US Stock Indices

[Mercury]

I think we are looking at a small 1-2 retrace within the Wave 3 down.  Near miss on the Fib 38% for the S&P while the Dow makes it to 38%.  Russell 2000 hit its 50% Fib and Dax makes a near miss on the resistance tram (see FTSE post from earlier this morning).

 

We could get a second bounce in the next hour, which would be a good place to Short or else a drop below the wave 1 end is also a good short point, given a strong Wave 3 to come.

 



[Guest Condor]

for the latter option do you mean it goes below 2046.8 that would be the W3 proceeding to a lower low?

 

[Mercury]

that's right   The best place to enter on a retrace is at a suitable Fib/resistance level but in this case the market fell just short of the Fib 38% (made it in other markets) so IF this is a 1-2 (and the move down from Brown 2 is in a 1-5 so there is a good chance it is a small 1-2 of Brown wave 3 then a drop below the end of wave 1 making a new low is a good sign of a sharp drop to come.  It should move at some speed once it gets going too. 

[Guest Condor]

little battle going on right now.....bears v bulls

 

[Guest Rich88]

So far we are holding support at 17640, could be back up from here



 

[Mercury]

Yes around that critical possible wave 1 end point, which coincides with a resistance zone from 18 March price action.  If the market punches through this zone (ending with the 23% Fib on the Daily chart) then we can expect a fairly strong run down for a while.  Interestingly US gov 10 year yields are down from 1.927 on 26 Apr to 1.775 now as investors flood to safe havens and the Vix is up 6.4% today so far so I'd say the Bears are winning this at the moment.

[Guest Condor]

i know you meant 17640....hope not

[Guest Condor]

both Dow and S&P having same struggle same time..  come on the bears..

[Guest Rich88]

Sorry changed it now. If we break it today then last month's bull trend is over. Maybe sell in may after all. But I do have a hunch we will bounce from here till at least half way through the month. The dax is looking simular to, I think we could bounce from 9720 and resume the bull trend

[Guest Condor]

has the dam wall broken ? and it's pouring through.... fingers crossed 

[Mercury]

Fair bit of support to get through first.  Market needs to get through 2040 (Fib 23% on the daily) after which a swift run down to 2020 is on the cards but that could be tomorrows move.  If it closes today below 2046 I'll be satisfied.

[Guest Condor]

i'm doing a bear dance - every little helps

[Guest MrJake]

Hi Guys

 

Sorry I have missed all the fun today but I have been a little busy.

 

Well we reached my first target of 17650 but just missed the second by 7 points, perhaps tomorrow will be the day

 

I will be looking for 17480 and then 17400

 

Here is to a slide tomorrow

 

 

[Guest Rich88]



[Mercury]

Looks to me like my EW 1 wasn't quite in yesterday but now it is and this is a small retrace to W2 before the plunge resumes.  Sell the rallies is my strategy for now until a stronger end point appears.  Once the Wave 3 really gets going (the wave 3 of 3) it will be fast and furious.  But there is a lot of resistance just above and support just below so either way the move will have to be strong to break through.

[Mercury]

BTW,  I like the longer term route map but just not up from here, has to go down some more for me, especially on the US markets.

[Guest Rich88]

Looks like another bull and bear fight will probably break out today, with oil up and Europe pulling back.

[Mercury]

Picking up on  excellent video post on congestion zones and my reference to the S&P from yesterday I thought I'd share the following for comment/food for thought.  While I got the exact Wave 1 point wrong that does not negate the overall picture.  This morning we currently see a turn off the recent overnight rally (it could make another high still but as this market is currently on futures it is hard to judge just yet) at the Fib 50% (a very common turning point - only the 62% is more common).

 

As I always say, the best entry points are on retrace turns but you have to either keep stops tight and seek another entry at the next level or keep them wide to accommodate the possibility of another leg up to the next resistance level.  It is a numbers game in the end and you have to play the likelihoods as there are no certainties.

 

If you miss the retrace and still want to get into what could be a swift move down then the breach of a congestion zone is the place to do it, especially on a strong wave 3 move.  I often use the 4 hour chart to look for congestion zones and trade them on the 1 hour chart (see below).  So for me I see the top of the zone as in the 2046 region and the bottom around 2036 BUT there is a part turning point low around 2033 so for safety I'd look at shorting below this IF the move us going swiftly and therefore showing signs of being a wave 3.  If it is edging down slowly and uncertainly then I would be less confident.

 

When trading these kinds of congestion zone breaks I prefer to already have some good trades working from higher up and so this would be a top up trade (effectively funded by the trades already in place).

 



[Mercury]

I think we are in a normal retrace move but as to whether we have completed yet or not I cannot say.  The markets seem to be holding up above yesterdays lows and so long as they do another leg up the the next resistance level cannot be discounted.  I suspect we may now need to wait for the US open to resolve this but even if it goes back up I would be looking at an A-B-C move, perhaps to the 62% Fib levels on Large Cap US markets.

