Daily Murmur 22/11/10

by Gary Glover

Major Bearish Signals everywhere you look.
I have been a serious chartist, technical analyst for almost 13 years and I can't ever recall seeing so many false break patterns at one time on weekly set ups.  What is most unbelievable about this is a lot of these are on major stock and commodity indices.  Just to name a couple the  S&P 500 Index, Dow Jones Index, Nasdaq, FTSE, Crude Oil, Sugar, Aluminium and Platinum have all rallied to a new high in recent weeks recently and failed to hold the high in place.  This is a major bearish signal and in my experience this is a high probability bearish set up.  

Just look at the BHP example below, see how often the big swings succeed following these false breaks, this is up near the 70-80% in my books, so the fact that so many have made this pattern is a unique universal sell set up.  This just happens to coincide with our commodities boom and bust forecast. 

The interesting thing about this false break pattern is that a large move follows this technical signal.  A minor new high is generally followed by a minor new low, so a retest of the previous low often means quite a move.  To get a high probability of success and also a larger than normal move, is probably why this is one of my favorite technical set ups.

I am starting to think that the commodities have topped and that we aren't going to get to January.   November and January are seasonally our two most likely times for a high and now I think that the high is most likely in place.  All these false breaks and lots of other indices retesting high's is starting to all point to a bearish move.  Four of the world’s major stock indices have all made false break highs and have a target approximately 15-20% lower.   Four commodity charts have made the same sell signal and a handful of these others are just shy of their record highs.

The BHP chart is indicative of alot of stocks and indices currently.


Disclaimer

Gary Glover is an Authorised Representative (Rep No. 259215) of Novus Capital Limited ("Novus"). Novus is a holder of Australian Financial Services Licence No 238 168. Novus, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.