20080930

Today's rally has finished above yesterdays close, covering the gap from 19th Sep:



The WIG20 Index looks little bit more optimistic:



The session today gave me an impression of a reflexive rebounce, but we shall not expect anything. We shall just react. From technical point of view the tomorrow's session can be critical. We have a possibility to create double bottom (with target price ca.41800, but not before we take out the last high) or to make a lower-low (which will give us another strong long-term signal).

There are tons of news and articles commenting current economy situation (check MarketWatch, Forbes or Bloomberg). Therefore, I don't think you need another pile of information. Most of news are really pessimistic - maybe we are at true bottom now? Only the time can show that, right now it is safer to assume we are still in bear market.

Let's take a look at currencies then. The CHFPLN is high (subjective opinion), but it well keeps to its channel as for now:



The EURPLN looks much more hectic:



The price made the higher low and crossed the important level of 3.37, but it still has not taken the previous high (3.49). It's hard to say what is coming next (triangle maybe?), thus we need to observe it.

Update from 01/10/2008:
As for now it seems the market has choosen the first option and we are in short-term up-trend. Note the possible formation of double bottom with target ca.41800. I would not consider it a reliable formation before we cross at least the level of 39000:



Like Brian Shannon says: any rally in a bear market should be guilty till proven innocent. Trading against the trend (sell signal in long-term chart) is risky business and we generally are not skilled enough to do it.

Sources:
[http://www.gracecheng.com/stocks/2008/09/30/any-rally-in-a-bear-market-should-be-guilty-till-proven-innocent/]
[http://www.marketwatch.com]
[http://www.forbes.com]
[http://www.bloomberg.com]

20080929

Today's session was really impressive. The WIG Index failed -4.18%:



The WIG20 Index failed even more -5.03%:



We have broken the resistance of 37300, which is pretty strong sell signal for short-term. We are still above the Sep low, but the short-term double tops pattern should be noted on both charts. Nevertheless, in such situation short-term forecasts are meaningless.

As for certain stocks, KGHM failed -11.69% as of today:



This weekend was a interesting one and there are few things are worth mentioning:

The largest savings and loan fund, Washington Mutual has serious problems now (here and here).

Citigroup takes the Operation of Wachovia (here).

The 700 billion USD rescue plan for US bank has been rejected today by House of Representatives (here). I won't even try to guess what impact on economy this action could have. Look here for article and a huge number of comments. There is also huge number of other sources and discussions in the Internet (here, here or here). Noteworthy is this article from Sep, 1999 with some of the nowadays dangers highlighted (thanks to UFO Forum). Lots of useful information and news can be found here.

Make sure you watch Brian Shannon analysis today (here). "It's better to be out of the market and wishing to be in, than be in the market and wishing to be out" - nothing is more true right now.

Sources:
[http://www.marketwatch.com/news/story/us-stocks-plunge-house-says/story.aspx?guid={7F45BE2A-0486-494E-B87C-76D9F2688338}]
[http://www.forbes.com/home/2008/09/29/wachovia-citigroup-financial-markets-equity-cx_cg_0929markets11.html]
[http://www.forbes.com/home/2008/09/28/bailout-financial-crisis-biz-wash-cx_bw_jz_0928agreement4.html]
[http://www.marketwatch.com/news/story/wells-fargo-wachovia-were-couple/story.aspx?guid={1865CC87-2BA3-4863-8F81-F3F9EED3261A}&dist=msr_4]
[http://bigpicture.typepad.com/comments/bailouts/index.html]
[http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=]
[http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/financial_meltdown;_ylt=Ak8s4k255lzwU9Y6KvAuHyKs0NUE]
[http://www.marketwatch.com/news/story/bailout-bill-unveiled-now-heads/story.aspx?guid={6209DA02-EC8E-4107-B78A-1B395F1A462E}]

20080926

As per chart, the WIG Index has confirmed its short term low (ca.37300) but is still below the last short-term high (ca.38800):



Similar situation on WIG20 Index: confirmation of a new short-term low (ca.2357), bur still below previous short-term high (ca.2473):



Therefore, nothing changed in the big picture and we are still in primary downtrend. Nobody knows where is the bottom. Under current circumstances in US economy and politics, playing on market is quite hazardous.

