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Thursday, March 28, 2024

Equity Technical Update

Courtesy of Tyler Durden

Submitted by Nic Lenoir of ICAP

We bypassed on a close yesterday 5,740 for the Dax which was the upside confirmation level. We would now recommend to wait a pull back to 5,740/5,700 to buy in order to play 5,890/5,900. A look at the weekly chart for the Dax shows that so far we still have a possible topping formation, and 5,890 would correspond to the second shoulder of a H&S on January’s highs. In the meantime, as long as we don’t close below 5,700 on a day the way is up. Since we have the 61.8% retracement of the sell-off since the tops right here at 5,827 it is likely we will retest 5,700/5,740 before going to 5,890/5,900 wich will give hobby bulls a chance to enter this move with a very reasonable risk reward. We note on the 180-minute chart that we have an inverted H&S with the neckline at 5,740, so a retest is all the more likely.



Ever since the S&P crossed back above 1,095 we had recommended closing the shorts initiated at 1,100/1,107. not much juice there but better safe than sorry. A break aboce 1,112 confirmed the upside to 1,122 which we reached in a hurry. The 1,122/1,129 range should hold us here. Interestingly we have a different count in Elliott for the Dax and the S&P. The S&P looks a lot more like an impulse since the lows, whereas the Dax seems like it is forming a zigzag towards 5,900 where a next bearish leg will kick in. The way to reconcile this would be for the S&P to grind to new highs while bouncing between 1,115 and 1,130 or slightly above while the Dax proceeds to pull-back and reach the upside target. As a general rule, the Dax has been a much clearer indicator of trends than the S&P has been we will encourage following the game plan laid out by the Dax and rethink the whole game plan if/when we get to 5,890/5,900.



EURUSD is breaking out after we highlighted several time the strong divergence in momentum indicators. We see 1.4008 as the first big target (50dma), with intermediary resistance at 1.38/1.3820. The trend is bearish for the medium term, and we will monitor good re-entry levels for tactical shorts as the market progresses on the way way up. If anything though this move confirms our outlook on the Dax.



In equities our risk if we are wrong is to be in a 3rd wave up so playing the upside on apull-back with a tight stop on daily close below 5,700 is the prudent play, especially for those with core EURUSD shorts.

Good luck trading,



Nic

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