Indices

[Caseynotes]

As mentioned in the APAC Brief Dow continues to crawl on towards the highs while FTSE, mired in Brexit uncertainty is trying to put a support level at 7200, currently at 7286.

Weekly charts;

 

[Caseynotes]

Trump waited til US market close to announce latest trade tariffs and after putting in daily bear bars all now bouncing back with Nikkei leading the way with a clear break through long term resistance.

[Caseynotes]

Strong push up by Nikkei could well lead the way today. Dow looks to continue higher breaking out of it's recent bull flag. Dax has broken up through the important 12110 which just leaves FTSE to break 7325.

Daily charts;

[Caseynotes]

Today looking for continuation of the break upwards by Dow, Dax and FTSE while Nikkei takes a breather following Tuesdays strong surge.

[Caseynotes]

Dow closes just piping the all time high.

[Caseynotes]

All four indices pushing higher with the Dow breaking it's all time high at close yesterday. The Dax and FTSE have been in close correlation on the small time frame charts this week.

4 hour charts;

[Caseynotes]

Interesting time to take a look at the monthly charts as Dow retests the highs. Difficult to expect a break with the US/China trade dispute in full swing but certainly positioned well for any kind of deescalation. Note before this leg up price hovered on the line before a spark ignited and the index took off, that spark was of course the Trump election.

[Caseynotes]

Dow backs away from the high and looks to put in a support level at 26546, Dax and FTSE follow suit, the three are highly correlated on the 1 hour charts at present. Nikkei mid range.

 

[Caseynotes]

Dow looks to have found support off 26477 after breaking lower yesterday while Nikkei makes a break higher. Dax and FTSE remain in step and are looking to test recent highs.

[Caseynotes]

Dow testing support at 26348 on the 4 hour chart while the daily chart shows Dax and FTSE pausing in the bounce up off weekly support, Dax has a trendline to break through to go higher. Nikkei maintaining it's breakout with a bull flag/channel.

Daily charts;

[Caseynotes]

Week end, month end and quarter end flows today.

The Dow yesterday reinforced support at 26335 but the following move up was capped at 26560, this morning looks poised for another attempt.

Dax had a strong day and is now looking to break up through 12460 for another leg higher. FTSE in a similar position looking to continue up through 7557. Nikkei continued higher before pausing.

[Caseynotes]

On the weekly chart Dow remains hard up against the all time high waiting for a sign to push on, the two main events to watch are the China trade dispute and the imminent US mid-term elections. Nikkei paused last week from it's slow and steady climb higher. Dax, as mentioned in the APAC report remains trapped by the downtrend line over concerns including Brexit, US/China trade and more recently Italian banks/politics. FTSE looking to continue the upward leg towards 7790.

 

[Mercury]

Re FTSE100 I agree @Caseynotes in the sense that a short term rally is in play in my opinion.  This falls in line with my assessments of the US indices.  Right now I think we may be seeing a Flag/Pennant breakout rally on the FTSE100 (1 hour chart).  If correct the FTSE100 has quite a rally in it, probably more so that the US indices if it is going to make another all time high before end times...  You can see similar set ups on the 3 major US indices also, in fact Nasdaq has already broken a Flag and has just poked above the previous all time high on 30 Aug.  All looks bullish in the ST to me as we move towards US NFP on Friday, if we make it that far before a reversal...

 

[Caseynotes]

@Mercury,  lol the FTSE bears were completely wrong footed this morning pushing price down 40 tick on the 1 minute 8:00am opening bar only to see it turn back up to follow the Dax which is, so far, 60 tick up on the day. Not quite sure what the FTSE bears were thinking. 

[Mercury]

Spike in GBP/USD probably @Caseynotes, there seems to have be some inverse correlation of late, doesn't last of course.  I don't pay too much attention to that stuff anyway.  However on the hourly chart the 8am pin bar rejection of the bear move and subsequent Flag breakout (not yet fully confirmed) is a bullish signal.  A fresh high on this rally phase (i.e. break of Thurs 27th high) would seal the bullish move for me and then I will be looking for the major turn on all indices for an exit and reversal. 

[Caseynotes]

EU/GB compromise deal looks set on the Irish boarder question spikes FTSE down and GBP up.

[Mercury]

Whatever caused the GBP spike: rumour, speculation whatever, Eur didn't follow suit and US indices are heading up (Nasdaq just off 7700).  IF this continues I doubt GBP and FTSE100 current direction is sustainable but let's see how it unfolds before passing judgement.  My biases remain unchanged at this juncture.

[Mercury]

US Indices rocking back a bit from fresh all time highs (on Nasdaq) and Flag breakouts on SP500 and Dow.  FTSE trapped in Flag consolidation.  Time to sell out?  Not yet for me.

