The technical support (and also the 2011 low) for DJIA was 10,400 thereabouts on October 4th 2011. The low for this month of November was 11,250 thereabouts on November 25th, last Friday. Note: 10,400 on Oct 4th and 11,250 on Nov 25th. What a coincidence!
From another angle, the lows are getting higher, while the highs are getting lower. From a technical perspective, while the highs and lows converge, it would indicate a breakout of this range. The biased is downwards. But anything could really happen.
While some of you may already note in times of extreme volatility, when the major averages were declining, the ‘mental’ S&P technical support was 1100. Once it reached that level, the ‘big boys’, bargain hunters, fund managers all kicked in with program trading and lifted the S&P more than 20% from October 4th 2011. This is hindsight.
What needs to be seen is that the rally on Monday, was it a technical level that pushed Europe indices 4-6% higher, US indices 2.5-3% higher?
Imo, the lows and highs are converging. Note the support and resistance level. You may then panic or rejoice when either is breached. Click here for the second BIG rally the week after!
Similarly, the US dollar index was just a nose away from the technical resistance level of 80. This and the above may coincide to determine where markets will be heading soon.
Important data this week: India GDP, China PMI (the previous was just flash estimates). The estimates for India GDP is below 7.1%. The ^BSESN index may test the lows in the next 1-2 days. Please also note the inverted yield curves.
Europe: The source of information is getting ‘tricky’. As you probably know, the market reacted very strongly when news was published that IMF would help bail out Italy. Market and currency markets rallied. This was subsequently denied. High yield currency pared gains while equities retain their gains. Even, the source of information from reliable financial providers can be totally misleading.
Happy trading!
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