AUD - HIGHLY SPECULATIVE VIEW.

GOVERNMENT HEALTH WARNING - This following 'Technical View' is highly highly speculative. - However, if it comes out right, there could be potentially a major move on AUD , but treat with caution at this stage,,, there would be plenty to be made on it if it does occur.

There is a very rare and highly speculative technical formation called a '3 Peaks and a domed house pattern'. I first heard about it some years ago, and I first applied it to the 'Banking Index' a few years back, which fortunately kept me on the right side of the 2008 bear market. - I am curious as to whether we are seeing a completed or near completed 3 peaks on the AUDUSD? - I shall not delve into the details of this pattern, if you want to know more this link here covers it.

The AUDUSD weekly chart is below together with the idealized 3 peaks pattern. - (I have only numbered the key points on the AUDUSD chart).

For comparison, I have attached below the Bank Index chart I identified a few years back together with its 3 peaks chart.

Some points
1: What the pattern is forecasting is a huge drop in the AUD, however, it is not clear whether the top is in, or whether there is still a high to come, before the top is in. - I would say this may be a 50/50 call at this stage. If the top is not in, then is probably a couple of months away at least.
2: I assume a deep correction of this nature for the AUD would surely be echoed in deep corrections in risky assets.
3: I am not saying that this is definitive, not at all, this is a highly elusive pattern, which even when it appears as though it may have formed, can just turnout to be something else entirely. However, as you can see from the Bank Index above, when it does occur, it portends something really nasty.

The Bank Index and Housing Index, worrying signals. + 'Sub-Prime 2' ?? + Quick EURUSD comment.

My posting on Friday and my posting today will be totally contradictory. Friday's posting showed a reason to be bullish on the back of a comparison of the SP500 in the mid 1970s versus the past year. This has been a part of the backdrop for the year and has been one reason (amongst other technical reasons, holding me back from getting my bearish hat on since we based in the summer). However, there have been a number of reasons I have failed to join the bull trade, despite reference to various bullish scenarios I have made, which is that I just see too many conflicting signals and this keeps me wary of the the bull run.

My post today will focus on what is going on with financials and housing. In recent weeks I have made various references to how the financial sector continues to lag this market. Using the Phili Bank Index as a proxy for the financial sector, at times the financial sector has threatened to move up, but every times it tries it gets shunted back down again. This week the SP500 once again moved higher, however the Bank Index yet again failed to follow suit and ended the week having endured a torrid time. On Wednesday morning the Bank Index made a small break up through resistance on the open only to completely reverse and by Friday's close had lost around 7% from Wednesday's high. This can be seen on the chart below showing the SPDR Bank Index ETF. 

What worries me is that the financial crisis of the 2007/2008 saw a big divergence between the broader indices and the Bank Index through 2007 prior to the collapse in 2008.  The top chart shows this below, the second chart shows how we are once again seeing a strong divergence.

 

 
The next pair of charts show the Phili Housing Index (an index of 27 stocks representative of the housing sector) and the SP500 over the past 5 years. Note how strongly these diverged through 2006 and 2007, then eventually in 2008 the housing index and the broader market started to move in unison, during 2009 both markets recovered then fell away in summer 2010, however rather like banking stocks the direction of the housing index and the broader market has diverged over the summer and fall.

Finally and linked in to the above I want to draw attention to this weekend's John Mauldin letter. I have been reading his letters for a few years now, he makes these available on free subscription basis (click here to open his home page where you can subscribe). Mauldin has been a brilliant commentator of the financial markets, and I believe a read of his weekly letters is a must for anyone who wants to understand the fundamental backdrop to the big issues facing markets. - This week's letter is titled 'The Sub-Prime Debacle: Act 2', the title says it all, I don't need to elaborate any further, however I do suggest reading it in its entirety (it can be seen clicking here). Mauldin first really started focusing on the Housing Market as a major potential worry in the second half of 2006 and became more focused on Sub-Prime through 2007. I am posting a link here to one exceptional article he wrote in August 2006, which not only highlighted concerns about the housing market, but talked about about how a series of small shocks can weaken the underlying structure of a market leading to the sort of instability which makes a 'Crash' possible. In light of events through 2008, I really think this article was somewhat prophetic in nature.

