The writer is a technical analyst, Bursa Graf from the Guideline Group
What is technical analysis?
A method for making an investment decision in the capital markets, which is based on market behavior. The graph is the final result of the decision-making equation of all investors in the market, thus embodying all the information relevant to the decision
In the last analysis I estimated that the road to the 4,000 point area in the S&P500 index is paved, and only from there will real difficulty be felt. During the recent rises, the index reached a record level of 3,911 points, and only the wind blowing from the resistance level managed to quickly fold it down. However, the manner in which the past week closed does not close the door on another upward move. But with or without an uptrend, there are still no agreed signs of a final bottom.
In the current analysis I will try to explain my negative opinion about the direction of the market. And even if it turns out to be wrong in the end, the signs are there and you should be on the safe side. Buying opportunities come and go, but the money in the account for each error in judgment mostly goes. And this is the place to mention that the stock market game is not a game about money but about decisions, and so the purpose of this analysis is to move you towards a correct decision.
So what does the data say:
In the current analysis we will look at the weekly graph where there are several key components.
■ The dry and self-explanatory data show that the trend in the weekly graph is a downward trend, with the high and low points arranged in a descending structure. You can clearly see this on the graph. These are created by the sellers and buyers respectively, and when they are arranged in a descending structure, it means that the sellers are willing to sell the same goods at a lower price than they sold it last time. The same is true of buyers, who are willing to pay less and less. consensus.
The last set low point is lower than the previous one
■ A few weeks ago, the downward streak was broken and the market went into an uptrend, which, despite the red week that passed, is still in full swing. As I wrote in the last analysis, as long as the rising sequence in the weekly chart is maintained, the chances of the market to rise will be good, and in order for it to be maintained, the S&P500 must hold above the level of 3,741 points this week.
■ The last uptrend started at a lower low than the previous one, as can be clearly seen on the graph. Not only is the trend a downward trend, but the last set low point is lower than the previous one, which substantially increases the likelihood that the current wave of increases is nothing but temporary.
■ The market is trading below the moving averages, and both are sloping down. Along with the arrangement of the price structure and the way the moving averages are located, the trend is down and the momentum is negative.
Seller pressure came, but did not stop the increases
■ In the last analyzes I wrote that it is difficult to know where the current correction will take the market, although it can be assumed that up to the level of 4,000 points the way is open. And the index was indeed not far from there. In the area of this level, pressure from sellers will be felt, as it is a resistance area. The pressure did come, although it did not cause the complete end of the move.
■ The long-terms, as I mentioned in previous columns, are what determine the direction of the market. And the long ranges represented by the quarterly and monthly charts limit the market’s upside potential.
So where does that leave us? The market, led by the S&P500, may continue to go up a little, but not really much.
The dollar-shekel exchange rate: the next fluctuation will be sharp
The balance of power between the dollar and the shekel has seen ups and downs in recent years. And so over the years the American currency weakened to a low of NIS 3.044 per dollar, a low that has not been seen for a long time. But since then, the dollar has soared in recent quarters to a record high of 3.615 shekels, and now the question is whether it is expected to continue rising, or whether, similar to the correction that is going through the stock market, this record is also calculating its end backwards.
A short-term view will show that the dollar lacks a clear trend and direction against the shekel. These two dance a hard-to-follow tango where they each take the lead for a moment and then are led. This tango is actually a shuffle that means a balance between the forces of demand and the forces of supply. On the one hand, tough buyers at a price of NIS 3.493 per dollar have proven their existence in recent weeks, conveying a message of faith in the dollar’s rightness. On the other hand, they are not alone in this story, there are also sellers. Of course, they think the opposite and hold the opinion that the direction of the dollar will be down. They express this in a fixed price of NIS 3.586 per dollar.
Your guess is as good as mine
The disagreements are so strong that most of the technical parameters show a decrease in volatility and standard deviations. This process is likened to a spring that has been stretched to the limit, and is released as a result of an external trigger that jumps the asset, usually into a sharp movement right up or down.
It is clear to me that you now expect me to commit to a direction. Those who read me on a regular basis know that I belong to the breed of surgeons who choose a clear and reasoned direction, but this time the motif of guesswork is very weighty. This means that we will have to hold our breath and wait for the next hint of the dollar, as soon as one of the established limits is crossed.