing these days. The Stochastic is pointing forward and the Euro rose again today. So far. The formation which is about to be formed is very worrisome for the Euro as there is a chance the power of the Euro Bulls that drives the increase of its value toward the Dollar to be vanishing.

The weekly graph still shows the Euro may has some time to go up but the Stochastic points it to be a bit overbought.

The more important warning sign is on the Monthly EURO/USD graph shown below:

Here the MAs are still not on a positive side but still the Euro has risen a lot for the past months. What lights the red lamp is the Stochastic value which show the Dollar might be oversold. If that proves to be true we might witness another major rise of the Dollar in the next months. The situations requires attention and the conclusions might vary depending on the real data.

Euro/Dollar (EUR/USD) Technical Analysis - Daily, July 29, 2010

The Euro/Dollar pair was in quite an uptrend for the last weeks. The graphs however show this could be close to an end. We examined the weekly graph in our weekly technical analisys and now the Daily one looks promising.

The Daily Euro/Dollar graph (click on it for a better view) shows the pair was making new highs for the last several weeks while the MACD continued to make lower highs. Now its even on the negative side. The Stochastic shows the Euro is now in the overbought area.
The bearish MACD divergence combined with the overbought condition could trigger pretty soon selling of the Euro after all the buying power gets too exhausted.

A possible trigger for such a movement could be any of the news expected today - the Unemployment change in Germany, the Economic confidence in EU, M4 Money supply in UK or the Jobless claims in USA. One may follow these news (and even more) in our Economic calendar .

Euro/Dollar (EUR/USD) Technical Analysis - Weekly, 31 week, 2010

It's been a while since our last technical analysis of the Euro/Dollar currency pair. The Euro continued its upward movement supported by the strong oversold conditions of the previous months. Now it trades around 1.298/1.30 where the 61.8 Fibonacci retracement level lays. On the daily graph we see a continuing upward movement of the pair price for the last 2-3 weeks while the indicators continue to make lower highs.

The weekly graph of the Euro/Dollar pair (click on it for a better view) presents an interesting situation. MACD is on positive side while the MAs are still negative. The Stochastic is in overbought area. And the price of the Euro is at the 61.8 Fibonacci level. A fail to penetrate this level could result in another upward movement of the Dollar. The bearish divergence seen on the daily graph supports the idea that the current resistance level would sustain and another fall of the Euro could be on its way. For a clearer view we might look at the monthly graph below.

On the monthly graph we see the major trend is still up for the Dollar and down for the Euro. The Stochastic is signaling an increase of the Euro value which took place during the current month. Still the major trend is not changed and having in mind the weekly and daily graphs another fall of the Euro towards the 1.19/1.20 levels is possible soon.

Euro/Dollar (EUR/USD) Technical Analysis - Weekly, 27 week, 2010

The expected upward movement for the Euro toward the US Dollar took place in previous weeks. While at first the Euro fell to about 1.19 then it advanced quickly to above 1.24 touching the 1.2460/70 area. After that the power of the Euro bulls started to vanish and it lost about 2 cents.
This week starts with an advance of the Euro again and now it trades near 1.24 level again. The weekly graph (click on it for a better view) however hardly supports a lasting increase of the Euro value against the US Dollar.

The Euro went to the MA level and the Stochastic is continuing to climb to the overbought areas. Still however, it is not there so we might witness a test or even a break of the previous high at 1.247 level. The next resistance lays at the 38.2 Fibonacci level which means it would trade around 1.256 Dollars. Still the MAs on the weekly graph are too far from each other and the possibility for another fall of the Euro to around the 1.2/1.19 level is valid.
The trading during the week could be a very volatile one because the Euro/Dollar pair is at marginal levels. Plus the end of the month is near which would form the view on the monthly graph.

