This is the daily graph of the JSE Allshare Index.There is a developing head and shoulder formation on the daily graph with the two cirlcles indicating the shoulders. The second shoulder is not yet fully formed, but be cautious.
A head and shoulder formation is not a 100% indication that the market will come down after the second shoulder have formed, but the probability is around 80%.
Also another technical analysis pattern, the Hindenburg Omen, is looking to develop.
The Hindenburg Omen is a technical analysis pattern that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed. [Source: Wikipedia]
To read more about the Hindenburg Omen, click here http://en.wikipedia.org/wiki/Hindenburg_Omen
Volatility has continued its uptrend since going up from the 6th August 2010. Gold is also trading higher this morning at $1219 per ounce.
The Asian markets are trading higher this morning and the Dow Futures are positive by 0.13%. We expect the momentum of the relief rally to slow today or tomorrow before turning negative again, confirming the head and shoulders pattern.
Thus, we think there is currently more downside risk than upside risk.
Safe trading
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