Dow Jones vs. Oil: Their positive correlation remains.

This chart shows the positive correlation that the oil has kept with the Dow Jones Index for the last two years. Both of them have shared the same falling structure and they are equally developing their respective uptrends.

However, in March 2010 it has emerged a substantial difference between Wall Street´s most representative Index and the dubbed "black gold". As the Dow Jones has been able to overtake the former resistance of 10.750 points, which was reached by the twentieth of January, the commodity has appeared to be too weak to go through its equivalent level. So far, the area of 84 dollars has behaved as a difficult hurdle to be cleared.

The technical situation analysis allows to establish a hypothetical scenario for the coming weeks: if the Dow Jones has been successful in achieving the goal of going through its analogous resistance, maybe the oil could do it as well.

The market is waiting for important economic data. On the one hand, on Wednesday it will be published the ADP National Employment Report, which is a measure of employment from an anonymous sample of about 500,000 U.S. business clients. On the other hand, on Friday, investors will know the non-farm payroll and the unemployment rate in United States.

Both of them could encourage or disappoint the current market sentiment, depending on the final figures. In any case, these data can play a crucial role in terms of knowing the result of the struggle that the oil keeps against the level of 84 dollars.

The technical recommendation is to open long positions if the oil overtakes the area of 84.80 dollars. It´s advisable to set a stop loss in 79.00.

Microsoft: Despite its slow pace, its primary structure remains upwards

Microsoft seems to have moved at a slow pace for the past two months if we compare with other Nasdaq´s securities, such as Cisco or Apple. In fact, its increase during this period (8%) has been considerable lower than these two companies, which have risen a staggering 20% and 22%, respectively. 

Despite this meagre rise, its technical situation remains bullish. As most stocks, its recovery began in March 2009. However, its most relevant moment took place two months later, by the beginning of May, when prices went through the level of 21.00 $. This break-up entailed a new upwards cycle and, consequently, the former downtrend eventually finished.

Therefore, Microsoft keeps its rising structure, which is represented in the chart by a primary tendency, whose slope is moderate (an angle of 18º). It´s remarkable the fact that at the end of 2009 the speed of its recovery increased significantly. This rhythm increase allowed this security to reach the level of 31.50 dollars before it could be expected. 

By contrast, in 2010 the company owned by Bill Gates has experienced two different moments: the first one, which involved a 13% decline, and the current short-term rebound, that is the technical element which a coherent strategy should be built on.

To summarize, investors should  take into account that Microsoft remains in a rising scenario, despite the fact that this year has not already recovered its higher levels. The mission for a short-term investor consists of watching over the first supports, placed on 28.00 and 27.50 dollars.

The technical recommendation is to hold. Stop loss in 27 dollars.

Tutorial on Technical Analysis: Does History repeat itself?

The purpose or our educational project is to make financial knowledge more accessible to students, to spread financial culture among general public and to provide regular traders with help to reduce the inherent risk to Stocks Markets. 

As a result we aim to publish a set of short descriptions on basic concepts related to Technical analysis, which is one of the most interesting disciplines used by investors to deal with their daily key dilemma: Should I buy or sell a security?

Technical analysis is as technique for examining a security´s series of historical prices in order to forecast its future behaviour. 

This method consists of a comparison between both its current and its historical price, so that a likely evolution could be determined in advance.

This field of study is based on a hypothesis: that history repeats itself. Having said that, by analyzing the past we can infer a probable security´s future price. Consequently, Technical Analysis considers that Psychology plays a crucial role in the Stocks Markets and that the final price is the result of many human elements´ interactions. From this perspective, the evaluation of past psychological situations acquires a considerable relevance. If the analyst understands how a mass of investors behaved in the past, it can try to foresee the future in so far as a potential analogous market moment is coming.

To understand our approach, look carefully to the next chart, where we propose two possible similar scenarios on the CAC 40´s French index. Even both situations could be subdivided according to an intermediate or short-term perspective. So far, it´s obvious that it´s too early to appreciate if both chronological moments can really be considered analogous.