The important news from the markets concerning the EUR/USD currency pair in the week ahead are the Consumer Price index in Germany (to be released on Monday), the Money supply levels in EMU zone and UK (due Monday and Tuesday), Personal income and Consumption in USA (to be released on Monday), Consumer confidence in EU and USA, Unemployment rate in Germany (Wednesday) and in EMU and USA (Friday), Gross Domestic Product of UK (Wednesday), Jobless claims in USA (Thursday).

US stock market short-term update - technical, S&P 500, 09062010

The futures trading shows some of the strength of the bulls might be vanishing so one should beware.

What is formed on the 4 hour graph is a hidden divergence between the S&P 500 (SPX) index and the Stochastic indicator which could signal a retreat for the index at least in short term. There are several hours to pass before the opening of the market so these could be bears' hours.
On the smaller time-frame graphs the down direction is even more visible. On the 1 hour and 30 min there is still more time to pass before the down movement is finished.

US stock market technical analysis - S&P 500, daily, 09062010

US stock market has fallen a lot. What started as a surprise to many of the players at the beginning of May continued during the whole month and now the S&P 500 index has reached one of its lowest levels for the period. The signs of the current fall were visible even in April when a series of bearish divergences were formed on the daily and weekly graphs and our expectations of a fall of the markets proved to be right. That downfall was striking to many people and now as they have fresh memories of the pains they might have taken during last 3 years, they are now more scared than ever. Suddenly almost everybody turned bearish which explains the striking volatility and sharp downfalls of the indices. But this means also one more thing - there could not be much more fuel to the inertia. And the rising of the markets could surprise at least as many people as did the sudden decrease of the indices. So much for the psychology. :)

What we see today on the daily graph might pretty much mean the bulls might take some control now.

The graph shows the index continues to make new lows but the indicators don't follow. For today the S&P 500 grew and the Stochastic shows it being in an oversold condition. Still the MAs show the index is in a negative area but those divergences could lead to an increase. Still for a long-term bullish view, this bullish divergence better be confirmed by the MAs crossing on the upside.
The weekly graph shows the index is in a downtrend but a warning sign for the bears (and a good news to the few bulls) is that on the monthly graph the index still hasn't crossed that line and is in an uptrend. There is also no MACD bearish divergence there.

Despite the uncertainty if the index will change its down trend now for the long term, the 4 hour graph shows that for tomorrow there's a big chance the increase to continue. What we see here is the bullish divergence is seen in two indicators which could definitely lead to a continuation of the increase. Around 1068-72 level could be some resistance and if that gets broken, the way up to 1100 seems open.

Euro/Dollar (EUR/USD) Technical Analysis - Weekly, 23 week, 2010

Hello. Let's take a look at the possible scenarios for the week ahead concerning the Euro/Dollar trading.

 The weekly graph points to possible bullish divergences for the Euro which could signal the trend reversal is near. The main problem with these divergences however is that they are not finished yet. This could lead to many people getting hurt by expecting a strong upward Euro movement while it still hasn't found a strong enough momentum. A classical case for a bull's trap. This could trigger a wave of stops being hit which presents a big opportunity for a test of the previous lows of the Euro around 1.21.
The daily graph also raises some warning signs which basically consist of the fact that even with positive MACD histogram and being in a relatively oversold position, the Euro is still not able to advance high enough (above 1.25-1.26) and to sustain that level.

With all that said it would be good to keep in mind that the mentioned divergences could get formed in the near future (maybe even next week) and an explosive upward move of the Euro against the US Dollar is highly possible.

Euro/Dollar (EUR/USD) Technical Analysis - Daily, May 26, 2010

After yesterday's closing of the Euro/Dollar pair near to its open level, today's trade started lower. However the technical analysis shows the direction might change during the day.

The daily graph of EUR/USD (click on it for a better view) shows the Euro gets close to being oversold while the MACD histogram is positive. Still the Stochastic points down but the formation looks promising for an Euro advance. Let's check the lower time-frame graphs.

