Saturday, May 19, 2012

The Dow Jones - Ichimoku Study - Week: 14 May to 18 May, 2012 - Gravity and Equilibrium revisited..

Gravity and Equilibrium revisited - Bingo!

Exactly 2 months ago when the Dow was at its peak - our Ichimoku study threw up a gem titled 'Gravity & Equilibrium' - here is the link (click).
At that time, we  saw the Dow gravitating down towards the Kumo.
Today, with half the journey done, we look back, and can repeat the last line of that post '..why else study?'

So here is this week's screen - do note that the Preamble now comes after the screen (and is for new readers).

Last 5 Signals seen on DJI 30 - Week Chart (EOW) as on chart below:

1. Chikou Span Cross: Strong Bullish Signal (C)
2. Tenkan Sen/Kijun Sen Cross: Neutral Bullish Signal (T)
3. Kumo Breakout: Bullish Signal (B)
4. The Flat Kumo: Bearish Signal (Ko)
5Tenkan Sen Cross: Weak Bearish Signal (red line)

The Arrows point to...

1. The Purple line is the Chikou Span - this one looks like it would touch and cross the Price line soon - Bearish Signal, if that happens.

2. The Price has stopped short of the Kijun Sen - Dark Blue line - Support here is considered good and Bulls can take heart from that. Bullish signal that.

Bears have done a good job of keeping the price below the Tenkan Sen (Red Line) for two weeks now. 
Bulls now need to use the Kijun Sen support to move the price above the red line.
From being a Bullish screen this one has become a Neutral one, from the Ichimoku point of view.

DJI 30: Medium Term View (or) Week Chart (or) EOW with the Ichimoku Cloud: 
DJI 30 - End of Week Chart - 18 May 2012  

Preamble (for New Readers):

.....Regulars can skip this part......


We do a weekly Ichimoku study, to complement our 'Triple Screen Technical Analysis', of the markets that we track, in our quest to master Technical Analysis.

When taking the 'weekly' time frame, to use the Ichimoku Cloud, we need to consider the following..

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(9), one month(26) and two months(52). 
Now that the trading week is 5 days, we should actually use 7,  22 and 44 instead. 
However, the majority of systems, worldwide, still use the old settings 9, 26, 52. 

We need to study markets, on a weekly basis on this Blog.  
How do we fit 52, 26 and 9 into that need?  With one candle being one week?
There are 52 weeks in a year, 26 weeks form two quarters (or a half year) and 9 weeks equal about 2 months.  Fits the old logic - albeit differently.
Presto, we have a longer term view with the same settings!

So, if you like to move off the beaten track, for a change... do read on...

Quick Reference : 
Chikou Span - purple line,
Kijun Sen - blue line, 
Senkou Span A - black line, 
Senkou Span B - grey line, 
Kumo - grey shaded area,
Tenkan Sen - red line.

Useful resources (free) from the Web:

S&P 500 - Triple Screen 'Technical Analysis' - Week: 14 May to 18 May, 2012 - Midlife Crisis Point

Learnings from the Past Week:
Our short term view of the market turned Bearish last Monday (click).
The Bears then took it down to 1300 and lower by weekend.
After Thursday's Market action, we suggested that one support point would be the Weekly MVWAP 34 (click).
Bulls found support, exactly at this point, on Friday.
Would mid life (mid channel) crisis, affect the Bears at this stage - or are we in for more red?

S&P 500: Long Term View (or) Month Chart (each candle is 1 month's price move)  (or) EOM Chart:
S&P 500 - End of  Month Chart (EOM) - 18 May, 2012. 

With Price above the MVWAP 34 - this screen is owned by Bulls.
With a weekly close below all our short term MAs - its a nervous owner indeed.
The 13 SMA and the Channel mid line - are support areas for the Bulls.
The astounding effect of the Three inside down (click) has been a gain of 100 points and counting for the alert Bear.

S&P 500: Medium Term View (or) Week Chart (each candle is 1 week's price move) (or) EOW Chart:  
S&P 500 - End of  Week Chart (EOW) - 18 May, 2012.

The Weekly channels (white lines) have had a reduction in their angle of inclination, due to recent Price action.
Support for Bulls is exactly at the MVWAP 34 as suggested.
The Stochastic indicator has gone into oversold territory.
We saw this screen, scream 'Bear' in last last week's EOW (click) - we expect a pause for breath at the MVWAP 34 (arrow).

S&P 500: Short Term View (or) Day Chart (each candle is 1 day's price move)  (or) EOD Chart:  
S&P 500 - End of  Day Chart (EOD) - 18 May, 2012.  

Our Day Channel (yellow lines) just got steeper - after the channel break.
The Positive divergence, seen last week, is still apparent (yellow arrow).
An all red week is rare - but with Price below all MAs and a channel break as pointed out last Monday - this too has happened.

Looking forward into next week:
Bears are on top. 
They have almost all Indicators on their side.
Support at the Weekly MVWAP34 should lead to some consolidation.
Positive Divergences are a precursor to some ranging moves or trend reversal.
Bulls have the above two, and hope on their side.