There have been many analogies with regard to events throughout the 2007 - 2008 financial crisis, personally I prefer the analogy of a Tsunami, a substantial earthquake takes place thousands of miles away in the ocean (Sub-Prime) a wave races out in all directions, as it gets closer to the coast it grows larger, still those close to the coast have no idea it is approaching, then seemingly from nowhere utter devastation, often out of all proportion to the original trigger event. The thing with Tsunamis is they usually consist of many waves, not just one wave, this is often referred to as the tsunami wave train. The amount of time between successive waves, known as the wave period, is sometimes only a few minutes, in other instances waves are over an hour apart. Many people have lost their lives after returning home in between the waves of a tsunami, thinking that the waves had stopped coming. - I can not help thinking the waves of the Sub-Prime Tsunami have yet to have fully passed by, perhaps if Mauldin is correct, then Sub-Prime Act 2 is the next wave.

Perhaps the early indications are starting to show in the behaviour of the divergence between financials and the broader indexes. I am not sure the market is yet ready to succumb to the next wave, however the fingers of instability remain, and new ones appear to be emerging. It is possible the SP500 has one final spurt, helped by the impending arrival of QE2 and a stated change to the Feds Inflation target, which could see a move back to the highs of April 2010 or perhaps a touch higher (the 2007 divergence of financials and the broader index happened as the SP500 made a slight new all-time high) or perhaps it could succumb sooner. -  One technical analysts I follow is 'Humble Student', he believes we are very close to the next tsunami wave. I have come to respect his calls after following him for a while, he provides lots of alternative technical analysis methodologies and nailed almost to the minute the 'Flash Crash', and the low and rally in late August/early Sept (thus in my opinion enabling him to avoid the moniker easily attached to so many Tech-Analysts of 'Perma-bear'). His timing has not been perfect thus far on this call, however if something so big and significant is about to hit either soon or after a small delay, then exactness on timing is probably not the most critical issue here.

EURUSD

Friday saw a sharp turnaround in the EURUSD in the wake of the Bernanke Speech after hitting its highest level since January. The 1.4000 area appears to be large psychological resistance area for now. I feel we may see more corrective activity this week. The past two days have produced some potential reversal candle signals. The two charts below reflect this, the first one is the daily Spot FX chart, the second chart is the CME EURUSD future.

Finally the 4-Hour chart (below) appears to reflect the above, showing strong bearish divergence on both RSI and MACD, and also a failure at the rising trendline of the past months rally. Short-term, I think we may see an attempt at 1.3860-80, where a shallow trendline of the 2 weeks intersects, below it is quite possible we see a deeper move to 1.3580 (38.2% retrace).

Equities - the path of least resistance appears to be up.

For now at least the path of least resistance for equities appears to be up. Whatever the reason or rationale, buyers are currently in control, and until this changes, it would be safest to assume there are further highs ahead. The consolidation of recent weeks appears to have finally ended,and it would appear we are now making a thrust away from this, indeed this move appears to be occurring across a number of markets, which adds credence to the idea of further gains ahead. The charts below echo this point, the first set of charts show a selection of US equity indices, the second set of charts show the DAX index and Eurostoxx Index futures this morning.

The next chart shows the VIX index, this appears to have made a break below a large Descending Triangle over the past few months, this drop in volatility below support should be a favourable development for equities.

 

The last chart is the old laggard, the KBW Bank Index, this still lags the rest of the market, however interestingly it is very close to completing an inverse Head + Shoulders continuation pattern, a clear break up through 48.00 (it closed marginally through here last night) would suggest this may finally start to join the Bullish party. 

 

SP500, clear for lift-off !!??

A very strong performance across the equity markets yesterday, seems to hint that last weeks fears of a setback have abated, and further gains are now favoured. The chart below shows the Weekly SP500 after last nights close. Yesterday's price action appears to have overcome a potential hurdle in terms of the line connecting the peak of 2007 and the Apr 2010 peak. Whilst I do not consider this a majorly important line, since it only included 2 touches, and did not define a trend or trend channel, it nonetheless had the ability to become significant if it held the markets advance at around 1150.

I have also highlighted the Inverted Continuation Head + Shoulder pattern on the weekly. The consolidation of the past 2 weeks appears to have been a break-out consolidation, and with the re-test of the neckline on Monday, it would appear that this pattern may have some mileage in it. The potential upside over the next several months, using the measured target would appear to be around 1249. Personally however, I am not a big fan of this particular pattern, however one can not ignore how well it appears to have formed. It also fits in well with my other Bullish indicators, I covered this in detail in a post on Friday which can be seen by clicking here. I always like to put the other side of the argument too, this was covered in detail too in Friday's post, and while many of these points appear to have been overcome in yesterday's move, there is always a risk of a false move sucking in new bulls, and forcing bears to cover.

