Technicals | Jun 16 2010
By Rudi Filapek-Vandyck
The difference between bulls and bears in June seems to be determined by how far this month's risk rally is likely to push up equity indices – the fact there will be a rally is already beyond discussion.
The bears are expecting a nicely carved out head-and-shoulders formation, which should confirm their view that ultimately this sideways pattern is going to morph into something much nastier. The TechWizard points out this morning there is an alternative scenario which would be equally bearish for the outlook for equity markets: the formation of a triple top on price charts.
The TechWizard has been predicting a rally for weeks and he's happy to stick with that view for now – longer term, however, he retains a negative view.
One of the key reasons why he remained confident that a rally would follow is because his favourite market indicator, the MACD, refused to completely turn negative. The slow line never broke below the zero-line, explains the Wizard, and because of this he believed a rally would follow.
In addition, the Wizard notes the Dow Jones Industrial Average has now tested and re-tested the 10,000 level five times since April. This too would suggest a rally has now become overdue.
The TechWizard is the pseudonym of Scott Morrison, whose experience in financial markets exceeds twenty years. Morrison operates his own website nowadays at www.techwizard.com.au. The views expressed are his, not FNArena's (see our disclaimer).