In March 2009, a new uptrend appears to emerge. But will the CAC 40´s next market movement soar as it happened from 2004 to 2007?

We invite you to express your viewpoint on this issue by linking the proposed case with the Analysis Technical Principle that “the future can be found on the past”.

This first introductory concept involves an essential pillar to understand the whole content of this website. All questions are very welcome. So feel free to ask us for any clarification.

Apple: Prudence must be the strategy after an all-time high is achieved

The recovery that Apple Computers has experienced in the past year is really impressive.

Its behaviour is exactly the opposite to what had happened in 2008, when the collapse of the Stocks Markets had undergone an accentuation by the last quarter of that year.

Nevertheless, at the beginning of 2009, a tripple-bottom was formed around the area of 82 $, which confirmed a reversed pattern and, therefore, a cycle shift.

From that moment, the second quarter of 2009 began with a staggering increase for the securities of the American multinational corporation. Apple climbed around a 60% since March to May 2009. Nevertheless, its uptrend didn´t finished after this remarkable achievement. In fact, it continued to soar for the next ten months.

During the session of March 25th 2010 the computer manufacturer reached the level of 230.97 dollars, that´s an all-time high, which accounts for a 180% rise from a year ago.

However, this stock is beginning to reflect some exhaustion. The RSI is showing negative divergences, which could involve a significant short-term decrease. Besides, the channel bottom could behave as a strong resistance, which could interrupt such a enormous appreciation.

The technical recommendation is to sell at the current prices. Stop loss in 236 dollars.

Euro against dollar: European currency´s weakness could lead it to the level of 1.30

As we anticipated some sessions ago, http://timelymarkets.blogspot.com/2010/03/euro-against-dollar-goal-is-achieved.html there was a couple of technical reasons to think that it would be very difficult for the European currency to go over the level of 1.38 dollars per euro. This zone concentrated a huge bearish interests. First all, because of the powerful resistance that prices have formed around this area. Secondly, because the main technical element, the falling channel, was too influential in the middle-term scenario. Consequently it coudn´t allow the euro to have a sustainable recovery. Finally, the classic indicator Momentum was completely overbought.

Afterwards, the support of 1.35 break-down has confirmed the euro falling scenario. There is not relevant supports from a short-term perspective until the level of 1.30, which coincides with the channel bottom. This area could again draw new bullish interest, taken into account that technical indicators could be oversold by then.

The technical recommendation is to open long positions on the level of 1.30-1.3050. Stop loss in 1.2860.

e-mini Nasdaq 100: the selling goal is very close

The e-mini Nasdaq 100 has climbed more than a 14% since the past February the first, when it  strengthened its middle-term uptrend, which was born in March 2009. Prices developed a support in the zone of 1.730 points, which has been the beginning of the last rising impulse.

Currently, its technical position involves a call for prudence to those investors who trade in a short-term basis. This opinion is based on two technical obstacles that this index may have to face in the next sessions:

First, the resistance of 1.960 points represents a significant bearish stronghold. This level was the last decent opportunity for many investors to go out from the market in August 2008, just before the Stock Markets collapsed. As for the Nasdaq 100 it plumbed almost a 50% in barely a quarter.

Secondly, the raising channel top is very near. Therefore, the bearish positions should make some kind of additional pressure. Consequently, they could interrupt the current middle and short-term upwards movement.

The technical recommendation is to open bearish positions around the level of 1.950-1.970 points. It´s advisable to set a stop loss around the level of 2.020 points.

E-mini S&P 500 future contract: Rising structure remains

The e-mini S&P 500 future contract has kept an impeccable short-term rising tendency. The decline between January the fifteenth and February the tenth increased the likelihood to extend its eleven-month primary upwards movement, due to the fact that it was able to diminish its excessive overbought situation that most of technical indicators showed. Therefore, the correction from the level of 1.150 to 1.050 has played a key role, because it has boosted this new rising impulse.