One of the points I mentioned which had been giving me some concern was the performance of the Bank Index, this was a major laggard in the September rally. However this too showed good strength yesterday and there is growing confidence on my part that the pattern formed over the summer on this chart is a bullish Falling wedge pattern. Still I would like to see yesterday's high overcome as it coincides with two other recent highs, in addition there is a Gap from 10th/11th August a close above this would also be a strong Bullish sign (This gap also exists on the BKX index itself though it is much smaller). (The chart below shows these points).

SP500 - Failure at 1150?

We have seen a lot of noise on the equity indices these past few days, one of the indices I have been watching is the Bank Index, this has been lagging the recent rally in equities, last week this produced a bearish 'Three Black Crows' Candle formation, Friday's move only managed to return to the middle of this pattern, whilst yesterday produced a 'Bearish Engulfing Day', this keeps the near-term picture bearish on the Bank Index.

With regard to the SP500, the 'Rising Three Methods' formation which I mentioned yesterday on the SP500 was null and void following failed confirming follow through. This also backed away from the 1150 resistance, just a reminder I had 4 different signals acting as Resistance here at 1150 on the Daily SP500. The chart below shows three of these. 1) The Horizontal Line drawn from the Jan 2010 highs. 2) The Mid Line on the Andrews Pitchfork. 3) The top of the Rising Channel which has largely contained price action over the past 5 months, and which is projected from resistance and support form 2009.  The 4th resistance level is the 2/3rd retracement of the decline from April to the June low, which also occurs at 1150.

Also worth noting that the Nasdaq Composite has hit the 2/3rd retrace in the past 2 days as have the NYSE index, whilst the Dow Industrials has hit the 76.4% retrace. The confluence of these key levels as resistance may yet prove to be significant. moving back to the SP500, as long as the 1150 resistance holds firm, my stance will be neutral, a break back through last weeks low at 1118 would however be a bearish setback.

SP500 finely balanced - but leaning to the upside.

I believe that most the time markets are finely balanced, the price at any one time relative to an earlier period reflects the various arguments for and against a higher or lower price, be they Technical Arguments (which in my opinion are a graphical depiction of the overall market psychologically), or Fundamental Arguments. - That is not to say that I believe the price is necessarily right at anyone time, but rather that it could go either way, depending on whether the bullish of bearish factors win in the short-term, eventually though it will move to the right price level, though when that occurs and how that occurs is a path unknown, indeed even the idea of a correct price level is itself a subjective argument. - But as the great investor and trader Benjamin Graham once said "In the short run, the market is a voting machine, but in the long run it is a weighing machine." 

- In recent weeks I have espoused various Technical Arguments in favour of the Bull Case, along with some contra arguments which could argue in favour of the bear case. Last week was an interesting week, after an initial break up through key resistance, the bear case appeared to re-assert itself with a number of potential warning signals causing concern, however this turned around sharply on Friday posting a strong bullish move on decent volume which took the SP500 back towards the high of the week, indeed Friday may well have been a key day. - I will re-iterate the 5-day Candle Pattern formed over the course of the week, which I mentioned on the afternoon update on Friday, it is a pattern known as a 'Rising 3 Methods' pattern, this is a continuation pattern, an example of this is shown below:

The above pattern is a short-term pattern, and as with all short-term patterns follow through is required as confirmation, without this the pattern could be null and void. In the meantime the SP500 is very close to significant resistance at 1050. I have 4 different signals acting as Resistance here at 1150 on the Daily SP500. The chart below shows three of these. 1) The Horizontal Line drawn from the Jan 2010 highs. 2) The Mid Line on the Andrews Pitchfork. 3) The top of the Rising Channel which has largely contained price action over the past 5 months, and which is projected from resistance and support form 2009.  The Fourth resistance level is the 2/3rd retracement of the decline from April to the June low, which also occurs at 1050.

However, what is also crucial is that last week saw a break up over the neckline of the Inverted Head + Shoulder continuation pattern, which can not be seen in anything other than a Bullish light. 