As for the question "how much more can we go down?" - there is no answer, but don't believe in anything like "we are low and it can't go lower". Take a look at DJIA from 1929 and the answer is "we can always go lower":

20080925

The WIG Index rallied today a little bit:



Similarly, the WIG20 Index gained some value:



Today's session changes nothing in the big picture, I will also note the rally was not confirmed by volume breakout, but it was still some value gain. On intraday chart, we can see short-term higher-low and maybe also the potential to take last intraday high (ca.38900). Generally speaking, we are not interested in day-trading as maybe 5% of people at most will make money on that. Nevertheless, it's always worth to observe what's going on:



EURPLN chart (thanks to ChartStation) has an interesting situation. Of course, it is too early to say, what is going on as there is no clear pattern there, but the price is near the band of previous channel and we can wonder if it goes back to previous trend:

20080924

The WIG Index stayed above Jul's low:



The WIG20 Index stayed at its level as well:



Today's session was boring, the charts are boring and also the today's analysis is also boring: sell signal in long/medium-term and confusion in short-term.

Warren Buffett invested 5 billion USD in Goldman Sachs (NYSE: GS). The transaction terms also include 10% of dividend and an option to buyback with 10% premium (here). The price reached about 130 USD as for now.

Sources:
[http://www.marketwatch.com/news/story/goldman-sachs-shares-gain-reaction/story.aspx?guid={4D90BEF9-6BAD-45BC-BC10-F83004A900EF}]

20080923

The WIG Index fall today, but it's still above the Jul low:



The WIG20 Index is below its Jul low:



Like yesterday, not much can be told about current situation from those charts. US market closed low, thus I think it will also be our direction tomorrow. The clue about future market can be growing volume, which tends to rise in market direction. Nevertheless, remember, that only the price really matters.

Brian Shannon in one of his analysis mentioned gold (this post). Some sources (i.e.: www.dwagrosze.blogspot.com (blog is polish, but you can easily use the Google Language Tools for translation, here) are suggesting to keep ca.10-15% of total capital in physical gold (which seems to be a good idea anyway) as it gives the portfolio owner something like a backup for a really bad times. The gold has become very volatile lately (chart thanks to ChartStation):



We shall note the lower-low & lower-high pattern on weekly chart. However, other signals are mixed: we clearly bounced from Fibo 38.2% and the retracement was very dynamic. Opening long position is risky and until we take out the last high (988) it's still sell signal. The 1000 USD seems to be psychological barrier as well.

Two last big investment banks: Goldman Sachs and Morgan Stanley are becoming bank holding companies. They will subject themselves to stricter federal oversight, but they will get access to the Federal Reserve's lending facilities (article here).

Some interesting post on short selling nowadays: US, UK, Australia, Russia, Germany, France and Belgium barred short sales last week. Hedge funds, which are usually driven by trend-following strategies, have lost valuable tool in many cases and will have to adjust their approach.

Sources:
[http://ftalphaville.ft.com/blog/2008/09/22/16196/short-selling-world-wide/]
[http://www.marketwatch.com/news/story/goldman-sachs-morgan-stanley-become/story.aspx?guid={CB72201A-A795-4C78-8F68-E64DAA26398D}]
[http://dwagrosze.blogspot.com (via Google Language Tools)]

20080922

The WIG Index could not close the gap from last week:

The WIG20 Index looks better, but it's still under Fibo 61.8% level:



Fibo levels can give us some clues, but almost nothing else can be told from those charts. Therefore, take a look at intraday chart:



We have an uptrend line (green line), we also have few gaps above and below current price. Generally speaking the chart is rather neutral in terms of next session. However, taking into consideration low close in US markets I'm guessing (and only guessing in current technical situation) this will be direction for tomorrow. Remember, that in long-term there is still sell signal.

