How strong are the lows?

I’d always like to know what to reckon and what to be dealing with. You might call it a report of status we can adapt ourselves to the development of the next weeks or months with.

There’s even more need for something like that after an exciting trading week characterized by some nuclear horror announcements, carry trade unwinds and the "rosy" future prospects like the half-hidden declaration of war of the "willing" against the new Axis of Evil Libya-Syria-Iran including the well-known "blitzkrieg" scenario, the old familiar oil scenario with the well-known Napoleon-effect of the Grande Nation. We see the fratricidal war Italy vs. Libya, France and France’s colonies… the battle of Tobruk. Do we care for some more? What about ward off the terror threat?

I am almost not in the know any more. Was the blitzkrieg just waged because of cheap oil in front of Europe’s doorstep getting Libya under control just like Iraq? Are the western-oriented Arabian nations striving for a Final Solution of the controversy Sunnites-Shiites out of mere greed, to ensure the worldwide oil supply? Is it all for distraction from internal difficulties in Core Europe? Is it the salvation of the Dollar/Euro/Yen including all the financial markets – or the deflection from the Japanese nuclear holocaust? Was an overhasty armed conflict begun supposing blue-eyed that everything would be over in 72 hours? In the case of Saddam Hussein as well the planning of the mission as the reaching of the objectives has taken some more time…

I only know that history always recurs, that the governments someday lose control finally because they are not able to learn from the mistakes of the past. It’s a natural cycle happening again more or less regularly; often mortal and always bloody. Get prepared, because the people always suffer from those mistakes!

History may also recur in the finance places of the world. In this issue I’d like to examine the significance of the actual lows in the American stock markets and to make an assessment on the further long term course of those markets. For that purpose I steeped myself increasingly into the actual monthly GUNNER24 Setups:

Dow Jones:

The honored politicians should look at this setup and think about the question how it is possible that a first initial impulse from the year 2007 which is turned downwards having lasted three months can already show a significant top in the year 2011. Is it predestination? Is it Voodoo? Anyway the 2*1 resistance Gann Angle opens the possibility for a significant top, i.e. we see here a top that can’t be overcome so easily, simply because the 2*1 Angle has always got to offer resistance – decreed by nature.

For the moment the actual March candle rebounded from the support at 11625. Dear politicians, do you really believe that your hasty gunboat policy and your irresponsible cash injection actions are answerable for that important support which was determined and predefined as early as in 2007? No, the markets would have stopped there anyway: The future resistances and supports develop from out the past moves of the markets. They’re not based on some future expectations and/or some present panic reactions.

From my point of view this support is not to be broken that easily. It’s equally important and strong as the 2*1 Gann Angle since months ago it represented a significant resistance, then it was overcome, and now in March only once it was tested successfully and impressively. The actual significant rebound from the monster-support says something about the force of the support. A short entry on monthly basis is not useful before a closing price of less than 11600 is generated in March. In that case there’s a high probability that a downswing until the 2nd double arc will happen until May/June, because since March the market is in the temporal sphere of influence of the first double arc. Target would be 10500 then.

Consulting the actual 3 Candle GUNNER24 Up so far I see one March correction which has tested the horizontal support of the just passed square only once. The March candle hasn’t even touched the support Gann Angle, never mind the dotted purple lost motion extension of this support Gann Angle. The main target hasn’t been reached, and since we know from the 3 Candle GUNNER24 Down Setup that the March low we’ve seen so far is significant rather being supposed to resist for that reason my assessment is valid that they should buy in the Dow because the gun roaring and the Japanese disaster are not expected to play an important part for the 30 Dow assets.

Not before a March closing price of about 11815 some correction potential will arise until the proximity of the 2nd double arc, then a rebound should follow there until the main Target being the 3rd double arc should be called at again.

Conclusion: The Dow is allowing at the most a correction down to 10400-10500, and possibly we saw the March low already, correspondingly there may be no short signal.

S&P 500:

Here again it’s possible that we saw the lows already taking effect the old principle in that case "Buy when the guns are roaring". Well, the trillions unofficially released last week for new safety measures in all the nukes of the world, for wars, for anti-terror measures, for groovy new armaments, for currency supporting and so on will have to be spent somehow.

Just like in the Dow, something like an "obvious top" was reached in the S&P 500 as well. February reached (likewise April/March 2010) the 2nd double arc. Thus a possible correction potential was opened for the time being. Not before the March closes below 1250 you’ll able to say whether it will be made use of. A similar correction onto 1100 as last year at this season won’t become likely before the monster-support will be broken on monthly basis.

If March closes above 1279, hence above the clearly visible support Gann Angle we’d rather reckon with a continuation of the rally. There’s much to be said for it because February 2011 closed within the 2nd double arc exercising the 2nd double arc rather an attractive than a repulsive function that way - in contrast to April 2010. And in contrast to the Dow, here the 2*1 Gann Angle hasn’t been reached yet.

With the 1249 low an important support mark was tested in the actual monthly 3 Candle GUNNER24 Up. A clear short entry on Monthly basis would require a March closing price below 1249. Target would be the 2*1 Gann Angle in that case.

Also in the actual weekly up setup we make out that the 1279 are very important. By that the market closed above the green dotted support diagonal last week. From the high candle to the last week we count a 5 candle downswing now. So it’s possible that also with regard to the count a significant low was reached. Two more weeks the market will be in the temporal sphere of influence of the 3rd double arc which has produced clearly falling prices so far. That is rather pointing to two more weeks of decline, but not necessarily. The sphere of influence between two respective double arc lines is rather notorious for wild swings than for constant moves in one direction.

