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Saturday, March 10, 2012

The Dow 30 - Ichimoku Study - Week: 05 March to 09 March 2012 - Bulls have it all.


Preamble:
We shall do a Ichimoku study to complement our 'Triple Screen Technical Analysis' of the US markets -  Taking the 'weekly' time frame may be experimental but lets look at the facts..

The standard settings for an Ichimoku Kinko Hyo chart are 9,26,52 and are used on EOD charts.  When Ichimoku was created back in the 1930s, a trading week was 6 days long. So we have one and a half week, one month, and two months. Now that the trading week is 5 days, we can use 7, 22, and 44 instead.

However, sticking to the standard settings (as the majority still use them) one notices that there is a case for 'End of Week' Charts where each candle is one week's data. There are 52 weeks in a year, 26 weeks form two quarters and 9 weeks equal about 2 months. We have a longer term view - lets check if that works out in the days to come.

One needs to read up on Ichimoku (see our first post here to start off) and use the link below, as I use the same color code. There are many more studies out there, feel free and get a good one.




DJI 30 - End of Week Chart - 09 March 2012
The Dow Jones Industrial Average 30 - Ichimoku - End of Week Study.

A: See the green 'a' and 'A' and the green line. 'a' is the 'Senkou Span Cross'. If the senkou span A (black line) crosses the senkou span B (grey line) from the bottom up, then it is a bullish signal. 26 weeks before the cross - 'A' at the green line shows the relevant candle - as you would have read by now - A neutral senkou span cross signal takes place when the price curve is inside the kumo at the time of the senkou span cross. We have a Neutral Bullish Cross.

B: See the orange 'b' and 'B' and orange line. 'b' is the 'Chikou Span Cross'. If the chikou span (purple line) crosses through the price curve from the bottom up, then it is a bullish signal. A strong chikou span cross Buy signal takes place when a bullish cross takes place and current price is above the kumo. See 'B' and candle at orange line - as the candle is above the 'kumo' we have a Strong Bullish signal.  

C: 'C' is a 'Tenkan Sen/Kijun Sen Cross'. A neutral tenkan sen (red line)/kijun sen (blue line) cross Buy signal takes place when a bullish cross happens within the kumo as seen.

D: 'D' is the 'Kumo Breakout'. The signal to go long in Kumo (grey cloud) breakout trading is when price closes above the prevailing kumo - as seen.

Bulls would enjoy the above.

E: The last input - we see that the price took support on the 'Tenkan sen(red line)'. One notes that price breaching the tenkan sen can give an early indication of a trend change .. maybe the Bear will get lucky some time soon.

S&P 500 - Triple Screen Analysis - Week: 05 March to 09 March 2012 - Doji'ng the Bears..

Recap: The SP500 was resisted at last year's high and we looked for direction in last week's study (post here). The index had developed a Bearish Harami on the EOD and it was below the 5 EMA. However  we had assessed then, that it was not yet 'Advantage Bears'. 

In last weeks action the Bulls took the index back above the 5 EMA on the EOD charts and this fightback keeps the Bulls on top - what next?



S&P 500 - End of Month Chart - 09 March 2012
S&P 500 - End of Month Chart (EOM): The MA crossovers we studied last week are still in place, the divergences have vanished as of now. This chart looks distinctly Bullish, but for the hesitation written on the peak - in struggling to move above last year's high.




S&P 500 - End of Week Chart - 09 March 2012
S&P 500 - End of Week Chart (EOW): After 4 weeks of staying above the 5 EMA, this week's candle has taken support near the 10 EMA. The Bulls have dodged the Bears this week with a 'Doji'. So let us read about that - as a refresher from some free resources on the net...

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introduction_to_candlesticks
http://www.candlestickforum.com/PPF/Parameters/12_221_/candlestick.asp
http://thepatternsite.com/NorthernDoji.html




S&P 500 - End of Day Chart - 09 March  2012
S&P 500 - End of Day Chart (EOD): The Bulls were happy to stay within the same channel as last week, and stage a bounce back, to end on top, above the 5 EMA. The Bearish cross of the 5 EMA below the 13 SMA remains - leaving the Bulls with diminished momentum. 
Since we are a Study Blog - here is something to mull on...inspired by the last three candles on the chart above..

http://www.moneycontrol.com/technicals/news/candlestick-patterns/advance-block-bearish-reversal-pattern_578785.html
http://www.fxwords.com/b/bearish-advance-block.html
http://thepatternsite.com/ThreeWhiteSoldiers.html




Looking Forward: The long term Charts viz. the EOM and EOW, are in Bull mode. On the EOD one sees some hope for the Bears. If the 5 EMA 13 SMA cross remains Bearish and the price then breaks below 5 EMA, one sees early signs of Bear strength. Staying within the current channel on the EOD keeps the Bull safe for now.