One of the markets giving me concern last week was the Bank Index, this has been the laggard market in recent weeks. Friday however it made a decent bounce off support, keeping a large Rising Wedge pattern (A potentially Bullish Formation) as a remote possibility. Note I had said on Friday that the top line of this had been busted, however this appear not to have been the case (See chart below showing the BKX ETF).

I will re-iterate the various Bullish and Bearish arguments in greater detail in tomorrow's post. I hope today's post is not too confusing, in summary I think the odds are increasingly favour the Bullish side, though the Bearish arguments still weighs on this.

SP500 Index, BKX and VIX Update + classic Fawlty Towers.

Yesterday's setback for US equities has not resolved anything, the likelihood of a pullback was strong after the breakout of the neckline of the recent inverted Head + Shoulder formation, however I am still undecided as to whether this is merely a pullback to correct some of the strong rally over the past 3 weeks or if we are looking at something more worrying. I made a decent case for the bullish argument a few weeks back, (This can be seen by clicking here and scrolling down the posting), yesterday I said that there a number of warning signs suggesting caution, that posting can be seen here. - Today I am bringing something new to the argument, it is a further interesting twist on the SP500 it shows the range of the past few months as a very wide consolidation band, sloping slightly upwards. However, whilst at first glance these lines these lines, and particularly the upper line, appear to be drawn against the recent highs and lows, they actually extend a lot further back. - I have pasted a second chart below showing these same lines extended back to 2008.

When looked at from the bigger picture, this turn down from resistance looks like it may have greater significance. The upper line acted as key resistance in June 2009, then as support on several occasions through late 2009 and early 2010. Since late May (the flash crash did break it for a few minutes in early May) it has acted as resistance, with the exception of the failed break above it in early June. - This line has proven to be pretty pivotal over the past year and a half. - The same can be said for the lower line which exactly parallels the upper line. The lower line acted as support in late 2008, despite being broken for a couple of days on a spike basis, it then provided support through Jan 2009, once broken it saw a very sharp decline to the March 2009 low, however when the market recovered it acted as support in April 2009 and again crucially in July 2009. More recently it provided solid support to the two recent lows of June and August this year. - Of course the rejection of the upper line does not mean that it will not break above it, however I think this has throw out a further warning indicator to add to the points I made yesterday.

With regard to yesterday's posting, the Bank Index posted a very poor day yesterday, and closed inside the upper declining wedge line, which further points to an increased risk of a false breakout of this declining wedge. (See chart below).

Finally the VIX index continues to stir, this had failed to decline with the recent rally, it not surprisingly jumped on yesterdays sell-off, and is very close to the upper line of a large declining wedge. A break of this line would be a concern, suggesting possible further gains for the VIX. (See below).

To sum up my view, I do not have a firm opinion at the moment on this, I see an underlying Bullish structure bigger picture, but shorter term I see some indications that are a touch disconcerting. On the downside, I would not take a bearish view yet, I would like to see some sort of cofirmed short-term top, this I do not see yet. I think the market may help me make up my mind in the couple of trading days, in the meantime patience is warranted.

PM UPDATE

The market has made a strong upmove in the wake of this afternoons data, and is currently re-testing the early weeks high, if the market closes anywhere near current levels (1142) this will have completed a Bullish Candle Pattern known as a 'Rising Three Methods' pattern, which is a Bullish Continuation pattern. The insert below shows a typical 'Rising Three Methods' pattern, the chart below shows the current Daily SP500 Future. If the SP500 does hold this level into the close it shifts the odds towards further gains for equities, at least in the short-term.

 

 

Finally something for the weekend.

Earlier this week I had a frustrating ordeal talking to a Call centre in India,,, sound familiar?....As the conversation progressed (or rather did not) I could n't help thinking I had the Sub-continent's equivalent of Manuel of Fawlty Towers fame on the other end of the line. Which leads me nicely into this weeks 'something for the weekend', a couple of clips from the brilliant 'Fawlty towers'. The first clip is the Spanish waiter Manuel on the phone. The second clip demonstrates Basil Fawlty unique way of dealing with Communication issues, I would love to know how he would have dealt with an Indian Call Centre.

SP500 v Bank Index - Some worrying signs.