Consider now moreover the length of the week candles shown by the correction last April/May 2010. In the actual swing unambiguously we see much shorter candles. Now I’m asking myself: Hey! We’re really on the brink of one of the greatest nuclear catastrophes of mankind. For that matter an unprecedented sell off should take place with enormously long candles. But it doesn’t!

Conclusion for the S&P 500: My impression here, too, is that no nuclear catastrophe seems to be threatening, and slowly but surely the market is including the released liquidity injections into the prices.

For finishing, here’s the daily setup:

Also here GUNNER24 is showing that an important low might have been marked already. As analyzed in the last issue the 2nd double arc being the obvious sell target was called at. A significant rebound followed. Since the S&P 500 first of all spiked into the first double arc on Friday closing then narrowly below the first double arc however I can imagine a test of the lows for the beginning of next week (Monday/Tuesday) to happen. Each break of this 2nd double arc next week would activate the following sell target which is the the 3rd double arc at 1216. If the break takes place on Monday or Tuesday, it should be a little lower, maybe 1207.

I’m going to be observing this setup accurately. You can make use of it for your entry into long term short-positions on month view depending on the question whether the 2nd double arc resists or when it breaks (if it breaks), respectively. See the analysis completely above. But for the moment I rather assume that the lows will resist next week.

NASDAQ-100:

The current monthly 3 Candle GUNNER24 Up Setup reached it´s maximum price expansion! Interpretation: A GUNNER24 Setup always begins with the initial impulse. That initial impulse turns out targets, turning points, resistances and supports for the future. Our assignment is to detect the reactions in those markets and to trade accordingly. The interpretation sometimes depends which way you look at it. It's always subjective, but it follows some strict rules. Keeping to them may lead to considerably profitable trades.

This setup is most interesting. Above we make out that the February candle closed ABOVE the 5th double arc. Also the February high was lying ABOVE the setup. That might mean that the NASDAQ-100 hasn’t seen its highs. Nevertheless the market reacted more intensely than the Dow Jones and the S&P 500, recognizable by the length of the March candle. But the reason may be that in March the Gann Angle will be broken that has been providing support for months. That’s always a relatively violent process. Being distinctively weaker than both the other indexes the market is parking still above the support horizontal, but narrowly. That can result to be very strong taking into consideration that the three indexes are all parking exactly on important supports possibly having seen already their respective lows the Dow and the S&P.

But this setup also shows us that by the end of the month a profitable short entry might be possible in the markets. The NASDAQ-100 is producing a reversal candle at a March closing price of below 2284. According to the rules we would have to use that for a short entry. Target would be roughly the 4th double arc at the yellow/red marks in that case. As I’m interpreting this setup, that’s where at the latest the upwards trend should be resumed after a successful test of the 4th double arc.

Conclusion: Perhaps the glut of state money doesn’t pre-dominate in the NASDAQ-100 but the Japanese production deficiency and the threatening decline of the world economy is making a difference. This setup is very, very important because the NASDAQ-100 is always a trailblazer for other stock markets. Its signs lead the way for the Dow and the S&P 500 and many other indexes. At the moment there are the strongest indications for a correction of several months. But like always we’re called for awaiting the closing price of the actual month before we can make very confident statements and some safe trades can be undertaken!

Silver

In the scope of the GUNNER24 Gold Trader we went long on Friday at 35.27 by closing.

We see that during the whole last week the lower line of the 2nd double arc provided a mighty support, just like it had done before. A break of this line would have been an unambiguous short sign. But since on Friday the upper line was broken clearly and simultaneously the Gann Angle was re-broken on the contrary a rather strong buy signal arose. Thus the 38 is and keeps being the long term target in this setup. Of course, the enormously strong horizontal resistance at 36.50 will have to be observed exactly in this context!

The Friday high touched exactly the horizontal that arises from the left at the upper double arc line. That makes us recognize that the trade will not at all self-perpetuating. The rebound from it turned out sort of girlish, mildly spoken. That’s why at least it should be tested again and it should actually be overcome pretty fast.

For all of you who joint the trade, staying up late or getting up early, respectively, is on the agenda. I can imagine the following sequence at stock opening: At the beginning up to the Friday high, then down again to the 35 for another test of that important support.

If silver opens at 35.20-35.30 testing at first the 35 the late-comers will be able to go long relatively safe.

But because of the Libya war silver might rise in one go onto the clearly visible resistance diagonal at 35.70 for starting. At the latest that’s where a strong rebound should take place. There’s even a certain probability that the final Monday high will be formed near 35.70. In that case another attack to the resistances should follow during the European trading times. So I will estimate which resistance will take effect covering there and trying to grab even cheaper again. As we all know: the tendency for Monday and Tuesday is positive.

Silver doesn’t like Gaps at all. They use to be closed at relatively short notice. That’s why… you may use every Up Gap near the worked out resistances for a cover.

Please visit periodically our performance survey on our current silver trades, you’ll always find the actually valid stop-loss setting there: http://www.gunner24.com/trading-performance-forex-silver-copper/

Even better would be you order our GUNNER24 Gold Trader at only 29.90 US$ a month. Thereby you’ll always be on the safe side concerning the current trades and the stop-loss adjustments.

Be prepared!

Eduard Altmann