Technical Analysis: What is the medium -term projection of the Argentine Stock Exchange

La Bolsa argentina tuvo un gran arranque del 2019, con un índice S&P Merval que ganó en el primer mes del año poco más del 20% en dólares y que desde los mínimos de u$s 661 alcanzados en agosto del pasado año ya acumula una recuperación cercana al 50%.

Although the percentage magnitude of the progress from the minimums is consideration, the recovery barely manages to cut 30% of all the fall suffered by the index from its historical maximums of US $ 1830, achieved exactly one year ago (February 12018).

Beyond the enthusiasm it gave to the market participants the progress of January, the truth is that no one can be in a position to confirm that the worst of the crisis has happened and that is why the investor must still be cautious in decision making.

However, even aware of that, from a technical analytical perspective it is currently observed with a high degree of confidence that the progress in development for the index since the minimum of August of last year 2018 is not only a temporary recovery movement,but on the contrary it can be part of the start of a new bullish cycle, which will continue to the Bull Market of this market initiated in 2002 and that can carry the index not only of return to the historical maximums of 2018 but even towards higher instances forforward.

Now, what the reader will ask surely, what is the technical condition that the index currently shows so that our expectations are so optimistic despite being far from the levels of trend confirmation?.

Those who follow the technicals of the market and know the bases of the current of the technical analysis will know that one of the base axiomfrom this to be able to infer, without having certainty, a potential behavior to be developed forward.

En la siguiente gráfica mensual del índice S&P Merval en términos de dólares se puede observar con claridad todo el comportamiento desarrollado por los precios desde finales de la década de los 80 hasta la actualidad (más treinta años de mercado).

It is in this graph that it can be seen that the decrease developed by the index from the historical maximum of last year is currently a corrective section to the upward cycle or bull market in force for the Argentine stock market from the floor achieved in the crisis of the year2002.

However, the most interesting from the technical point of view that the graph delivers, is the harmony of behavior that the market had in its upward development from those historical minimums, both in terms of magnitude and in terms of time.

Precisely towards the beginning of September 2018, a few days after having formed his floor, which in a note published in the chronicler by Julián Yosovitch, (Chronicler Charts: the graph that can anticipate an apartment in the Merval)For the market it was aligned with harmonic behavior with respect to previous falls of the index in terms of dollars.From this we asked ourselves if the worst of the leave had already happened.

Given the market response in recent months, from those aforementioned floors, it is more confident of our analytical reading of considering that just those minimums of August at US $ 661 could have marked a definitive floor and that since then the upward cycle oflong term has been able to resume its course.

Como se aprecia en la gráfica adjunta, es nuestro escenario técnico preferido el considerar que el índice S&P Merval viene desarrollado su ciclo alcista de largo plazo en una gigantesca formación de cuña o triángulo diagonal, la cual se encontraría aún incompleta, siendo la baja del 2018 recién el cuarto movimiento de la figura (onda D), por lo que restaría aún un nuevo segmento alcista de importancia que buscaría en los próximos años recortar de manera íntegra las pérdidas del último año y así conducir el mercado a nuevas marcas históricas.

You should not overlook the harmony of behavior that the long -term market has been having, from its historical floor of the year 2002.Indeed, if we observe the relationship in behavioral magnitudes, we can highlight that both wave corrections b), wave d) have been exactly 76.4% fibonacci setback to the previous advance path in wave A)and wave c).In turn, the upward development of the C wave of the figure, seen between 2008 and the ceiling of the year 2018, has traveled exactly 261.8% of Fibonacci of what had traveled the progress in wave a) of the figure.

On the other hand, if we observe the relationship and temporary harmony, we can see that while the upward development of the Wave A) of the formation has been exactly 62 weeks, the upward development of the wave c) has doubled it perfectly in termsof time, delaying 124 weeks.Therefore, if this time relationship was maintained and effectively the progress ongoing since last August is part of the wavego ahead and that is why from the operation it is suggested to be mainly patient.

The concrete thing is that everything is being seen and what is expressed above although it is our preferred technical scenario for the Argentine market, which definitely predicts good winds, this should be followed up and validated with the behavior that is developing towards the nextmonths.We will see…

As we previously express it, in the wide framework of time we are optimistic for the market, even knowing that this scenario must be validated towards the coming months. Ahora, en lo que respecta al corto plazo, debemos saber que el S&P Merval en términos de dólares enfrenta en la zona de 1000-1100 dólares una resistencia muy importante, la cual posiblemente contenga el avance de los últimos meses y nos entregue un recorte parcial del mismo, lo que se suele catalogar como una toma de ganancias.

As commented, and given the proximity of prices to the aforementioned resistance zone, we insist that from the operation it will be necessary to be patients and remember that the trends are never linear but staggered, so that it will have to be attentive to those thosepotential cuts, since although always on the casualt.We will see…