Thursday, August 4, 2011

Daily Technical Analysis - August 5, 2011

What an amazing day in the US stock markets- Indices shed 5% in just one day! That is one of the most negative days that we have seen in the since the endless declines at 2008. S&P 500 easily broke that supports at 1250 & 1220 and it looked like that it could slide even more if it had more time.

For technical traders, these kinds of days are simply one big celebration. The market was moving in one way without looking back, and it was easy to make a lot of money, whether you traded stock, commodities or currencies.

However, if you did not join the party, do not tempt to go in unless you spot a real trade-idea. Entering the market just because you afraid "to miss the train" is totally wrong and you probably end up losing.

The US dollar rose against most of the currencies, except the unbreakable CHF. The wind blows to the USD's direction and it will continue as long as stocks fall.


The BOJ intervened in the JPY and triggered an aggressive 'short-squeeze' in all Yen's pairs. History shows that interventions tend to fail, as it happened on the earthquake crisis intervention. However, the bullish momentum is likely to continue, and the 4H chart shows that 79.20 is a possible level for reversing up. The USD is clearly overbought so it might correct down to 78.0.


As mentioned, the Swiss currency does not seem to care about the plunging of the stocks, and it keeps strengthening against the USD. The recent two candlesticks have upper shadows that indicate for the pressure of the sellers. The CHF is one of the investors' favorite instruments, especially when markets are shaking. A break-down of 0.76-0.762 will end up the current correction, and might continue to 75.0.


Another instrument, which investors like to run to when the monitors are red, is the precious metal. When the gold was traded at 1550 $/oz we estimated that it would break the 1600 $/oz, and so it did. The more the uncertainly grows, the more the gold becomes more attractive. However, investors might believe that a deep recession can have a negative impact on the need for gold, so the price might decline as well.

Yesterday's candlestick was red and it might indicate for incoming correction. According to the Fibonacci indicator, the gold might retest the break-up of the 1600$/oz.

published by SunbirdFX