SAMT Blog
Equity markets short term trends: some considerations
30. September 2019, by Mario V. Guffanti
Technical Analysis
In the last periods, the stock market has been characterized by a certain weakness, but also by a strong underlying resilience. This is what you can see from a visual analysis of the price structure: but it is always appropriate to evaluate the deep structure with indicators of relative strength, momentum and directionality. The current stock market shows some similarities of pattern with what happened on the gold market some time ago. In the following image, we have two gold charts on two different time windows: the first is a historical window with prices from January 2018 to May 2019, while the second is updated with prices to yesterday. Let's start by analysing the chart on the left: in the first box we have the price of gold and the relative strength index of the yellow metal compared with the MSCI World index (light blue line). In the central box we have an oscillator (MACD), useful for reporting any divergences from the price, and in the lower box we have a directionality indicator (ADX). This indicator is suitable to indicate us if the market remains directional: sellers and buyers must remain active, under penalty of the tendency lateralization, or its premature end. The ADX above 20 (green colour), confirms that the market is directional, and therefore our analyses have a higher probability of success.
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