To sum up, this index remains bullish from a middle and short-term perspective. Prices in the first scenario are guided by the parallel lines, which are the current limits to its movement. As for the short-run strategy, it should be planned taken into account that the rising trend, born five weeks ago, remains intact.

So far, the e-mini S&P 500 maintains its successive higher-low prices. The last supports shall be watched over, so that investors remain confident that the rising structure continue going ahead. This important zones are the level of 1.150 and 1.130 points.

The recommendation for this index is to keep long positions. Stop loss in 1.125 points.

The Bund rebuilds its middle-term rising structure

In the last analysis we explained the high hurdle the Bund had to deal with. There were three reasons to suspect that the German bond would have considerable difficulties to continue going up:

1. First of all, because of the rising channel top closeness, that suggested that the previous rebound (which began in February the 18th around the 122.50 zone) was about to be exhausted.
2. Secondly, because of the presence of the 124.80 resistance, which could exert such a bearish pressure on prices that it could eventually jeopardise that February shy recovery.
3. Finally, some short-term leading indicators, such as the Williams and the Stochastic were extremely overbought.

The overall circumstances led to forecast a moderate decline within this channel framework.

Prices tried stubbornly to go through the resistance of 124.80 for seven sessions. However, the goal was eventually postponed and a correction was brought about.

The subsequent fall has allowed the Bund to gather more bullish allies. As a result, it´s currently rebuilding its rising structure. As the middle-term scenario continues being led by increasing low-prices, the recent fall could have led the German bond to find out a new support in the area of 122.00. From this level, a new rising impulse could start. The next goal would be the next relevant resistance: 125.00.

The recommendation is to open long positions. Stop loss en 121.80.

Cisco: Bullish positions overpower a difficult resistance

Cisco´s movement confirms the significant improvement of Nasdaq´s main components. The supplier of networking equipment for Internet has been able to go through the difficult area of 24,80 dollars. It achieved this goal during the session of March the eighth, when the resistance was clearly overtaken. This movement strength assessment implies to evaluate a key data: the volume which came along the rise. The chart points out that this statistical data was specially high, compared to the 30-day moving average. Consequently, we can infer from this technical indicator, that the shift towards a more bullish scenario was validated for a mass of investors.


Anyway, we must not forget that the short-term way doesn´t lack obstacles. The next goal is the resistance of 27,80 dollars, which approximately coincides with the rising channel top.


The recommendation from a short-term perspective, is to maintain buying positions. Stop loss in 25,50 dollars.

DAX: It achieves the goal of its inverse head-and-shoulders pattern

In the video tutorial we published at the beginning of March,http://timelymarkets.blogspot.com/search/label/Video%20Tutorial we explained that the main German Index could develop an inverse head-and-shoulders pattern which should lead the Dax to the highest level that was reached on January the eleventh: 6.100 points. The rise measurement was done according to the basic principles of Technical Analysis: once the neckline is broken up, the upwards movement should coincide with the head height. The rising tendency which was born in March doesn´t seem to have finished. However, the presence of a resistance in that level of 6.100 points should be considered as a call for prudence.

The recommendation is to sell partially around the area of 6.050 - 6.100 points and to close totally long positions if it achieves the next goal, between the zone of 6.250 and 6.300 points.

Oil: Prices point out to the raising channel top

The oil upwards movement for the past three weeks has been coherent with its raising channel. As we analyzed in the two previous analysis, the prices could experience a rebound from this channel bottom. Our first goal was the level of 82 - 83 dollars, where there was a resistance which coincides with the top levels that this commodity reached by the beginning of 2010.

This objective has been achieved. From now onwards, the question is if it will be able to overtake this level to initiate a new impulse to 85-86 dollars. The reply to this dilemma involves an assessment of the short-term tendency, which began by February the fifth. So far, the yesterday correction has not damaged it.
Therefore, it remains a raising potential. Due to the fact that prices develop their movement in a recovery scenario, the new projection can lead the oil to the level of 86 dollars.

