US Stock Indices

[Mercury]

Made a mistake on the chart on my last post.  The 2 hour lines do not map accurately onto the hourly and in my haste I forgot to check this back so the chart was incorrect (really IG can you not do something about this?).

 

Anyway below is the corrected chart and the kiss back is still on this morning (pink line).  There is a chance of a further push up to the 76% Fib (yellow line) I see this on all the indices BTW.  Unless a new high is made the bearish set up remains in my opinion.

 

Central banks utterances are certainly making for unsettling times for trading!  It is amazing to me that a set of minutes from the FOMC can say so little and produce such a dramatic impact on the markets.  We live in interesting times indeed but when are the wheels gonna come of this particular joy riding wagon?  It's a coin toss but if it does fall from here I think that could be a strong clue that the markets are finally waking up to reality...  Let's see!

 



[Mercury]

Apoligies, meant to add in the last post that the overnight showing from Hang Seng and Nikkei was weak and adds to my Bearish sentiment and the notion that markets are waking up to Central Bank claptrap.

[Mercury]

US stock indices futures are dropping and so is the Dax despite FTSE100 buoyancy.  FTSE appears to be driven Resource and Pharma at the moment but Oil is falling back a bit.  Anyone got any views this early?

[Guest Rich88]

• Ftse looking good to sell again (keeping shorts small) ECB is in focus so could get dragged up along with dax

[Guest Rich88]

I do worrie about the ftse testing 6200 - 6220 area over recent sessions, if oil keeps moving higher then a possible break of trend could happen.

[Mercury]

Oil easing off a bit but not conclusively yet.  That touch and drop on the FTSE looks very strong (possible exhaustion selling signalling a turn back down).

[Mercury]

I chanced a short around about 6200 near the Fib 88% and am not hanging in mid air on a long receded tail (I love it when that happens).  If the next hours movement breaks below the over night congestion zone then we could be onto a decent drop.  That could also be a decent chance to risk a short, I'd put stops above the 88% fib for now but move then to just above the congestion zone if the move hammers down.

[Guest Rich88]

Ftse can seem to handle 6200 for long, but we seem to be in sync with oil today. 

 

[Mercury]

Looks like money is flooding into the Yen, worried investors?

[Mercury]

Also High grade copper is dropping hard, another industrial indicator worth tracking, which is now pointing south.  BTW, I think Copper is a better indicator for stock indices because Oil is a market with a few massive players, which can influence in strange ways (that's why I refer to it as spiky).

[Mercury]

Caseynotes, thanks for that info.  In recent past action by BoJ and ECB has produced only a very short term spike in markets followed by a drop and actual strength in the currency they are trying to weaken.  I think the intervention is making markets more jittery now (except for the US although...).

 

I think that after a short rally now Euro and GBP will go back into decline vs USD and the Yen, which may get a relief rally (i.e. the Yen weakens vs the USD), will continue to strengthen as investors become more jittery.  there is nothing the central bankers can do now except NOT raise interest rates, not exactly the bomb!

[Guest Condor]

That's a good point  the central banks can't drop rates so Not Raising them at the current time is the only option as Raising them after saying they wouldn't do that would lose credibility massively.  I've always thought of central banks as one club golfers [they can only tinker with interest rates (their all purpose 7 iron) to stimulate/cool the markets/economy].

[Mercury]

Well we have had effective negative rates by ECB and BoJ but this is hurting the banks because they can't pass it on to customers for fear of mass withdrawals.  This is one reason why we are hearing so much noise about cashless economy (i.e. if they get rid of cash then we HAVE to keep our money in the bank).  Also they could bring back in QE but that hasn't really worked and with elections all over the place I'm not too sure politicians will want to support using the public credit card on that... 

[Mercury]

Rich88 wrote "My targets is 17500 to. The dow has been used to false selloffs at the start of the day thought. Let's see if we break below 17600"

 

Rich88, just shifted your comment to the US markets thread, hope you don't mind.

