In the past few weeks we have been reading divided opinions on equity market performance. There is definitely no consensus on the bull market or the bear market. I read several articles suggesting it’s time for a stock market correction supported by reasonable arguments and several suggesting it’s time to buy equities. When public opinion is divided as it is in today’s market conditions, it means the markets are actually in a “corrective period”. Because it is the bull or bear market that has a direction and as a result a consensus. A trendless market doesn’t create a firm public opinion. You might ask what kind of “corrective period” is this that took us from 7,000 levels to 13,000 levels? Well the chart above puts these arguments into perspective and helps you understand and calculate the odds of both arguments happening in the following months.

Dow Jones Industrial Average is in a long-term correction. It is a similar correction to the one the index experienced between 1965 and 1982. At that time Dow Jones Industrial Average consolidated between 1,067 and 570 levels for 17 years! Dow Jones Industrial has been consolidating in a wide range since the beginning of 1999. And in this consolidation period it is now approaching to the upper side of its range. When compared with 2009 levels when the index was around 7,000 levels, market is now overextended and close to 14,000 levels.

So the arguments suggesting higher prices are betting that Dow Jones Industrial Average has completed its long-term correction and is likely to break above historical high levels and move to new all time highs.

Arguments suggesting a possible stock market correction are betting that the long-term consolidation is not over yet and the index is closer to its upper boundary which should eventually push prices lower.

If you were to make a decision by looking at this long-term chart  which argument would you give more weight?

Switzerland SMI index has been volatile due to euro zone debt problems. Until mid-2011 price action between 2010 and 2011 was more like a sideways consolidation. However, index broke down the strong support at 5,960 levels in July 2011. This triggered a sharp sell-off towards 4,600 levels. Recovery took 6 months and by the end of 2011 SMI was back above the previously broken support level and the 200 day moving average. I think this was the most important technical action that put the index back to positive territory. Being able to push back above the long-term moving average and the resistance at 5,960 level helped the index to find firm ground.

In the past few months we have seen SMI consolidating above the trend support and the long-term moving average. Index is likely to challenge the resistance at 6,500 levels in the following weeks. Unless we see 5,960 level break down again, we should expect a positive trend.

U.S. unemployment rate is unchanged at 8.3%. Employers in the U.S. boosted payrolls more than forecast in February, capping the best six month streak of job growth since 2006. Some 1.2 million jobs were created in the last six months, the most since the same period ended May 2006.

I’ve been updating the unemployment chart since August 2011 with the 1 & 2 year moving averages and back in 2011 I’ve concluded that in the worst case  unemployment rate can continue lower for another year until 2012.

http://techcharts.wordpress.com/2011/08/10/u-s-unemployment-rate/

In the past, after the long-term moving average crossovers, the shortest trend last for a year and the longest trend for 8 years. Since the crossover in February 2011 it has been one year and unemployment rate dropped from 8.9% to 8.3%. It has been a slow recovery but in the positive direction. It is now extremely important for this trend to continue in the following months. A rise in unemployment rate from these levels could have long-term negative effects for the economy. As a result in the next few months we should keep a close eye on the unemployment rate.

Rio Tinto Group is an multinational exploration, development, production and processing corporation with headquarters in London, United Kingdom. The company was founded in 1873. It is among the world leaders in the production of many commodities, including aluminium, iron ore, copper, uranium, coal, and diamonds.The company has operations on six continents but is mainly concentrated in Australia and Canada.

BHP Billiton is a global mining, oil and gas company headquartered in Melbourne, Australia and with a major management office in London, United Kingdom. It is the world’s largest mining company. BHP Billiton operates a wide variety of mining and processing operations in 25 countries.

Everyday I review several charts, I look at different countries indices and their blue-chip companies. Australia drew my attention due to its underperformance over the past one year. So I decided to spend more time analyzing the S&P ASX 50 constituents. Here are two interesting analysis that I would like to share on this post. I’m asking what is wrong with the commodity play Australia and its major mining companies?

Both stocks failed to break above their 200 day moving averages during the past 6 month strength in global equity markets. More worrying is that they both formed bearish continuation patterns which are likely to resolve on the downside in the following months. BHP BILLITON formed a clear symmetrical triangle below the long-term average with the boundaries standing at 37.80 and 34.50. RIO TINTO formed a flag or a wedge pattern as bearish as BHP BILLITON’s symmetrical triangle. RIO TINTO has 69 as resistance and 59 as major support.

So the question is why are these blue chips lagging and also suggesting further weakness? Are they discounting weaker global growth and demand?