Paulson's rescue plan gives the Treasury secretary the authority to buy $700 billion in mortgage-based assets for the next two years (here). The commentary in private blogs and in forums seems to be rather negative, for a quick summarization take a look here (and please note there is no plan to buy from hedge funds). Take a look at the number from US Bank Derivative Exposure (shamelessly stolen from The BigPicture):



We really don't know terms for the assets exchange and there is too many emotions to have a clear picture now. However, this action will expose US government for additional risk. I'm really curious what impact it will have on US Treasury notes - chart is here.

Sources:
[http://bigpicture.typepad.com/comments/2008/08/us-bank-derivat.html]
[http://futures.tradingcharts.com/chart/NO/W]
[http://www.marketwatch.com/News/Story/treasury-fact-sheet-rescue-plan/story.aspx?guid={2B9D21F6-35BE-4544-A454-3A2A910F59BB}]
[http://www.marketwatch.com/news/story/paulson-urges-quick-approval-rescue/story.aspx?guid={0160DF73-8869-4E13-AADF-5A51B4C37F1A}]
[http://www.marketwatch.com/news/story/us-stock-futures-slip-mortgage/story.aspx?guid={9A2D31C6-CCE6-4786-8D05-93E2391066AC}]
[http://www.marketwatch.com/news/story/goldman-sachs-morgan-stanley-become/story.aspx?guid={CB72201A-A795-4C78-8F68-E64DAA26398D}]

20080920 - EURPLN, CHFPLN

After breaking from the channel (this post), the daily EURPLN looks really messy:



Situation is not clear enough to make any long-term forecasts. Nevertheless, we can take a look at intraday chart:



The important level of 3.32 and Fibo 61.8% has been broken, therefore we can assume the price is going to fall more (please also note the unbroken level of 3.2750). However, as the situation of bigger period is not clear, we should not rely on intraday charts too much.

The weekly CHFPLN chart still looks clear enough with lower-low & lower-high pattern and the long-term downtrend line:



Sources:
[http://www.netdania.com/Products/ChartStation/ChartStation.aspx]

20080919

Today's chart for the WIG Index looks more than impressive:



The same goes for the WIG20 Index:



Both indexes have opened with a huge gap and continued upward. The daily volatility (measured by ATR) is rising as well. There are mixed emotions out there, but like Brian Shannon says - the price is the only thing that pays. The market look very bullish in short-term, but remember there is still sell signal for the long-term market.

European Commision asked polish government to lift the restrictions of polish pension funds. Current limit does not allow fund managers to invest more than 5% in foreign markets, which was not a bad thing lately. An article can be found here (translated via Google Language Tools).

Sources:
[http://gielda.onet.pl/0,1827749,wiadomosci.html (via Goolge Language Tools)]

20080918

Today's Term of the Day from Investopedia is Statement Shock. They surely have a sense of humour regarding current market circumstances.

Almost nothing new can be said about current the WIG Index situation. The price has more or less reached its potential target (from the triangle figure) and made a lower low:



The WIG20 Index seems to broke the support of 2006 low (2273), but remember the 16th of Jul where the similar situation occurred (with support of 2449):



Generally speaking, today's close was not so bad. Nevertheless, we have made lower low again:



Today's surprise comes from UK - to 16 Jun (possible review in 30 days) shorting financial stocks has been banned (here or here). Let's see how the WSE reacts tomorrow. The US markets reacted quite strong, therefore we will probably follow.


Also, tomorrow is the triple witching hour (short introduction in this post), thus we can expect huge volatility near the end of session.

The oil it's worth mentioning (chart thanks to ChartStation):



As you can see, stoploss has been activated. This rally bounced from previously broken uptrend line, what probably means the drop will continue. However, oil is close to the Fibo 61.8% and also near the important level of 85.4 USD per barrel, which can possibly act as resistance and end the correction of oil.

