200801003

The WIG Index may be drawing a descending triangle (bottom at 35700), but the chart does not show us anything new:



The intraday chart does not tell us much either:



The price is between important levels of 35700 and 37400. We can draw downtrend line, however those intraday trends tend to be broken easy lately. Quick summarization: sell on long-term, sell on short-term and confusion (as for me) of short-term.

The bear market teaches us a lot - I personally have never thought I would see the KGHM at 46PLN (chart thanks to gielda.onet.pl):



Bailout plan passed (here) and US market did lower low again - make sure you watch the Brian analysis here. Some interesting articles about bailout plan (here, with some fancy charts) and US workforce (here).

Sources:
[http://seekingalpha.com/article/98402-the-bailout-plan-still-has-a-fatal-flaw]
[http://online.wsj.com/article/SB122295094803198075.html?mod=djemCJ]
[http://www.marketwatch.com/news/story/bush-signs-historic-financial-bailout-package/story.aspx?guid={303FAA6C-7E73-4223-ADA9-FB465F185BE3}]

20081002

The WIG Index crossed the support of 37400 today:



In the big picture nothing changed really, We are still in bear market in long-term and medium-term. Nevertheless, take a look at intraday chart:



We did not manage to break 39000 and we have crossed the important resistance of 37400 (sell signal?), therefore I assume the double bottom formation is no longer valid. Nevertheless, intraday charts show just  short-term emotions and reflexes. It's worth to observe market in small periods, but our analysis should take into account longer periods.

Make sure you watch video from Brian Shannon (here) and note broken reversed head-and-shoulders pattern in gold. Pretty bearish US market close is showing the most probable direction for WSE tomorrow.

According to the researchers at Morningstar Inc., 91% of all mutual funds in existence have lost money so far this year (article here). Oil, gas are in clear bear market, gold has lost ca.20% from its high. Commodity futures (here charts for Cocoa, Coffee, Orange Juice, Sugar #11, Live cattle, etc.) are in various stages of their trends (subjective, but I'm generally looking for confirmation in lower-high & lower-low pattern in weekly chart), but generall commodity indexes are failing (i.e.: DJAIG, CRX, GNX, AMCI). Could it be we are entering last stage of market cycle (or rather we are already (nice picture of market cycle in this post))?

Sources:
[http://www.dailyfutures.com/livestock/]
[http://www.dailyfutures.com/softs/]
[http://online.wsj.com/article/SB122272238714287459.html?mod=djemWMP]
[http://futures.tradingcharts.com/menu.html]

20081001

The WIG Index has continued the rally from yesterday (more on it below):

The WIG20 Index looks also bullish in short-term (but without potential double bottom we can observer on wide market):



Both indexes look promising on short term. The WIG20 Index has made higher-low, which is promising. However, we still need a higher-high to signal short-term reverse. Take a look at intraday chart for WIG Index (chart from today's update of yesterday's post):



We can note potential double bottom formation with target price ca.41900. Nevertheless, I would not consider it as formation before we cross at least 39000. Do not forget, we are still in bear market at the best of our knowledge. This is great environment for daytrader, but not for position trader.

After failure of first Paulson's plan, the alternative one is prepared. Author of this article presents some of the ideas. Author raises concerns about removing the mark-to-market accounting rule, but also notes positive impact on mortgage bonds the act could have.

The Baltic Dry Index (BDI) is a daily average of prices to paid by an end user to have a shipping company transport raw materials across seas on the Baltic Exchange. This index is a one of the leading economy indicators as it measures the demand to transport raw materials, before production can be initiated. It tends to be much more resistant to speculation. More of its methodology and purpose here. Take a look at chart:





I'm not sure we should mark all highs and lows like it's in the picture, but we can see a pattern of higher-lows & higher-highs from February 2006 to May 2008 and then breakout (previous long-term low (ca.5600) has been broken). Currently, the BDI Index is in clear downtrend.

Warren Buffett prepares to buy 3 million USD of General Electric (NYSE: GE) preferred stock at a guaranteed 10% dividend that are callable by 2011 (here). That's a second major Buffet's investment in current market.

Sources:
[http://www.marketwatch.com/news/story/ge-sell-12-billion-stock/story.aspx?guid={82385698-8517-4ADA-8436-83DB02638BD7}]
[http://stockcharts.com/h-sc/ui?s=$BDI&p=D&st=2001-01-01&id=p85912874928]
[http://investmenttools.com/futures/bdi_baltic_dry_index.htm]
[http://en.wikipedia.org/wiki/Baltic_Dry_Index]
[http://www.wikinvest.com/concept/Baltic_Dry_Index_(BDI)]
[http://seekingalpha.com/article/97969-alternative-bailout-plan-good-and-bad-ideas]