Our technical recommendation is to sell partially on the level of 82-83 dollars and to close definitely long positions as soon as oil reaches the goal of 85-86 dollars/barrel.

ebay: The resistances break involves a technical situation enhancement

Ebay has showed a perfect equilibrium for the past seven months, which has led it to design a perfect rectangular shape, a very tipical pattern that happens when there is a balance between bullish and bearish expectancies. Nevertheless, in March, the bullish strengths have overpowered in the short term scenario. Consequently, the new technical situation seems to be more appropriate for long positions. In any case, the rise has been extremely vertical. Because of that, some correction could appear in the next sessions.

The recommendation is to take advantage of a potential decline to buy stocks of "Ebay". Stop loss on the level of 23 dollars.

Euro against dollar: the goal is achieved

As we pointed out in our last analysis, http://timelymarkets.blogspot.com/2010/02/el-euro-no-da-senales-tecnicas-de.html ,the euro had no many chances to experience a sustainable recovery against the North American currency. A potential rebound could essentially be brought about by the positive divergences that the indicador RSI was showed by comparison with the prices. However, the dominant element within the short term scenario was the incipient downward trend which began to develop itself by the beginning of December 2009.

So far, its key role remains unchanged. Because of that, this falling tendency has been able to interrupt this apparently short-lived rise of the European currency.
In addition, the overbought situation of Momentum provides more evidence that the euro could be pushed down by the falling scenario.
Consequently, for the time being, there is not reason to abandon bearish positions. Therefore, our recommendation is to close long positions. We establish a stop loss in 1,3900 dollars/euro.

Nokia, is the lateral movement over?

The Finnish Telecom company underwent a staggering fall in the Stock Markets, from the level of 28 euros at the last quarter of 2007 to 7 euros by the beginning of March 2009. Since then, Nokia has kept a lateral movement between the support of 8.40 euros and two resistances, which are placed approximately on the level of 11 and 12 euros. This technical situation has led to a balance between bearish and bullish positions which involves an ideal scenario to make an aggressive trade for short-term investors. Currently, the horizontal situation remains unchanged. Therefore, the sooner the prices approach this resistances, long strategies should be closed. Volume continues being very low. Consequently, there are not technical reasons to open a long strategy in the short run.

If prices overtake the resistance of 12 euros, the situation would be completely different. In that case, bullish strengths would take over the battlefield and it would be the chance to initiate a long strategy.

Dow Jones: Long Term Perspective

The North American Indexes have been more resilient to the news which have had a negative effect in the developed countries' Stocks Markets. As we have analyzed in previous strategies, many European indexes have lost their primary rising trendlines. They are currently trying to structure their move in order to be able to recover former upwards moves.

By contrast, the Dow Jones has been strong enough to keep its move up, after a brief period of consolidation. The most well-known Stocks index could offset the bearish pressure, thanks to the 9.850-point support´s strength.

Consequently, the long-term structure remains upwards. The recommendation is to maintain a long strategy. Stop loss in 9.700 points should be established.

Nikkei: A long term perspective

The long term analysis of the most representative Japanese index brings an ample range of information on its technical situation. In fact, it shows the most common moves that prices can be developed and consequently, analyzed by means of Statistics.

The Nikkei carried out a lateral move for 20 months, since January 2004 to August 2005. The range wasn´t too wide, but the purchasing and the bear positions were well established, which facilitated a speculative strategy between 10.500 and 12.000 points. This scenario involves a trader´s more demanding attitude in order to make a profit.

The 12000-point breakout lead this index to the highest of 18.000 points. This scenario´s main feature is its rising trendline. The only coherent strategy is to maintain long positions. Therefore, trader´s only mission is to watch over a possible trendline break-down.

From July 2007 to the lowest level of March 2009 the Nikkei developed a clear downwards trend. Logically, the only possible strategy was a short position as a general rule. Nevertheless, we can realize that prices built a channel where rising movements were sometimes brought about. For example since March 2008 to July 2008, the Japanese index soared dramatically from 11.700 to 14.700 points, which means a 25% increase.