Sources:
[http://www.fsa.gov.uk/pages/Library/Communication/PR/2008/102.shtml]
[http://www.marketwatch.com/news/story/british-regulator-bans-short-selling/story.aspx?guid={844E5B8E-C1AE-4C34-AD80-20193FF1B292}&dist=hplatest]
[href://www.investopedia.com/terms/s/statement-shock.asp]

20080917

The WIG Index continued this move:



Similar situation can be observed in WIG20 Index chart:



Any forecast for target level is simply pointless. Some of the projections can be seen on charts, but they are just potential supports.

It seems AIG just barely avoided filling for bankruptcy (here and something even more interesting - here), but it did not stopped panic in US market. Therefore, I suppose we will have a opening gap on WSE.

Make sure you watch the video from www.alphatrends.blogspot.com - it's really good today (do not to miss the gold analysis).

Update from 2008/09/18:
Noticed today, I believe we can see some sort of 37370 level confirmation in hourly chart:



Sources:
[http://www.ft.com/cms/s/0/271257f2-83f1-11dd-bf00-000077b07658.html]
[http://www.cnbc.com/id/26646278]

20080916

The WIG Index finally confirmed a direction today and closed below the Jul low (please also note the updated price target as per guidelines here):



The WIG20 Index also took a heavy hit today, closing below 2300:



After 2-months of confusion, it seems we finally have a direction (or bear trap). Therefore, the best position is still cash. We can't do much about the market, but it's good time to take a look at larger period and maybe try to find potential price action levels:



We just crossed the 37300 level (Jul low), the next important one is 35250 (2006 low) and 34000 (Fibo 61.8%). Below are levels of 31250 and 25500, but I don't believe (as if the market care what I think..) we are going there anytime soon, thus we leave them as for now. One sure and important thing from today's session is that we made a lower low and this is not a sign of bull market at all.

Session is US closed quite high with big volume, nevertheless they made lower low as well - the tomorrow's session can be interesting though. Make sure you watch today's analysis from Alphatrends blog - Brian Shannon seems to be confused as well.

The triple-witching hour is the last hour of the third Friday of each month that ends a year quarter (March, June, September and December). It marks the simultaneous expiration of stock options, index options and index futures. It is characterized by great volatility and index swings, where future traders are trying to set a more suitable close for them.
The next triple-witching hour will occur at Friday session. A chart from 21st Dec 2007 (thanks to gielda.onet.pl) shows what to expect:



Sources:
[http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:symmetrical_triangle]
[http://www.dacharts.com/articles/Buffy_on_price_action.php]
[http://gielda.onet.pl/notowania.html]

20080915

The WIG Index stopped at Jul low:



The 1-hour chart still gives us some hope with Jul low still not broken. The lower trend line of the descending channel can possibly act as resistance (but we don't bet it will hold):



The WIG20 Index looks much more bearish as it has made a lower low:



The WIG20 Index has obviously given strong sell signal, but the WIG Index still stayed above last low line. And that's the only reason why I'm not 100% bear after today's session close.

The charts above look suggestive, but we need to remember there are always alternative ways to draw them. Take a look at the WIG Index from last Friday:



I doesn't look so bearish as before, does it? The few ways of drawing current situation are the source of general confusion and that's why I would suggest to wait until we take the last high or low before doing anything. I assume the continuation of a downtrend is more probable now, but we should never convince ourselves to just one direction. We can be (and we usually are) wrong, but this is the reason why Stop-Loss order exists.
An interesting article about forecasting market direction can be found here.

