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Stock market turning points - are we there yet?


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5 minutes ago, Mercury said:

I only do long term swing trading, rarely day trading and only in a full and fast bear market.  I enter and exit trades on 1H charts but positioned within longer term charts (typically weekly/monthly and daily/4H).  It is known as the 3 screen method as devised by Dr. Alexander Elder (of Trading for a Living fame). 

Does it work?

I haven't found a trading system that does :D

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Yet another Asia session fall overnight.  That is the third in recent days.  Surely this is a worrying sign for the bulls?

Dax looks like it may have completed a final 5.  A break down from here is on the cards, assuming the never-ending buy the dips boys don't press the fat finger on the buy button again... 

DAX-1-hour_200220.thumb.png.1ab403e2485f98c919720a8e8c39cd6f.png

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Things are getting interesting for those of a more bearish persuasion.  If we look at the Russell 2000 monthly chart we can see that there remain two scenarios as follows:

  1. A wave 5 (purple) top out in late 2018.  A wave 1 bearish move followed by a large A-B-C retrace that turned at the Fib 88% and would now head lower in a massive wave 3 or C.
  2. The wave 5 (purple) is actual a wave 3 and we would then expect a fresh ATH wave 5 (red).  In this scenario the 3-4 (purple) is actually a Flag which marks the eventually end of the bull market around 1870.

If we look at the daily chart, assuming the Jan top was a wave 2 (purple) with NMD and turn at the Fib 88% off the ATH:

  • There is a decent shout for the fast bear move off the wave 2 (purple) turn to be a wave 1 (pink) (1-5 form)
  • The following rally looks very much like an A-B-C at this point and turned recently at the Fib 88% at a possible wave 2 (pink), also with NMD on the 4H chart.
  • This has been followed up with another potential 1-2 (green) bearish move.

Taking all the indices together my reading is for a further bearish phase before a relief rally that could precipitate a much larger bearish move.  If this plays out then I would expect the Russell to cement the market top out and trend change with a strong bearish phase as compared to other US indices.

RUSSELL-Monthly_220220.thumb.png.eee0a1ced529ccc6e20d2a58ec6d83ac.pngRUSSELL-Daily_220220.thumb.png.db77248a41d870cd5b26cedcafb82f0a.png

RUSSELL-4-hours_220220.thumb.png.e25eafe8c47bbb319cea0ca861e878af.png

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If we look at the Dax it is a different picture in that this index has put in a new ATH recently.  IF that new ATH was the top then it is a double top, this is a credible trend change signal, if confirmed by a sharp fall away.  If we look at the weekly chart there is a strong narrowing channel with a potential 1-5 form to the rally.  If the deep bearish retrace is a Pennant then the rally end is around where price has already turned and with strong NMD on the weekly.  On the 1H chart there is what could be an ending channel to the ATH that was broken and then retested.  That retest failed, producing a 1-2 bearish wave after which price fell away.  There have been several buy the dip spasms that have all failed to ignite so far.  The bear move has not been the spectacular drop and spike on a buy the dip recovery that we have got used to but I do expect a relief rally after a further bearish move to kick off next week.  If we then see an A-B-C form relief rally and turn at resistance a much bigger bearish move in a wave 3 or C can be anticipated.  Quite a way to go yet before we can start calling the top and hear the Greta Bear roar and curiously, if I look at the US large caps I think we may even see another fresh ATH before the end (see the SP500 charts below).

 

DAX-Monthly_220220.thumb.png.a00dbe21ce6c884ac617097316bd13b9.pngDAX-Weekly_220220.thumb.png.dc5cb69dda81eb6550c8f109c339d9b8.pngDAX-1-hour_220220.thumb.png.6a7cb79d905b776d27d57ca80ec24b89.pngSPTRD-Weekly_220220.thumb.png.503ee98b04bdef768aaa932d2a4e4b30.pngSPTRD-Daily_220220.thumb.png.841569a1d0118f24e936c826ab80bc3f.png

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1 minute ago, dmedin said:

Must be keeping your best trading ideas to yourself

No it's all there in my posts.  It all depends on how you select entry and exit, the rules you follow and money management.  The key is to NOT lose too much and then stick a winner hard.  Don't need many big winners this way.

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The perma bull market was/is principally driven by Tech momentum stocks so it would follow that a dip buying relief rally of final wave to a bull ending point would be similarly led.  The Nasdaq currently lies at a critical juncture for me as it has hit and bounced back up off a very long term channel support zone (8200 =/-).  If we now see a bounce here then the relief rally could be on but if we see this zone broken (close below at the end of the month (i.e. today!) then who knows where this ends...

FWIW, at at this point it isn't worth much, I think we will see a relief rally...

NASDAQ-Weekly_280220.thumb.png.55a48ca0c9ba24488f08fad9daa92fe2.png 

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Very similar set up for the Nikkei and that market has already closed live trading...

FTSE100's goose is cooked though, as is the Russell 2000 and other markets: SP500, Dow and Dax are more likely to have now topped out, from a technical perspective but still a day of the month to go so let's see...

NIKKEI-Weekly_280220.thumb.png.9fe590b22ed48c8c63cdcd71db9bc8a9.png

 

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On 28/02/2020 at 09:58, Mercury said:

FWIW, at at this point it isn't worth much, I think we will see a relief rally...