On the 1 hour graph of Euro/Dollar we see the pair is swinging around the Moving Averages. Still the MAs are positive and the Stochastic points strongly upward. This could lead to at least a short term advance of the Euro against the US Dollar with target placed at the previous high around 1.2380/90.

The overall risk of further decline of the Euro still stays on the bigger time-frame graphs.

Euro/Dollar (EUR/USD) Technical Analysis - Weekly, 22 week, 2010

The Euro/Dollar pair took again the major trend direction this week. After the increase of the Euro for the last week which was partly supported by the weekly and the daily graph, now it's again on the downside. During the weekend the news that a major Spanish bank - the Roman Catholic Church-controlled savings bank CajaSur, was took over by the central bank of Spain hit the Euro and made it fall on two consecutive days. Now it trades around 1.2230/40 against the US Dollar.

The weekly Euro/Dollar graph (click on it for a better view) doesn't show any strong upside support for the Euro. Both MACD and Stochastic are pointing down. Such movement could continue at least till Stochastic shows the Euro is too oversold. The current market sentiment is negative towards the Euro and every news about even potential problems in the EU zone could trigger further selling.
There are market rumors on possible ECB intervention but one shouldn't count on that as such a move is mostly hypothetical. However the more oversold the Euro gets, the higher becomes the possibility of volatile movements and explosive ups and downs. The reasons for such movements could be different and could include a possible intervention - either by decreasing the amount of Euros available on the market or by increasing the amount of Dollars.

Euro/Dollar (EUR/USD) Technical Analysis - Daily, May 20, 2010

Today's technical analysis of Euro/Dollar pair lead us to an interesting conclusion.

On the daily graph (click on it for a better view) of Euro/Dollar pair we see a bullish movement for the Euro. This explains the upward movement for the last two days. A possible target could be around 1.25 where the MA and several Fibonacci levels are found.

Still the smaller time-frame graphs suggest in a shorter term there could be a pull back of the Euro.
The 4 hour graphs still has some time to go up but on the others there are severe bearish divergences seen.

On the 1 hour graph we see the Euro tries to get higher but obviously it's loosing its strength. The Stochastic is in its highest levels but still the MACD is almost negative. Should this divergence takes the lead we could see another drop of the Euro at least around the levels it floated during the Asian trading day - 1.2320/30.
Having in mind the fragile Euro sentiment this could be easily broken and another fall below 1.23 could be seen.

US stock market technical analysis - S&P 500, daily, 18052010

The US markets have fallen a lot since the last technical analysis. Today the US Consumer Price Index (CPI) level is expected to be announced. The consensus figures are 0.1 (MoM) and 2.4 (YoY). Earlier in the day the Construction Output in the European Monetary Union (EMU) was declared to be 7.6% while for the previous period it was -7.2%.

The daily graph of S&P 500 (click on it for a better view) shows that the market is getting close to an oversold area. What is more interesting is if it will be a bullish divergence formed on the graph. Still the general direction is down and a test of the 1093 area is possible.

What is more interesting is the bullish divergence that is already formed on the 1 hour graph of S&P 500 which could signal an upward movement for today at least to 1120/25 area. If that gets broken, the market could go higher to around 1140.

Euro/Dollar (EUR/USD) Technical Analysis - Daily, May 18, 2010

Euro/Dollar (EUR/USD) forex market is a nervous one today with many swings in both directions.

On the daily graph (click on the graph for a better view) we see the Euro tries to recover some of its loses against the Dollar from the past week but still the major trend is negative toward the Euro. Stochastic is directed upward so this explains to some part today's efforts of the Euro to gain strength.

On the 4 hour graph the Euro seems to have some more road to walk before gets in the overbought area. Now it trades around 23,6% Fibonacci retracement level from the last downward movement. It was for a while above it but that didn't last long and now it trades below it again.
On the smaller time-frames graphs there are multiple bearish divergences formed which could explain the nervousness of the market around current levels.
Still the bigger time-frame graphs look a bit positive for the Euro so it might try another test of 1.2430/40 area.