Tuesday peek

Day 2 of short covering! The bears got absolutely slain! But they are not dead, apparently. I spotted some signs.

Let’s take a look at the STI weekly chart. Bullish divergence observed. I saw it and I knew there will be a rally but this rally came much earlier than I expected actually. Nonetheless, 20MA kissed. The first test of a MA  resistance is not likely to crack through. I spoke bout this a long time ago here I think. If it crashes through like it wasn’t there, I will wonder if it is a whipsaw. A real bullish (or bearish) test would see some form of retracement. The markets have been performing V rebounds from the lows at 1470. V shaped. While this in a way is good for the bulls, it implies the market has NOT bottomed yet as a V rebound is not typical of a bottom forming.  By the way, see the market crash last Sept-Oct where the 200MA was taken out? It was a point of no return, but the good news is the same magnitude doesn’t look set to be repeated. But who knows.  So where does we put us now?

First thing I noticed. 3 gap supports found. Third one normally is known as an exhausion gap, and the probability of this gap being covered is very high. Price is also at 100MA  resistance. Using fibonacci, resistance is seen at its current level, as well as 1786 which is the next level. It also happens to be major resistance. Till today this is STILL a bear rally. To violate the bear rally term, it needs to form a higher high. To do that, it needs to break 1786 as its first move.   Supports will be gap covering till around 1660.  Any downside should be capped at 50% retracement, which is around 1588 (around the 1580 resistance turn support). This implies we have rallied 50% from breakout level. Time for a breather. The upside VS downside isn’t much in favor of the former at this point.  Ultimate support seems to be 1560 at 61.8% for a higher low formation. I tend to favor 1590 at this point, due to the 20MA turning up. It should hold the price there, but if these fail, 1560 will be the last chance.

When i pulled the time line back a little, I saw this formation. What does it look like to you? Seems like no one pointed it out. Even I didn’t. Is it even considered the dreaded formation? On hindsight, it broke the neck line and died. It should be a 300 point break but we hit 200 before we reversed with a V rally. HMMM…