Finally, the question is if a new rising cycle has began in March 2009. So far, this is the most evident hypothesis, as succesive higher-lows appear. The last two supports have been 9.000 and 10.000 points. So the rising trendline must be watched over.

The long term recommendation, from a technical viewpoint, is to maintain long positions with a stop loss in 8.900 points.

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Japanese Yen against US dollar: It remains the North American currency weakness

This chart shows the evolution of the Yen/US dollar for the past five years. We can realize that there is two clear stages: The first one, which starts by the beginning of 2005, leads the prices to the level of 125 yens per $. In August 2007 the rising trend is broken down. This moment implied a cycle shift, as the vertical yellow line points out. This feeling change had significant consequences from a technical point of view, because there was not other choice apart from opening short positions.
From that moment onwards, US dollar has tried to consolidate a reliable support which allows a new upwards cycle. So far, the level of 85.00-87.00 has behaved as a prospective candidate, but it´s too early to consider if it eventually will play this supportive role for a bullish strategy. We consider that it´s much more relevant to watch over a possible resistance of 94.00 break-up, which definitely would imply the downtrend end.

Our Technical recommendation is to open a long strategy just if prices break out the level of 94.50. The next goal would be the area of 101.50. Be aware that you should set a stop loss in this case in 91.30. Meanwhile, it appears to be more coherent to maintain a short position.

Eurostoxx 50. Difficulties to develop a reversal pattern

The Eurostoxx 50 had appeared to be very weak during 2010, especially after the rising trendline breakout in January 15th. Since that moment, the most coherent strategy has been the bearish one. However, prices seem to have found out a reliable support in the short term: the level of 2.670 points. A reversal pattern of shoulder-head-shoulder is beginning to appear. The key points to ensure a successful long strategy is, on the one hand, to go through the neckline, and on the other hand, to do it with the technical indicators in a neutral position. Some fast indicators such as Williams and Stochastics are overbought. Therefore, it should be necessary to have a rest before trying more ambitious goals.

Technical recommendation is to take advantage of possible corrections to the level of 2.750 points, to add long positions. Stop loss in 2.650 points.

Hang Seng. Stochastic´s overbought conditions could lead to a decline in the short term

The technical situation of Hong Kong´s main index has significantly improved in the last week, especially after the 20.500 - point level break-up. However, there are some obstacles in the short term which could prevent it from continuing its upwards movement. Fist of all, the level of 21.000 points, that was a strong support in the last quarter of 2009, should become this time a difficult resistance to be pierced for the purchasing interests. Secondly, some indicators, such as the Stochastic, which are overbought, suggest that prices could have risen too fast and too steeply in the short term. Therefore, the market sentiment could turn a little bearish. In this case, the index could look for to lean in the short-term upwards trend, around the level of 20.400- 20.500 points. The recommendation is to add long positions in case of decline and to set a stop loss in 20.100.

Dax: To be attentive is a must. A pattern of shoulder-head-shoulder might be carried out

The main German index was up about 69% since March 2009 to December 2009. During this period it was able to keep an upwards tendency. As soon as prices touched that trend, quick upwards movements were brought about. This scenario indeed facilitated the proper strategy: according to Technical Analysis basic principles, a trader must be coherent with a trend direction. Therefore, long positions should have been kept for the last three quarters of 2009. However, by the beginning of the second fortnight of January 2010, the situation changed dramatically. That tendency, which had played a key role, was broken and therefore, it didn't make sense to maintain the same strategy.
It was difficult to evaluate the consequences of such a tendency break, especially because the volume was significantly higher than the monthly average. From that moment, perhaps the indicator which has taken the lead in the new scenario has been the 200-session moving average. This indicator has allowed the Dax to build the foundations of its recovery. In the short term, it´s developing an inverse shoulder-head-shoulder. The most important element is the neckline that the level of 5.735 represents. If prices pierce it with an important volume increase, the next goal would be the high levels of 2010, that´s 6.100, which implies a recovery of 6.30%.
From a Technical point of view, we recommend to open long position above 5.750 and a stop loss on 5.480.