The last couple of days have seen a pause in the SP500, perhaps this is expected after such a continually strong rally in recent weeks, and given the key break of the 1132 resistance this week, we could be merely seeing a corrective pause. Many of the elements I have mentioned in recent weeks continue to suggest medium term we will see further strength, however I certainly do not consider this a given at this stage, and there is one or two matters which still bother me. One of these is the lagging performance of the Bank Index. - The top chart below shows the Bank Index above and the SP500 below. On the face of it, the Bank Index made a break out of its own Falling Wedge in the past 2 weeks, this should and could be a bullish development, however thus far this breakout has been somewhat uncertain.

Looking at a direct comparison versus the Bank Index and the SP500 the picture however looks more worrying. The top chart below shows the past five years of comparison between the SP500 and the Bank Index. I have highlighted the incidences where the price action diverged negatively between the Bank Index and the SP500, this occurred on three occasions in the early stages of the 2007/2008 bear market and each time subsequently dragged the SP500 lower. The lower chart shows the Bank Index v the SP500 in the past six months, note there is a strong similarity between this chart and the period in the larger chart in 2007 at the start of he major 2007-2008 bear market. 

Another concern has been the recent divergence between the VIX Index and the recent gains on the SP500. The charts below highlight this.

Another worrying sign has been the recent Volume on the SP500; during the rally from the late August lows, the volume has been poor, on Monday it picked up a little, however given the big up day and break of key resistance it was not huge, however the last 2 days have seen small negative days, yet Tuesday was the largest volume day since late June (with the exception of last Friday's option expiry day), and yesterday also saw bigger volume than Monday. (See chart below).

Divergences (either momentum or comparison indices) and volume are secondary indicators, in the same way that a warning light on a car indicator panel warns that there is something which needs looking into but does not necessarily mean the car is about to stall, however, the more indicators are flashing, the more caution should be taken - Currently therefore, I read this as an increased risk of a correction to the recent rally, with an outside possibility of a failed breakout of the recent key resistance around 1126 on the future (1132 Cash), which could have longer-term bearish implications.


Further to the above, I have posted below charts showing the SP500 future (8 hour candles) over recent months, note how the price stalled exactly at the Andrews Pitchfork resistance. The second chart below shows this same chart zoomed in, the futures have broken below the base of the rising channel of the past 2 weeks during the European morning session today, support from the neckline (not shown) connecting the June and August highs come in around 1121 on the future (1127 Cash), a break below here could see a more aggressive correction towards the gap at 1105-09 on the future (1109-1113 Cash).

US EQUITIES

 Equity indices have reached key levels. The SP500 index is running into 1130/1132 key resistance band, I favour the first shot at this area as likely to see an initial failure, however I have to consider that there is a risk we could see it burst through here leading to heavy stop action, or we could see a small stop induced break and failure.  Bigger picture however, I think there are increasing bullish signs and a successful break over 1132, either now or after an initial setback, will I believe be a signal for further gains in the weeks and months ahead. I do however consider all options open, and can not rule out that a failure here could be the beginning of a sharp decline which could accelerate below 1090. 

My view that we may be heading higher eventually relates to the price action and the pattern formed over recent months. - I posted an article back on the 3rd August (can be seen by clicking here.) where I suggested that the larger formation occurring could be a Falling Wedge pattern which may have a bullish outcome. In support of that I posted the following chart, where I identified different types of Falling Wedge patterns (This is a repeat of earlier exercises I have carried out in Fixed Income markets).

A list of the four types of 'Falling Wedge' can be seen by clicking here. At the time I identified the pattern forming as a 'Type 2 - Falling Wedge', though I did add the following caveat - 'Just to add a layer of confusion (The market does not like to make it too easy). Though I have labeled the recent wedge as a 'Type 2', it is not out the question that it is a 'Type 3' or even part of a larger non-wedge pattern.'  - Price action since then has if anything re-enforced my belief that we have a 'Type 2' pattern, if this turns out to be the case, this would suggest that we should have a bullish resumption, with a strong possibility that we are heading back to the highs of April at a minimum. - By the way though my confidence in the 'Type 2' call is increased, the above caveat still remains. - The chart below show the current pattern labeled as a 'Type 2 Wedge', I have also shown below that the two previous 'Type 2 wedges' from 1998 and 2006.  - Note the 2006 example bears a stronger resemblance to the current pattern.

Further to the above this Type 2 Falling Wedge pattern can be seen across a host of US Equity Indices. The following charts shows the Dow Industrials, Nasdaq and NYSE index.

