Our queen chartist Ploy is back with her latest thoughts!

Finally, I am back from the dynamic markets of commodities and forex.

After twists and turns in the market, finally we have got ECB’s OMT and Fed’s QE3!!! Every markets rally in signs of happiness and relieves. The question is: how far will these rallies go?

The S&P 500 index has breached an important breakout above strong weekly resistance, and the index is poised to test 1,555-1,560 or its previous High at 1,576.06, reached in October, 2007. The Dow Jones faces similar resistances at 13,600 and 13,750. Those are upsides for Wall Street in the current rallies.

Rallies in stock markets are confirmed by a decline in the US dollar index. The index may tumble to support at 78.60-78 or lower. In term of timing, I found a low cycle in the US dollar index, shown in the chart below. The chart interprets that the US dollar index may continue its decline until approximate September 24, or last week of September. Since the US dollar index is comprised with Euro (around 57% of the index’s components), I looked at the Dollar/Euro exchange rate and found a peak cycle ended approximate September 24, or last week of September as well. That means, the Euro may continue strengthening against the U.S. Dollar until around September 24.

Also, my interpretation is that something will happen around that time in either the U.S. or the Eurozone; my guess is the Eurozone. We never know whether Draghi will really drag the whole bloc out of the crisis.

If above charts are not enough to convince you, I also found both peak and trough cycles in the SET index. The peak cycle in the SET will end around September 24 or the last week of September. That peak may be followed by the trough cycle, which means, the correction after the peak may last approximately 1 week or until October 1 and/or the first week of October.

Above are timing which may help us gauge how long these rallies may last. I will touch on that again in the next two weeks.

For next week, the SET index may continue its rise, heading up to test resistance at 1,280-1,285. Higher resistance is at 1,300. The index may be volatile if it falls below support at 1,265-1,260. In that case, the downside may be as low as 1,230.

Thanks Ploy! Welcome back!