The Nasdaq is the market I am using as my primary directional indicator.  The Hourly chart shows the Flag breakout, fresh all time high (just) and current retrace.  It is quite normal to get a retrace and retest of a Flag breakout and also normal for a price gap to be closed before the dominate direction of travel is resumed (unless it is a reversal or breakaway gap).  This one is just a small standard gap I feel and I will not be surprised to see it closed.

On the Nasdaq a gap close would occur at Fib 50% of the small rally off Friday noon turn and rally. at the bottom of the Flag.  A retrace to the Fib 76/78% levels would be a retest of the original small Flag breakout levels, also acceptable in a bull continuation scenario.

Factors opposing:

1. Double top on Nasdaq? But not elsewhere and other markets don't appear to be showing similar top out points
2. Negative momentum building but you would expect that as we approach a potential major market top

I suggest we should see retests of Flags and rally away coinciding with a Flag breakout on the FTSE100.  However if we see a break back below the Flags this scenario may be negated.  I will be giving this a bit more room to develop before making a call on my Longs.

Thoughts anyone?

 

 

[Caseynotes]

5 hours ago, Mercury said:

Whatever caused the GBP spike: rumour, speculation whatever, Eur didn't follow suit and US indices are heading up (Nasdaq just off 7700).  IF this continues I doubt GBP and FTSE100 current direction is sustainable but let's see how it unfolds before passing judgement.  My biases remain unchanged at this juncture.

Quite right @Mercury, spikes on news may have no bearing on a weekly chart but I can assure they do on an intra-day chart, especially as they tend to blow the day plan completely out of the water, and so are of immense significance to those who trade on the lower time frames.

These spikes have become a regular occurrence since the Brexit vote and the FTSE and GBP charts are at the mercy any wayward word from any politician from either side of the channel, which is why I tend not even to open GBP charts these days, the FTSE being more subdued is more tolerable.

I have a curiosity in the long term charts but don't get too concerned with the technical aspects as they are so clearly fundamentally driven but my basic approach remains the same for all time frames, price takes on direction to find a new level, if there is an old level within reach it will probably go there.   

[Mercury]

Fully understand your perspective @Caseynotes and agree, that's why I don't day trade.  However you touch on an important point, it is vital that people understand where anyone who is making a comment or offering perspective is coming from (i.e. their natural bias) to put said comments/perspective into context.  For my part I am a long term swing trader and hence I look for major market turns into long term trends.  I put a lot of effort into analysing scenarios through various time-frames to make sense of the markets and devise a likely road map.  I will take short term trades (still over several weeks duration) only when I am fairly sure of the likely road map within my longer term view.  Crucially, my view point that news releases and things like Brexit zeitgeist doesn't matter is based on this approach.  Clearly major data releases such as US NFP and Central Bank interest rate decisions do impact over the short term and may even occur at or near major turning points but are not necessarily the only reason for long term moves and major turns.  In the end the important point here is if you are looking at any of my posts you have to recognise and understand my views on these things, which is the only reason I give them.  If you take a different approach news etc may be very important and both can be equally valid and can even co-exist harmoniously.

[Caseynotes]

8 hours ago, Mercury said:

In the end the important point here is if you are looking at any of my posts you have to recognise and understand my views on these things, which is the only reason I give them.

Quite right @Mercury, that was the exact same point I was trying to make about my own posts, perhaps I was just being a bit too subtle.

[Caseynotes]

The US/Cad trade deal keeps Dow hugging the highs, once at the table Trudeau capitulates just as fast as Junker, both due to the imminent threat to their auto industries. So the only hurdle left to what could be the next major leg up for US indices after this period of consolidation is the Chinese. No auto imports there, just everything else. A some point, despite tradition Chinese belligerence, China will have to bulk at the continuing damage done to their stock market. Trump can wait. 
There are always the doommongers who repeat we are on the edge of the next big crash and they are right because we are always on the edge but when the economy is booming, there is full employment and people are producing and creating wealth GDP can only rise and so, when conditions are right, those increases will find their way into stocks.

Daily charts >

 

Edited October 2, 2018 by Caseynotes

[Mercury]

Agree with all of that @Caseynotes but in my view the economies of the world are not booming.  What you said has been true since Bretton Woods in the 1970s and especially so since central bank interventions in 2009.  However the entire boom was fueled by debt related money printing (literally creating money via issuing debt, which could only happen when the gold standard was lifted).  At some point you have to pay for this, not pay back the debt, that will never happen because it is impossible.  You pay with economic contraction and if, as you say, all that GDP growth made its way into the markets then during contraction the reverse happens, well we know all this from history.

Labour participation is as all time highs but the quality of the jobs being created is poor and many people are slipping out of the stats as they do not report either being employed or taking benefits...  And wage inflation is paltry, especially compared to actual inflation, fuel prices inflation and house price inflation.  This is unsustainable.