 

Re: false sell offs in recent past I think that is because we were in a rally and those sell offs were just relief retraces.  What is different this time is the following in my view:

1. US markets have made a lower high with strong move down
2. There was negative momentum divergence with price at the 4 April high, suggesting a turn plus same has been building on the daily chart for some time.
3. On the S&P500 (the biggest and most significant market) that turn came at the Fib 88% from the Nov 2015 high
4. The Russell2000 has turned right on the Fib 50% from the June 2015 all time highs (and just above the Fib 62% from the Nov highs)
5. All the markets are stochastic and RSI over bought on the Daily chart and have come back out of over bought in the past few days
6. Non US markets have already fallen away, especially Nikkei, China and Dax - thus leading the way
7. Copper is in another significant bear run while Gold has just rallied strongly
8. Oils has turned south again and may be starting a final wave decline to a new bottom
9. The yield on 10 year US T-bills has dropped to 1.725 (it went to 1.657 in Feb 2016 just as the stock markets hit bottom but otherwise has been mostly above 2)
10. The Vix has popped up 7.8% this morning (US time) and while it has a long way to go, when it moves it does so quickly 

Taken individually the above are not significant but all of them?

 

If we see a fresh lower low and a sustained break of the neck line Josh from IG mentioned then we could be on for something very interesting here.  If we get a clear 1-5 wave down and a 1-3 back up on the US markets then watch out below!

[Guest Condor]

US500 dropped onto the neckline at 4044 and bounced back. managed to get a few points on the way down to that. 

[Guest MrJake]

I hav moved this from the FSTE100 - Daily Analysis thread

 

"I tend to watch for a general flow of the rise and fall and then taking a position on what appear to be set movements. The figure of 17500 was more of an on the way down point which I have used for an area to take a profit. The move on the 15:00 candle provided me with a nice profit for the day.

 

Obviously, the amount of profit is relative to each persons view.

 

My next downward point is around 17420"

[Mercury]

You meant 2044 right Condor?  Interestingly there are 2 necklines (Daily and hourly chart).  I always prefer the Daily, just because it seems to be more reliable in my experience, although I track it on the hourly (just need to watch out for mapping error...)

 

What is very significant in my view is that all the US markets have now made a lower low after a lower high.  This is important for EW theory in that if it hadn't we could have been on for an A-B-C retrace higher but now that the necklines have been broken on all three US markets I watch and lower lows have been achieved I am confident that we are in a EW1-5 down of a larger Wave 1 down off my Blue 2 turning point (see charts below).  My forecast now is for price to approach the next resistance area (17400 I think on the Dow but let me know what you think) and then turn for a retrace rally to complete the larger wave 1 (this should be in 5 mini waves).  It is common for the retrace rally to come back for a kiss or near miss on the broken neckline before rapidly dropping away in a wave 3.

 

On the attached charts you will see the original triangle line breaks and kiss back followed by the neckline break and a possible scenario for a kiss back (just shown on the Dow version).  This may not happen until next week, I have squashed it so it will fit for now.  You will also see all 3 markets are very similar and sport Neg Mom Divs at all the main turning points.

 

Basically we are set up for a sustained drop to at least the Fib 38% on the daily chart and then various scenarios will come into play but more on that later.

 

Please do let me know what you think, am I smoking drugs or what?  And views on next resistance level on all three markets would be most welcome.

 

Charts:



[Guest Condor]

Sorry  yes i did mean 2044 - finger trouble.  Unfortunately I wasn't around the 2044 breakdown which would have been a winner - still the long drop is still available.

 

S&P 1820-40 looks definite support from Mid-Feb - as for point on the way down i'm thinking definitely around 1950 as support /resistance

[Mercury]

1950 ok, this first move wont go that far, maybe 2020ish before a strong retrace back towards the neckline is my thinking but lets see how it evolves.  My strategy is to hold all shorts above the neckline and cash anything below near 2020 (assuming it is looking like a turning point).

[Mercury]

Just a quick update.  My necklines weren't drawn accurately enough, not that accuracy is ever really possible but there are degrees.  See updated charts of all 3 US markets.  the one to watch this morning is the FTSE I feel.