 

The Bank Index (See Chart Below), did start to follow its own path on the last low, however it appears that this may have moved back to becoming a 'Type 2' set-up, this is one to be watched...

The Dow Transports Index also shows a similar set-up, however price action created a Type 1 rather than a Type 2 Falling Wedge, this also tends to have a Bullish Resolution (See chart below).

At present none of the above indices have yet made a break above the previous high from early August. This should be watched, since a clear and sustained break over these levels are likely to be the confirmation needed to suggests higher levels ahead, a failure (which I think is most likely short-term) will be lead to further consolidation for now or possibly a deeper decline (which I favour as least likely).

Elsewhere there are other signs which I believe continue to point to an eventual favourable resolution for US equities. The chart below shows the VIX Index v the SP500 index over the past few years, the VIX index continues to trend lower in a similar way to how it moved in early 2009.

Finally a number of key FX markets, which have been strong barometers of Risk-on versus Risk-off over the past few months continue to shows signs of potential bullishness suggesting a return to Risk-on may be on the cards. The top chart below is the EURCHF, the trend remains lower, however there is strong bullish momentum divergence between the low of July and the September lows, as well as within the recent September low. This may be flagging up a risk of a correction higher in the EURCHF cross. The lower chart shows the AUDJPY cross, this has been one of my favoured risk barometers, this has made a decent breakout of the symmetrical triangle, suggesting further gains ahead.

 

 

Finally the AUDUSD has a potentially very Bullish 'Big Picture' pattern, this can be seen on the chart below the Pattern is a 'Right Angled Expanding Triangle'. This suggests a strong bullish move eventually for the AUDUSD.  A rising AUDUSD, is something I equate with 'Risk-on'. - However, short-term, it is up against strong and significant resistance, in the same way as the SP500 and other US equity indices. I would be very surprised if the AUDUSD was to make a successful break over this resistance on a first attempt for many months, particularly in light of the 6+ big figure rally over the past three weeks, without any real consolidation or correction.

 

 - To summarise. I feel that the technical outlook for US equity is starting to look brighter, I am seeing what I consider increasing signs of an eventual Bullish resumption for the next several months (though I still feel that this will be a precursor to a much more severe eventual bearish move). In the short-term I still feel a corrective setback may occur, though possibly on a failure at 1132 or on a stop induced breakout above 1132.

Equities Topping Patterns - Everywhere

My post yesterday highlighted the risk of a short-term bounce, everything was setting up for a 'key-day reversal'. Well the bounce as it happened was very very short-term, the indices made it to the neckline of the Head & Shoulders pattern which broke last week before falling away. Though the S+P futures, did manage to complete a weak 'key-day reversal', this was not confirmed on the S+P500 index itself. Looking ahead some of the conditions still exist for this bounce to re-occur, however I think the odds have become remote for now. Looking at the bigger picture, though recent days' price action has show indecision, refering back to some of my earlier posts, I feel we may head lower soon, and possibly much lower.

Beyond that, I have decided to see how the bigger picture looks across a wide variety of markets. One of the maim tenet's of Charles Dow's original 'Dow Theory' was that of confirmation. Dow believed that a directional move or trend in the Dow Industrials Index could not occur unless the Railway's average (The Dow Transports Index) was moving in the same direction. If they diverged, then this called in to question the sustainability of the trending move. - The world has moved on since then, there are far more markets, covering specific sectors, or different size of market capitalisation. To that end I have looked as charts across a broad spectrum of indices, these can be seen below. All charts have a similar topping formation and each one has recently broken to the downside. To me this is strong confirming evidence, which adds weight to the major topping pattern, the Head & Shoulders, which should portend significant lower levels in the weeks and months ahead.
Beyond the US markets, it is also worth looking at global markets. The following charts show a selection of major G7 markets. What is clear here is once again we have similar topping patterns, though the German DAX offered a variant of the Head & Shoulders and has not yet made a new low for the recent phase (nor have a number of other markets within the EURO bloc).

The next set of charts move beyond the US and G7 countries and look at a variety of markets symbolic of Asia, South America and Commodity countries. Once again the major topping pattern is evident in all three charts. The Hong Kong markets has produced another variant of the Head & Shoulders pattern, this is probably because of the strong Chinese influence, - Chinese stocks indices seem to march to a very different beat. - As was the case with the German market, these have yet to make new lows for the recent move, however they all appear to have a strong downward bias.