NASDAQ-Weekly_280220.thumb.png.55a48ca0c9ba24488f08fad9daa92fe2.png

Updated Nadsaq Charts for Friday close.  Note the pin bar bounce (daily chart) off the LT supporting trend line that now forms a key support level around 8200 (8100 bottom of the zone).  My key oscillator indicators are all in over sold on the daily and shorter timeframe charts.  I have PMD on the 1H chart and a ST 1-2 bearish retrace after the potential turn.

Of course it is quite possible that price reverses sharply on the opening tonight but based on Friday's price action I am more inclined to the buy the dips scenario holding once again, especially after the late Fed jawboning on Friday, right out of the Draghi playbook...

In terms of the next phase (other than a break of the 8100 level and slip into oblivion that is), I see the following:

  1. If the recent ATH was the top and turn then a strong retrace in A-B-C form to possibly close the gap.
  2. If the recent bear move was a 3-4 retrace, and as there is no NMD on weekly or daily charts this is quite likely in my view, then a new ATH is indicted.  BUT given the nature of the bear move I see this scenario as very much an ending channel phase that will not soar to massive new highs but may make circa 10000 levels, which would be another touch on the LT resistance trend line.

In terms of other indices, it may very well be that the other US large caps will not make fresh ATHs even if the Nasdaq does.  The signals for a top and turn are stronger here, especially perhaps on the non Tech Dow Jones. There is NMD on the weekly but not on the daily charts for both SP and Dow so could go either way.   FTSE100 and Russell 2000 still look like their much earlier tops are THE top and the Dax now looks like it may have posted a bull ending top with NMD at the turns.  Dax has broken a key channel and FTSE is currently held at a crucial LT supporting trend line.  We may very well see a small bearish retrace early on but then a rally away.  A strong gap down and run through the lower support is the worry for anyone of a bullish mentality.

Elsewhere I see Gold/Silver as having turned into a contrarian bear market.  This isn't going to go straight down but would be consistent with another bull phase on stocks.  Additionally I do not think USD has yet capitulated and see at a minimum a relief rally and possibly a new high on the move before it does switch to a MT bear phase .

NASDAQ-Monthly_290220.thumb.png.5f0302e44b770457995f5110c91a5371.pngNASDAQ-Weekly_290220.thumb.png.2163cdd58a3d571b225dbb6c73f7b04d.pngNASDAQ-Daily_290220.thumb.png.af88ec87ff8ba8236e0b583f2a5f6c3f.pngNASDAQ-1-hour_290220.thumb.png.b10772613d938216bd46783eeb7f88ac.pngRUSSELL-Weekly_290229.thumb.png.f6918b41fc14a6c2b51eaf694db201c7.pngDAX-Weekly_290220.thumb.png.501b2ad1f10b398ad52dba68f95c5b18.pngFTSE100-Weekly_290220.thumb.png.d8c5dd5f788992df1c2dbb57aab55835.png

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13 hours ago, dmedin said:

The rally is over - sell the rally!

really..?  You were a committed perma bull dip buyer just a week and a half ago...  Why change when even LT Bears like me are suggesting a buy the dip is on the cards?

NASDAQ-Weekly_020320.thumb.png.5a17f9eb70be5a7ac7c6c899044469ea.png

 

 

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16 hours ago, Mercury said:

really..?  You were a committed perma bull dip buyer just a week and a half ago...  Why change when even LT Bears like me are suggesting a buy the dip is on the cards?

NASDAQ-Weekly_020320.thumb.png.5a17f9eb70be5a7ac7c6c899044469ea.png

 

 

 

 

I was buying in too early and gave up most of what I made selling the downfall ... but beggars can't be choosers 🤠

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17 hours ago, Mercury said:

You were a committed perma bull dip buyer just a week and a half ago


I only admitted the obvious fact that all major U.S. indices have been in an uptrend lasting more than a century.  And I believe there compelling economic reasons why this must be so, not just for America but global capitalism.  That's just a fact, without implying any value judgements or the desirability of it.  (Many elements of Wall Street are eminently undesirable ...)

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Looking across most major indices it seems market tops and turns are in but for US large caps this is not yet clear.  If the last hour on Friday was the first real buy the dips intervention then it would remain to be seen whether this carries to a new ATH or is just a relief rally prior to a major bearish move.  MSM has turned very bearish over the overblown Hollywoodesque end of times narrative and the contrarian in me says...  Not yet..!  I am leaning towards a relief rally with a possibility that only US large caps make fresh ATHs or all only put in relief rallies.  If you look at the FANGs the picture is bearish but far from conclusive so on balance I am not convinced that we are there yet and even if the top and turn is in a significant relief rally is indicated.

Technically:

  • Pin bar bounce off the LT supporting trend line (lower channel line) and another pin bar on Friday that could be a wave B.
  • Gap above that ordinarily should be closed, unless it proves to be a breakway gap
  • 1-5 up to the A or 1 turn and an A-B-C form bearish phase to the Fib 76/78% level and a strong rally candle in the last hour of live trading on Friday.
  • PMD on the wave 1/4 (pink) and on the wave B/2 (blue) points to more in this rally.
  • Possibility that a 1-5 down from wave B (green) is needed that would suggest another leg lower but for now it looks promising for a decent rally phase to kick off from Sunday/Monday, with or without that final lower leg.
  • Possible correlation with a potential Gold bearish turn and USD relief rally and USDJPY rally.

NASDAQ-Daily_070320.thumb.png.51ce321ee53af170bd897ada0b07ffc2.pngNASDAQ-1-hour_070320.thumb.png.41b41dc58c6c4c09a8fbde3217a9df10.png

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