 | The flag is forming as I expected, but today's session in a daily timeframe puts me in the alert mode again. Daily candle is a doji star, signaling a stall/reversal in the market. Of course, this pattern can be still rejected, as earlier, but this time we are above july all-time high level. This could get more dangerous if tommorrow's session would be bearish, expecially when the market exceeds friday's low, which would form an 'evening star' pattern. As it says on the chart, the market is approaching a full 1:1 scale measured move from the 3420 low and added to the recent correction. That does not mean, the price is going to fulfill its perfect rally, but indicates that the short and mid term stop losses are just below the flag. Eventual test of the lower flag band may cause a squeeze, with a little help from declining global markets. |
 | The american trading session is bearish at the time of writing, because of Citigroup today's report, reigniting the credit concern. Depending on the close, this situation could cause a downside gap on tommorrow's open. Right now, judging by the intraday data, we have a tripple top situation inside a rectangle/flag pattern. The market remained today above its intraday low, which doesn't mean a reversal yet, but a flattened open interest near the market tops (third day in a row) definitely indicates that the price will have a hard time passing through the resistance level (new flow of money required). So a sharp move below 3880 will be a true test of psychology for some traders. |
As you can see, recently we have quite volatile situation in the markets. Problem of subprime mortgages in the United States is surely unsolved yet. Moreover, american investors are concerned about whether the economy is going into recession or not (expecting Fed lowering rates again), because of the declining Dollar and rallying commodities causing inflation. This week has some crucial news considering CPI, housing starts and initial claims in USA. Exiting this turmoil either way, will in my opinion define future of the global bull market (long term).
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