High-risk short-setups in the US indexes - and the long-setup in gold

The US stock markets considered by us have reached the important resistances, besides in the daily and weekly time frames they are overbought and they reacted more or less violently last week. Being the clock of the rally the NASDAQ-100 had to accept the greatest pullback, in the S&P 500 intraday we took in some reductions which were the greatest for months. Just the Dow Jones hasn’t shown any weakness yet. But on Friday it arrived at its daily GUNNER24 Main Target!

Now in all three of the indexes the constellations arose which facilitate a short entry next week. We are preparing for that explaining the possible short-entries in this issue. The short-entries are pretty risky because the downwards potential is limited and the correction should not last long.

To point out closer the risks of those short-entries on daily basis I’d like to go into the “big picture” of this bull run we illustrated for the first time in the issue of 12/12/2010 by the following weekly S&P 500 counter setup:

The 1300 seemed to be logical as an important mark then because the market is following the green double arc upwards undoubtedly. There are three important resistances at the 1300 which are taking effect now. Please do absolutely read up in the issue of 12/12/2010 on the way we constructed this setup because now I’ll have to deal closer with the possible short trades.

The weekly situation: The two time close of the week within the 4th double arc confirmed the target of 1378. With its low at 1271 last week tested the 1*1 Gann Angle that has been supported the market for months. If next week closes below the 1*1 it will be seemingly logical that a short term sell signal will be released. But: Still this important support has been lasting!

On the top left at the intersection point is where we are putting a counter setup now:

As analyzed as early as in December at first sight we recognize that the market has been moving upwards in the sphere of influence of the green double arc during the last weeks as well. During the whole month of December and the beginning of January the upper line of the green double arc was limiting the rise. Last week the market ran into the resistance being really in a correction mode now. In case the 1271 are fallen below on daily basis the 1249 will be a target. Just like it happened in the past that’s where the possible downswing should come to its end at the lower line of the green double arc.

In the general consideration of the counter setup this is going on applying: The market is in the positive sphere of influence of the green double arc keeping there at least until 02/21.

Specifically that means: Until that date we mustn’t expect a possible correction to break through this double arc. Concerning possible shorts the maximum target will be the 1249. That’s at the latest where another attempt should be taken to break the present top. If that green double arc is powerful enough to drive the market upwards next week things shouldn’t get to the stage where the 1271 are broken, and the short entry won’t take place.

In that case the market should continue working on a break through the 1300. A blow off will happen if the 1300 area is taken on weekly basis, because the green double arc will rise steeper and steeper forcing up the market.

Also in the daily 8 Candle GUNNER24 Up of the S&P 500 the 1249 are derivable:

We can see the market setting the first signals to follow the 5th double arc downwards. The 5th double arc is showing its influence probably forcing the market downwards. But the closing price above the 5th double arc is showing us unambiguously that we will have to expect new highs in the course of the year. In spite of the last down swing the S&P 500 is still near the Gann Angle corridor in which the market has been moving upwards for months. Let’s zoom into the setup now to analyze more meticulously:

With the Thursday closing price for the first time for 33 days a closing price below the Gann Angle was produced. Friday escaped again into/at the corridor. As the price course of the last days has been presenting itself the possible correction should happen above the 5th double arc so really it shouldn’t proceed dramatically. In case of a daily close below 1271 you may go short because in that case it would be obvious that the 1300 want to be reached in a roundabout way only. Target is 1249, SL1271, reverse and double.

But Look out: If the market has completed its correction by the Thursday low already marking a new year high at the beginning of the week before the 1271 breaks that would be an irrevocable signal to cancel this short entry and all the other described ones!

In case of the NASDAQ-100 the correction turned out sharper. On weekly basis the last candle can be interpreted the way that A) the lower line of the main target is still producing support and because of that reason next week a rebound from it may result in a new test of the highs. But B) a reversal candle was produced that represents a short signal on weekly basis we won’t trade however because on the one hand, as mentioned the highs can be called at again and because the market is still showing too much upwards power just like in the case the S&P 500. A short entry on daily basis may be undertaken if next week the Friday low is broken on closing price basis. Target is 2210, SL 2332.

As mentioned in the introduction the Dow Jones hasn’t reacted to the pullbacks of the other two indexes but delivered a new year high on Friday:

Friday closed within the 5th double arc, so here, too, in the further course some higher prices are to be expected. It’s absolutely possible that Monday or Tuesday some new highs follow. But just like in the last weeks the Gann Angle above the price should offer resistance permitting just marginally higher highs. In the course of the week a nice intraday reversal would be ideal preparing the possible short entry. A daily close under the Thursday low would be the trigger for the shorts. Target is 11,600 where the actual Gann Angle support is proceeding. SL is the last year high.

Gold – Risk-Long trade

Last week we prepared you saying that in case the 1362 are broken the 1340 should be called at. That’s what happened. By the Friday low at 1337 the 1340 were tested. Thus some important preconditions arose which indicate that the actual correction in gold and silver might have ended in terms of price and time. Of course that is not the case if we consider the metals by the traditional technical tools of analysis. For all the upwards-trend lines are broken there. The Moving Averages are signaling: sell, sell, sell! The weekly and the monthly indicators are turning downwards. The H&S Target is standing at 1290.

In spite of everything the GUNNER24 Forecasting Method is signaling a triple support at 1340 that justifies at least a short term long entry if it resists. If the 1340 do not hold we’ll see at first 1300 – maybe as early as next week…yeah, a dramatic sell off is imminent.

1340 support in the monthly 8 Candle GUNNER24 Up:

In our actual 8 monthly setup gold is sitting exactly on a very important monthly price and time magnet. Backtest of the upper line of the 2nd double arc at 1340.

Simultaneously, in the long term monthly 13 Candle GUNNER24 Up Setup, the “Big-Picture” at the same price level also the upper line of a double arc is being tested back. That’s an indication for the importance of the 1340 since it’s extremely seldom that in a couple of parallel setups on monthly basis the same signals are present!

It’s obvious that a breakthrough of the 1340 on monthly basis would unleash downwards-forces the market couldn’t cope with easily. Considering the monthly setups – it might thoroughly go down to 1220 in that case.

The 1340 in the daily 2 Candle GUNNER24 Down Setup: