Weekly Market Analysis – Week 37 – 9th To 13th September

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Market making higher highs post recent slump, but is this rally for real?

Following last week’s optimism starting from HK’s Carrie Lam withdrawing the extradition bill, HSI kickstarted a bullish move globally across different markets with a +4% move on that day the news was announced.

Then what we saw was that DAX30, SPX & DJIA breaking to their new recent highs, a start difference from weeks ago where the market were largely trapped in a range bounded manner. All markets broke out of their necklines, and were seemingly on a rage to recover for lost time since late July 2019.

Of the few markets that I track, DAX and DJIA presents the strongest trend while the broader base SPX & HSI still lags their counterpart.

And while the majority of traders round the world are focused on daily time frame on their charts, I prefer to start from a even higher time frame (weekly) to filter out the noise presented on the daily charts.

S&P 500

Structure retest seems to be successful.

Technical Analysis is often a mixture of art & science. While there are rules to guide us on how should we plot our analytical lines, it’s also the judgement calls that presents different perspective.

Case in point, should we have plotted the resistance zone around 2950 level, then this chart would present a story that is largely chaotic. But in this case, using the high of 2018 as a reference, we can see that the Sep 2018 & Apr 2019 rally is largely prospected as a false break out.

Having hit the long term trend angle around the 2750 level, the next wave of break out running up to Jul 2019 broke the previous all time high, and flirted with the huge psychological level of 3000.

Then what happened since then, was it retested the high made in Jan 2018, and rallied right up, and seemingly going to break the 3000 level once again. If I was just looking at the daily time frame for my analysis, it would have included alot more of the bias & noise which brings me more harm than good.

DJI 30

In the midst of breaking out of the triple top made since Jan 2018……

DJI presents a slightly different picture as opposed to SPX. While the SPX seems to be a success retest, DJI merely bounced off my long term trend angle, and is in the midst of breaking out to test the all time high once again.

Before it can do that, I am expecting it to be resisted or stagnated around the 27000 zone first. And meanwhile I was penning this article down, I am seeing strength in the 30 large/mega companies over the broader based SPX.

My money is on a a successful run to R1 monthly pivot in time to come for DJI. But it has to show signs of accumulation around the 27000 level first in order for the scenario to play out successfully.

NDX 100

NDX is the strongest and it is the most likely to break the all time high…

While the SPX & DJI are charging up, I can’t help but notice the inherent strength in technology sector. From a technical stand point, this is the strongest looking chart, and it’s the most likely to flirt and break its previous all time high

Even though the overall market has tanked quite a fair bit, NDX remains strong by forming a higher low structure, and the price action is suggesting that it would rally upwards to retake the all the time, which is coinciding with the R1 monthly pivot.

Before it can head to R1 resistance, it’s currently getting stagnated with my key level (red line). What I would like to see is the price staying around the red key level, and forming some pressure for the thrust up to R1 pivot.

XLK: Technology Select Sector SPDR

Reflecting the strength in technology, XLK is poised to break the previous all time high…

The strength in the NDX prompted me to look further in to XLK (not a defensive sector). If the overall market rally is fueled by defensive sectors, this implies that the market participants are taking a cautious view towards this rally.

Should the rally be fueled by growth sectors, then the likelihood of this rally sustaining would be alot higher. In this case, I am singling out XLK among others (XLI, XLC, XLY) because it’s riding on a wave of optimism in the technology sector.

While XLK is resisted off my red key level for now, I am expecting a higher low structure to be formed, and for XLK to retake the previous high, which so coincides with the R1 level.

In summary… I think there is a high chance that the global markets will continue to rally and seek to break (or false break) their previous key levels. This should continue till the next wave of pessimism kicks in (presumably from trade war).