Starting signal for the year-end rally?

After that brief breakthrough of an eight week consolidation area and reaching the new 2011 lows last Tuesday, the equity markets reacted with an immediate upward reversal and a massive near-term rally back to the consolidation area.

For the bears it’s very disappointing that the breakthrough wasn’t durable. Moreover this conduct is a sign of a relatively inner strength of the markets which suggests that we’ve possibly seen the year lows and now the 2-3 month year-end rally has begun.

Before we go into the actual weekly S&P 500 GUNNER24 Buy Signal let’s have a quick look at the monthly setups of the NASDAQ-100 and the Dow Jones:.

The monthly 3 Candle GUNNER24 Up Setup is showing us that the market rebounded clearly from the long term resistance of the 3rd double arc in April/May 2011 after reaching the year high. For the first time the July candle spiked into the 2nd double arc from above. For the second time August spiked into this support area finally breaking the important 2*1 Gann Angle then, making thus the 1*1 Gann Angle to become the long term target. This one will be reached – within many, many months or years, respectively! By the lows of last week which briefly dipped into the 2nd double arc for the third time the 2nd double arc seems to turn out to be “unbreakable” – at least within many months. This third test of the 2nd double arc even allows – in case also the October closes above the 2nd double arc – newly heading for the long term resistance of the 3rd double arc at 12000 before the market would have to rebound from there again in order to head for the 1*1 Gann Angle finally.

A weekly close above the resistance horizontal anchored left in the setup (intersection point of the upper line of the 2nd double arc with the beginning of the setup) of more than 11258 should give the final impetus for reaching the 12000-12300.

Also in the NASDAQ-100, on monthly basis we can see that the most important support might resist, and the new rebound from the very important 2*1 Gann Angle might have rung in the annual year-end rally. In the sight of 2-4 months the NASDAQ-100 is rather on its way to new higher highs, I think. More likely we are seeing here a consolidation at the highs – the lows of the last months “don’t even reach” the important support area of the 4th double arc. With the low of last Tuesday the market even produced a higher low on monthly basis what the Dow and the S&P 500 did not succeed in doing. In terms of chart technique the market is completely all right and ready for new highs!

At short notice now the 5th double arc would newly have to be headed for at first. At 2272 the next important resistance is threatening there.

Weekly S&P 500 buy signal:

Unambiguously the year low fell below the 2*1 Gann Angle at the 4th test of this angle. But the rebound from the 2*1 is clearly visible. The week didn’t only close far above this angle after all but it was lying within the consolidation area again and within the lines of the 2nd double arc. The weekly high was marked at the upper line of the 2nd on Friday thus proving the importance of the entire 2nd double arc.

According to W.D.Gann the third and the fourth tests of an important Gann Angle are often decisive for the further price course. Because of the vigorous rebound from the 2*1 in the 4th test the continuation of the effect of this rebound energy over several weeks is very likely, probably having to lead to the next important Gann Angle, the 1*1 Angle in the medium term. By reaching the 1*1 the rebound is supposed to end. Since last week was a reversal candle beyond – closing price of the week was higher than the week before – on Friday at the close we went long at 1155. Target is the 1*1 Gann Angle at 1205.

Nothing doing about gold

The gold price is actually forming a bottom around 1630. But the short term downwards trend hasn’t been broken yet. The long term upwards trend is keeping on.

During the next two to three weeks we’ll see whether gold is going to swing up to the old heights or whether it takes another intense test of the strong monthly support Gann Angle at 1560 or beneath that. In the short term, all in all gold is oversold. The Commitments of Traders Report (COT) is extremely bullish for gold. Please read here again everything important on the general situation of gold.

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