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

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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.

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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.

 



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Crikey, not sure I want the herd on board just yet...  When everyone swings prematurely to the other side it is often time to worry about the contrarian view but perhaps this is not the case.  I wonder whether the trend followers will hold to their bullish views for a while yet and hope the next NFP gives the Fed pause for thought.

 

I did love the following excerpt from the FOMC minutes last night:

 

"Some participants saw limited costs to maintaining a patient posture at this meeting but noted the risks—including potential risks to financial stability—of waiting too long to resume the process of removing policy accommodation, especially given the lags with which monetary policy affects the economy."

 

Cost to the economy or their positions?

 

And this one tickled me particularly, where have we seen this sentiment about the FOMC's concern with their credibility before?

 

"A couple of participants were concerned that further postponement of action to raise the federal funds rate might confuse the public about the economic considerations that influence the Committee’s policy decisions and potentially erode the Committee’s credibility."

 

And finally this one is perhaps telling as it is the first departure from unanimous dovish-ness for quite a while.

 

"A few participants judged it appropriate to increase the target range for the federal funds rate at this meeting"

 

 

In short it doesn't mean they will or won't raise rates in June but it places that possibility more firmly on the table if they can make a credible case out of the next round of data.  NFP anyone?

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Maybe it's all just a game were playing, but how long can they spin it out for?

 



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Until the presidential election is over at least, unless the market takes the matter out of their hands, which it should and probably will do.  Unless the Fed does something rad like reversing its position and launching QE4 before the end of the summer any delays to action or even 1 rate rise will send the stock market down.  I suspect it will all be over before the election in November...

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The Dow has hit a two month low today,but has bounced since. I still think there is more downside to come. Looking to sell strength. 

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S&P Daily. Pin bar bounce off support but little room to move. Not much on the calendar today likely to give it a push in either direction.

 



 

 

 

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Yeah don't know about that  is that support major or just cause for a retrace?  The bid that the FTSE got this morning was despite no "news" - does news drive markers or the other way around?  I think only surprise news drives markets like the Fed on Wednesday BUT should that have been a surprise?

 

Question: why, given the strong hawkish stance of the Fed and poor corporate results and high valuation levels, did the stock markets go up today so far (today is far from over...).  Could it be that sentiment is just massively, crazily with no fundamentals bullish?  Here is a little snippet from Hedgeye, which shows that the market expectations of Fed rate rises way high at the beginning of the year (cue market fall) then that expectation dropped significantly BUT even after the Fed made hawkish sounds the expectations did not move that much...  Either the market just doesn't believe the Fed or they don't want to believe the bull is dead!

 

https://app.hedgeye.com/insights/51073-a-quick-look-at-rate-hike-probabilities-before-after-fed-minutes

 

A little cartoon from Hedgeye to illustrate the problem...

 



 

Interestingly Hedgeye are touting Long positions on long term US bonds, utilities equities and gold - all defensive plays... 

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Yes, I think there is a lot of head scratching going on at the moment in both the indices and the USD. And the commentators have been talking a lot about the lack of credibility of the Fed and their actual ability to do anything anyway. 

 

If you missed it, this meme was doing the rounds yesterday, from someone at the BOA. If even they don't have a clue ...

 



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As the FTSE and the DAX drop off this mornings highs with overbought indicators retreating also I am left thinking that this is unlikely to be a wave 3, unless a drop pick up pace soon.  The overall impression I have from looking at the S&P500 is that their wave 1 down has not yet completed and may do so in or around the Fib 38% level off the 11 Feb low.  In macro terms (daily chart) I see a head and shoulders formation with a small break of the neckline and kiss back and anticipate a further fall to the support zone around the Fib 38%.  Depending on how this traces out there is a strong likelihood that this will complete the wave 2, after which a retrace back toward the neckline is a likely scenario.

 

A break of the neckline to the upside, with associated breaks of resistance zone and tramline on smaller timeframe charts negates this of course.  US open once again will tell the tale but despite the strong rally in Europe (more in FTSE than Dax) I am leading to an approach of the Fib 38% levels before a strong retrace at the most likely scenario.  Surely the Feds hawkishness cannot be so easily dismissed?  Wouldn't a Bull want a better entry point?

 

  

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If dow goes back to 17600 then I'm looking to sell for a move back to 17300 

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Agree with this assessment  however we have to guard against the scenario that a wave 1 end and turn has already happened.  I think another leg down is likely but this whole move has seen quite a lot of whiplash back and forth so has been hard to call and trade, this may be typical of a wave 1 where the bulls vs bears struggle has not yet been resolved.

 

On my Dow chart I have this current rally as a 3-4 retrace with a final wave down to complete the bigger picture wave 1 move, after which we can expect a strong rally.  I see a similar picture on the other US charts, although the Russell and Nasdaq are a bit more bullish.  On the 4 hourly chart we have yet to see a Pos Mom Div, which I would usually like to see at the end of a large scale move, this we would get on another leg down.  On the hourly there is Pos Mom Div, which could mean the wave 1 has completed.  Either way it is difficult trading and one might be better served waiting for a clearer resolution to this move.  If trading Short the down side doesn't look that large so small positions with close stops are the thing I think.

 



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Good comparison chart showing the anatomy of previous break downs of the S&P and where things stand at the moment.

Arrow shows current position (blue), still early days.

 

 



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S&P big daily bull bar, so far, breaks the down trend line from April 20th on the daily chart ...

 



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haha thats funny  - mind you doesn't mean it won't happen - month not over yet, C

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Dears,

 

 

I am new to this Community. Information here very useful :). I am focusing on Wall Street Cash.

My short sell position stopped out because of long bullish bar! :( When i am looking back the weekly chart, just realized last week candle formed a Doji. (Weekly) Could it be this Doji candle bring some bull run on early week?

 

Sorry for my ignorance, please correct me if my view is wrong

 

 

 

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This is interesting. S&P weekly chart technically is really just showing a years worth of consolidation at the top of a 5 year bull run. On the second chart check out where the high volume spikes come in. The volume spikes are bulls buying up not bears selling down. Imagine how many stops there are just above the red resistance level.

 



 

 

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S&P hourly chart in RSI over bought for 24 hrs during spike and channel. IG customers 61% short. FXCM customers 87% short.

Retail getting squeezed. 

 



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Dow just breaking out of tram line. This short squeeze could still run a bit more yet!

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Recent S&P 500 H&S pattern failure reminded me of Tom Dante's take on chart patterns ...

 



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Yeah you have to be careful with chartist patterns, especially the more complex ones.  For me H&S is only really relevant at major turning points and even then needs corroboration from other analytical sources.  When they work they work really well but you have to see it complete rather than preempt it.  Same for Triangles and so on.  Not a fan of using these things in isolation.

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