 

Initially I had thought this Bear move might conclude with NFP tomorrow but now I am wondering if we won't drop into that congestion zone and go into a pre NFP slumber as everyone awaits that data release...  Guessing what NFP will bring is a ***** shoot.  Will low numbers like ADP bring out the bear because it shows poor economics or the Bull because more CB stimulus (or at least no rate rise) is on the cards and vice versa?  Who knows?

[Guest Rich88]

Im still looking for a retrace below 17640 before i think this bear trend is going to get serious

[Mercury]

I agree , on the Dow there is a congestion zone just below 17645 bottoming out at about 17525.  I am anticipating arrival in this zone before NFP and then some sideways action within it until NFP uncertainty is done with.  At this stage I am still Bearish and expecting the market to push down through this zone after which there isn't much support before about 17100 area.

 

Alternatively we could still see another leg up to the 62% Fib (Daily chart) before post NFP takes us on a strong move that blasts right through the congestion zone.  I went Short at the 50% fib with a stop above the 62%, in fact I have been shorting at all the peaks on my upper tramline (before I had drawn it of course).

 



 

 

[Mercury]

Russell 2000 just made a new lower low, bear move is still on!

[Mercury]

Just looking again at my S&P500 4 hourly chart it seems to me that we have 2 congestion zones stacked here.  It is no wonder we had the last 2 turns back up where they were but now the move back down has been swift and strong so far, will be interesting to see if price makes into the second zone and how it reacts in this zone.  NFP is the bugbear tomorrow, which makes it hard to trade just now because of likely volatility but if it does crash tomorrow then a stop in below the congestion zone may be the way to go.

 



[Guest Rich88]

Non farms year to date. 

[Mercury]

Aug/Sep 2015 is summer time where you get natural lows in activity in jobs markets (the hiring managers are on holidays) and the spikes before and after show getting ahead and catching up on this summer lull.  Jan is similar in terms of Christmas but average Jan with the months either side.  April has no such issues so if it is a bad one like ADP is suggesting then surely something must be up?  Can the hope of no interest rate rises be enough to counter a bad result?  Will the market really expect the Fed to reverse its policy and return to QE and even contemplate NIRP?

[Mercury]

After a surprisingly strong but so far brief rally on the Dax the market has returned back into the congestion zone but not before planting a third kiss on my tramline.  3 kisses are unusual but with a strong move back off the tramline on the third it is a strong bearish signal in this case that another leg, probably at least to the 50% Fib (Daily) and next tramline, is indicated.  

 

The S&P is also back in the congestion zone after a near miss on the Fib 38%, right on daily resistance line and currently there is bearish pressure on all the US markets.

 

A break below the congestion zone is a decent short bet opportunity and watch out for the Russell, if there is to be another leg down it is likely to make a new low first and signal same on other US markets.

 



 

 

[Guest Rich88]

The dow is holding support so far, but jm starting to feel equities are in for a big drop anytime?

[Mercury]

All stock indices hit significant Fib levels and rebounded back down and now Dow has made a new lower low.  Others soon to follow I'd say.

[Guest Condor]

Emperor's new clothes?! .... 

[Mercury]

I agree  Using the Dow as an alternative example to illustrate that this move is similar across the patch, I believe a major market turn had indeed occurred and has been confirmed in Elliot wave fashion with a 1-5 leg down followed by an A-B-C back up and turn back down again to make lower lows, which you can see illustrated on the 4 hourly chart below.  There was strong Neg Mom Div at the major turn (Purple 2) and a weaker Pos Mom Div at the end of wave 1 (blue 1), which has now been negated by the move lower.  A break below the congestion zone (crica 17400) paves the way for a sharp drop to the the next zone (17150ish), which is also the Fib38%.

 

However I can't be 100% sure that this recent move was the EW1-2.  Looking at the Daily chart there is a decent case for it and this would be my lead scenario just now.  The wave 1 turned right on the Fib 23% and forms a head & shoulders pattern, the neckline of which has recently been broken to complete the pattern.  In addition this also occurred at a junction between up-sloping tramlines (green) and the Fib 23% (It is also worth noting that any fast move down might bring the junction of the second parallel green tramline and the Fib38%).  H&S patters often come with a strong retrace back to the neckline for a kiss and fall away.  Such a move is a particularly great set up for a trade (short in this case).  Were this to happen I would expect the bounce back up to come off the Fib38% or related congestion zone and possible the junction with the green tramline.  If the market only puts in weak support at this level then falls away sharply scenario 1 of a wave 3 is in play.  If it retraces towards the neckline then that would probably be the 1-2 retrace with a strong wave 3 still to come.  The nature of any move down from here will give us some advance clues but for all of this to be in play a breach of the 17400 resistance is needed of course.

 

Overall my feeling is that a major turn has happened and the long term trend is now down.  As mentioned in a previous post, I believe the only thing that could now negate this is extraordinary action by the Fed.

 

Interested in what people think about the big picture.