Consumers have enough of everything and the credit cards are maxed out.  The credit crunch actions taken by regulators was supposed to have eased the pressure on household debt but it hasn't.  There is still a debt time bomb ticking.

House prices are slipping but so many people have gone in on ultra low fixed rates.  As they come off these rates the reality that they have overpaid for housing and cannot afford the interest payments will sink in.  This is exactly what happened in 1987, albeit with very different market dynamics.

And now Central Bankers have decided they just cannot continue to keep rates low and pump money into the economy (they knew the game was up ages ago in my view but the politics of the situation stayed their hands).  With real market rates rising (bond yields) the central banks had to follow or look ridiculous.  Expect this to continue.

Looking just at the UK we can already see the signs of recession looming.  I am talking about retail.  Every few weeks brings another tale of a well known retailer either going into administration or calling in advisors to help or reporting profit warnings or moaning about Brexit impacting their business.  There are almost constant sales and promotions now.  I know some people who work in major shopping centre ownership businesses (i.e. landlords) and they tell me many of their tenants are really struggling.  Retail is the apex of the economy, consumers drive everything.  A hit this Christmas will be catastrophic.  Maybe Black Monday will be a damp squib?

For the record I am a perma-bear when it comes to stocks, and have been for a few years now but that doesn't stop me trading indices, it just makes me wary.  I am NOT invested in stocks anywhere in my portfolio.

[Caseynotes]

Good points all  @Mercury  and very much in line with what you were saying 2-3 years ago. I was referring to the US economy which currently has 4.2% annual growth and rising, record low unemployment and unprecedented cash inflows since the lowering of corporation taxes as well as from improved trade deals. Not really the set stage for a massive downturn, not yet anyway. Many may have sat on the sidelines and missed the continued rally up of the last few years til this latest period of consolidation but given all of the above and the current charts a resolving of the trade dispute with China could well lead to a new leg up for Dow and S&P. 

[Mercury]

Also agree with all that @Caseynotes, I am at least consistent in my doom mongering...  I am happy with it though because I trade price action on the markets rather than my long term projections.  Bias is a killer for trading in my view (different for investing!).  Still it is helpful to have some long term road map for me, to keep me from over extending into a late rally.

One things though, how many crashes and recessions were predicted in the mainstream ahead of time?  Answer, none.  They are inherently black swan events and typically occur when sentiment is at a peak and data looks good.  So what you say about the US economy fits exactly into my thesis.  Trouble is it also fits into the thesis for an ongoing never end rally ("it really is different this time folks").  One thing I definitely agree with you on is the notion that there are a bunch of people wringing their hands because they didn't jump onto the rally bandwagon and/or buy into the never ending rally theory.  We will likely see these people jump in to create an exhaustion buying spike that will signal the end.  I'll be looking for a pin bar or up/down action to give a clue to this blow out if it happens near a high probability end point and results in a sell off.

As I write this I notice Indices falling back a bit.  Probably need to see the Dow close it's price gap before the rally resumes (if it resumes...) 

[trade247]

from a very VERY basic resistance perspective we have a resistance level to breach on wall street which may be quite tough. I feel if we do (no indication otherwise at this point) we'll see the squeeze as everyone covers. I'd be cautious of getting into a short at thispoint .... but when it slides I'm jumping on to run it down. 

[Mercury]

Agree @cryptotrader my projection is for a break of the resistance, short squeeze maybe, either way a rapid move up followed by choppy waters until a significant turn down.  Big picture I see this significant turn down as a retrace not a market top (bur let's see what price actions reveals...).

Elliot Wave theory would suggest a 3-4 retrace followed by a final rally to conclude the current overall move up.  Whether that is then the top of the market or not remains to be seen.  I'll post my Dow/SP500 analysis separately.

[Caseynotes]

Big resistance levels always take something a bit special to break them and higher highs during a trade war would be a lot to expect though if that barrier was removed anything is possible. Failure to break through doesn't automatically lead to a major reversal as this chart shows.

 

 

 

 

[Mercury]

Agree @Caseynotes although sometimes markets just meander through, as happened on the Nasdaq yesterday.  Received wisdom is for at least 3 failed attempts to register significance for a turn but there are, of course, exceptions to this.  Still I would not expect too many failed attempts if we are to see a push on short term.  I can't tell yet whether US NFP on Friday will be a catalyst for a short term break of resistance (and therefore we stay in consolidation below for the rest of the week) and move up to a major turning point or a catalyst for that major turning point.  Can only wait and see and keep my positions stop protected.

[Caseynotes]

As the chart above suggests @Mercury there really needs to be a sizable event to cause a sizable bar to break the level in no uncertain terms such as the bar that broke the level (zone) in late 2016. Given that the US is close to full employment the NFP numbers would be unlikely to produce such an event or such a bar.

While the US economy remains strong but the trade war drags on it is likely the meandering will continue for some time yet.