 



[Mercury]

Good Kiss and rebound on all US markets (plus FTSE100).  I expect a drop away now but one watch out is you sometimes get a second kiss before a big drop.  This could coincide with US opening so I'm playing this a bit cool for now with decent Stop room for the Shorts I took at the first Kiss points.  Actually in many ways I'd love to see a second Kiss and rebound as it both confirms the bearishness and offers a second entry (fortune favours the bold...)

 

FYI Dax  a little more buoyant as was Japan over night but both of these went bearish earlier than the US/FTSE so to be expected.

[Mercury]

Apoligies, meant to add: Of course the FTSE100 has already had a double kiss on the neckline so...

[Guest MrJake]

We appear to have had the second kiss (opportunity taken)

 

Perhaps now we will see the downward movement we are all expecting

[Mercury]

Hi Mr. Jake,

 

As you may have seen from my latest FTSE100 post, I have to admit I was wrong on the H&S neckline thing, bit of a red herring idea that was planted but sometimes from wrong ideas the right one can emerge.  I have been looking again at the US markets and I think I have found a more reliable H&S set up, which is not yet completed so let's watch and wait.  Regardless of this I believe the ending Triangle formations I had posted on previously are still valid.  My current line of analysis calls the top of the S&P500 at 2080 on the 4 April (if I'm wrong so be it, publish and be damned I say!  Or else no one would right?).

 

This high has strong negative momentum divergence, supported by Stochastic and RSI negative divergence also, on both Daily and Hourly charts.  In addition the turn came at the 88.6% Fib off the Nov 2015 high and the Feb 2016 low.

 

On the hourly chart I believe we have had a Wave 1 (yesterday, although there could still be one more leg down on this but we will know that soon).  If we have had the W1 then we are in a strong A-B-C retrace, which has only done Wa (bounce off the 62% Fib).  If the current move down is a Wb then it will turn before 2033 and exceed the 62% Fib before the drop gets going in earnest.  Likely candidates for that are of course Fibs 76% and 88%, given the recent past who could not be looking at the 88%!

 

Here are the charts (same scenario at play in the Dow and Russell).  Look forward to comments.

 



[Guest MrJake]

Hi Mercury

 

Thanks for an indepth report. I am still learning about the finer points of the differing charts and mearsuring techniques but I am sure it will come in time.

 

This is one of the reasons that I commented about any training sessions that IG would carry out

 

With what I have read on these boards and elsewhere in the news etc. my belief is that we are due for a downturn. I know we did not quite make the 17420 I mentioned yesterday but this recent bounce allowed the chance of a small gain part of which will be spent down the pub tonight.

 

A few chunky moves down like the current 1 hour candle would be welcome

[Mercury]

I think we are all still learning.  In my opinion (as a professional commercial analyst) if you think you have it locked up and are no longer seeking to learn and improve your analysis or be open minded about your techniques and those of others you are no longer an effective analyst.  That is why I seek people who disagree with me, to test my analysis and assertions.

 

I'll stop learning when I retire and even then hopefully not...

[Guest MrJake]

Looking at the last couple of days I am now working on a completely new strategy.

 

Whatever I think is going to happen, by carrying out my own research and reading others views, my plan now will be to do the exact opposite!!

 

(Having said that I still think it will go down)

[Mercury]

LOL!   I know that feeling.  Basically every time to place a trade it is a coin toss.  I often thing a monkey would do better than me!  However my approach assumes I will be wrong more than right (i.e. I'm not even expecting 50/50).  My strategy is to win big and loose small and then it doesn't matter that my hit rate is less than 50%.  Of course I don't day trade (unless we are in the grips of a major motive wave trend) I am looking for longer term positions.

[Guest Rich88]

You can see by price movement that the market is getting itchy on weather it can go higher or not. Looks like earnings season is going to be a choppy one..!

[Mercury]

Maybe, although I think that if the US markets do not make a higher high on this move, with Q1 earnings season coming in, the markets will move down quite rapidly.  After that there will be a recovery rally before a major fall.  I say this because a failure here means we are in a full on Bear market, in my view.  Perhaps worries over Q1 earnings is the catalyst we have been waiting for but it could be the worry and not the actuals that is key here.