Also a few words on oil - in this post we suggested shorting oil again. The oil price has crossed Fibo 38.2% and 50% and is near the 61.8% now 87.5 USD).
This is the last level, when oil price drop can be seen as correction. Playing oil right is really hard, we cannot be sure if the oil bounces or not, thus I will suggest to use trailing stop-loss instead of target profit now. The Parabollic SAR can be a good choice as we have a strong downtrend now. The daily SAR stoploss (as on chart) seems to be too costly, therefore I will suggest to use smaller periods (8- or 4-hours, but with some reentry strategy):



Sources:
[http://www.cato.org/pub_display.php?pub_id=9628]
[http://www.morevalue.com/glossary/restrict/Triple Witching Day.html]
[http://www.netdania.com/Products/ChartStation/ChartStation.aspx]

20080913 - EURPLN

Few interesting things happened in EURPLN. Take look at daily chart (from ChartStation) first:



The dynamic rally has also very dynamic throwback. It can be connected with primary minister Donald Tusk's speech about introducing EUR in Poland in 2011 (here (via Google Language Tools)). I just love reasoning after the event.
Nevertheless, before introduction of EUR, Poland has to go through ERM-II mechanism, which allows currency to only float in a range of ±15% with respect to a central rate against the euro. Giving current rapid growth of the polish economy and high interest rates it can be hard to satisfy.

Technically, the race was very fast and it will be nice to have some kind of confirmation, like a bounce from 3.32 or Fibo 61.8%:



Right now nothing can be said about future direction as the primary downtrend (lower low & lower high pattern) has been obviously broken. Situation is not clear and the new trend has not shown itself yet.

Sources:
[http://www.egospodarka.pl/33900,Wprowadzenie-euro-w-Polsce-w-2011,1,11,1.html (via Google Language Tools)]

20080912

Nothing new can be told since yesterday. The WIG Index did not change its price level and we are still waiting for clarification (this chart is a way too suggestive):



The WIG20 Index has similar situation, but is much more choppy.



There is an interesting article how hedge funds are impacting the market in general. Just few citations:
...on any given day 25%-60% of global trading is handled by these unregulated funds...
...hedge fund managers are forced to cope with +20% return expectations...
...use of leverage, long, short, and derivative positions...
It's no longer smart money, it's fast money instead. Hedge funds rely on momentum and sophisticated risk models, jumping from one bubble to another.
Problem is there are too many big and fast players there and the slower ones are dropping out fast. The last hedge fund going out from a bubble is going to be hit by its own leverage. And depending on its leverage it can be very hard hit. That presses hedge funds managers and introduces fear that they will be too slow. I will say there is direct relation between fear and how fast are we pressing Sell button. The result is tremendous volatility in US market.
The emerging markets do not have such a problem yet, due to very limited ability to play on derivatives other than futures (in case of WSE).

Sources:
[http://seekingalpha.com/article/95184-the-next-bubble]
[http://www.iht.com/articles/2007/08/13/business/hedge.php]

20080911

The WIG Index continued downwards:



The WIG20 Index closed just below (-8 points), the low from 2006:



Both charts look too suggestive. We have not confirmed the breakout yet, therefore it is not reliable formation. Also, we are still above the lowest low from this year, therefore I would suggest to be cautious and observe. There are always few alternative ways of drawing current situation.

Update from 2008/09/12:
Lehman Brothers (LEH) seems to have a serious problems (here or here) and US government officials (Federal Reserve and Treasury Department) are actively seeking for a buyer. Lehman Brother fell down like a 90% (as of today) from its top (84.13 USD) in last 20 months. Also their bonds (high interest (LBHBX) and short duration (LBSBX)) do not seem to perform well.
As for sumamrization check this post from LinkedIn:



Update from 2008/09/15:
"Lehman Brothers Holdings Inc, once the fourth-largest U.S. investment bank, will file for bankruptcy after potential buyers abandoned talks and the U.S. government declined to fund a takeover of the crippled firm." (Bloomberg, article here)

Sources:
[http://bloomberg.com/apps/news?pid=20601087&sid=akVBbwBfM65w]
[http://topics.nytimes.com/top/news/business/companies/lehman_brothers_holdings_inc/index.html?inline=nyt-org]
[http://www.washingtonpost.com/wp-dyn/content/article/2008/09/11/AR2008091102580.html]
[http://online.wsj.com/article/SB122116292232524671.html]