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) Analysis - Monthly, June, 2010

Last month the Dollar made one of its biggest gains in a month against the Euro. The trading began at May, 1st at around 1.33 and closed the month at 1.2286 with 1.2140/30 being the lowest level reached. This made almost 7.6% gain for the Dollar.

As was supposed in the current weekly technical analysis, June started with a test of the lowest level around 1.214 which was penetrated a bit to 1.2110 and a bounce followed. Now the Euro trades below its previous support level around 1.23.

The monthly graphs shows we are in a Dollar area and the Euro is deeply oversold. A warning sign for any Euro bulls would be the MACD whose histogram continues to dig deeper on the negative side.

As the support level at 1.23 was broken last month the next one (which is a major strong support) lays around 1.17/1.19 area. If the inertia from the last month proves to be strong enough, this is a possible target to reach.

Looking on the Weekly and Daily graphs we could see some signs for an upward Euro movement but even if it appears during the month, the overall trend is still negative for the Euro.

One should keep in mind that there is a possibility for a strong bullish divergence for the Euro to be formed on the monthly graph and if that happens it could signal a long (possibly years) upward trend for the Euro against the US Dollar. Still as we are looking at a very big time-frame graph it could take 1-2 months before such a divergence to appear clearly.