Jump to content

Stock market turning points - are we there yet?

Recommended Posts

WOW @Mercury, I guess you're more than a little bearish on the outlook for us equities. I must say the long term chart looks very overbought me to, I just thought I'd share a chart. The long term support and resistance on the weekly DJI using a support zone from the high and low of June 2016 and the resistance zone from the last high down to the low in March. One thing about this chart is even if there is a significant breakout above the last high it will only move the resistance zone even higher, sooner or later the bears will have their day. The only reservation I have is how low it could go from there, I am sure it will depend on the global outlook at the time.us30-w1-ig-group-limited.png

Share this post


Link to post

Sorry. I just updated my chart with a FIB going back to the 2008 low. My support zone is close to 50% retracement, so it sure could go even lower. We live in interesting times!!us30-w1-ig-group-limited-2.png

Share this post


Link to post
 
 
 
52 minutes ago, FOXY said:

WOW @Mercury, I guess you're more than a little bearish on the outlook for us equities. I must say the long term chart looks very overbought me to, I just thought I'd share a chart. The long term support and resistance on the weekly DJI using a support zone from the high and low of June 2016 and the resistance zone from the last high down to the low in March. One thing about this chart is even if there is a significant breakout above the last high it will only move the resistance zone even higher, sooner or later the bears will have their day. The only reservation I have is how low it could go from there, I am sure it will depend on the global outlook at the time.

I can't find a way to edit my post, I should have said:

from the high and low of June 2016 and the resistance zone from the last high down to the low in April.

Share this post


Link to post

@Foxy

Apologies I didn't see that you had responded as the @tag doesn't seem to have worked.  Anyway to respond, I am very bearish the long term for very many reasons, which I have posted on in the past.  I have been of this mind set for several years, seeking to capitalise on the big drop when it comes.  However I have also been Long stocks in this period as price action dictates.  As a swing trader I am looking for medium term zigzags and long term trend changes.  My methodology is set up to identify these swings and to dip in with low exposure until a move sticks.

So have we seen the end of the US Bull?  Chatter would suggest we have but I am not convinced yet.  Looking at the chief Bull driver, the Tech industry Nasdaq index, there is an evens case for the top having been posted or another leg up.  The draw of the 8000 zone and that very long term resistance trend line (monthly chart previously posted) is surely alluring and there are sufficient "this time it is different", "new normal" type people around to drive a last gasp exhaustion rally, which I don't think we have seen yet.  On all the US majors, and also FTSE, Dax and Nikkei, price is at a significant support zone right now.  A rally here is to be expected after a sharp drop (zigzag) and would either carry to a fresh high, likely the end for me but lets see how price does, or if the ATH is in we will see a lower low in the from of an EWT 1-2 retrace and drop.

Technicals on NASDAQ Daily:

  1. We had the current ATH on very strong NMD and a potential break of a narrowing channel (not shown).  If this is the end of the Bull then a retrace to that channel breakout zone (circa Fib 76/78%) is on the cards.
  2. Price is now at a support zone and if it turns around the current point (or a little lower - i.e. 1 more leg down on the 1 Hour charts) then we will have a parallel channel to track.
  3. Stochastic and RSI are in over sold territory, this is about where a short term rally would be staged.  A longer term Bear would ignore this point.  Indicators are circumstantial not universal, you have to read them in context.
  4. Now that all the gaps on the way up are closed on all markets (there is still one on the Dax but much lower down) the way is clear for a rally.
  5. There are 2 large gaps in the current bearish move in most markets that remain un-closed.  Unless these transpire to be so-called breakaway gaps I expect them to be closed.  Critically the top most gap on Nasdaq, Nikkei and Dax are all at the ATH (or recent rally highs in the latter 2 cases), therefore a close of these would automatically deliver fresh highs in the bullish phase.
  6. COT data shows the net position as bullish but not overly so and growing despite the Bearish move.  The Non Commercials (Financials) don't buy the Bear yet it seems, but then they almost never do.  Still I would prefer to see more over exuberance in COT data at the end of this Bull, which suggest another leg up.
  7. Major market tops and bottoms largely (always maybe?) go unnoticed with no discernible trigger, despite news outlets doing analytical gymnastics to find reasons, well they have to don't they?  There is too much Trade deal chatter for my contrarian antennae just now so I am minded to expect that to be blown away with a fresh rally.
  8. SP500 is showing a similar picture but the DOW currently has not put in a fresh ATH and is showing a potential Head & Shoulders, albeit a very shallow one.  Chances are the Dow will post a fresh ATH before this is done.  If that happens we might expect fresh ATHs on Nasdaq and SP500 as well.  However we could get a close of the lower gap only, resulting in a breakaway gap at the top.  Also in this scenario we get divergence between the Dow and the other US large caps, which is a sign of a changing market.  Either way we get a rally first.  

It is interesting to note that only the US large caps are in fresh ATH territory.  Dax, FTSE100 and Nikkei look more like they have topped out some time ago and are in large scale retraces.  I have posted FTSE100 as an example.  Here the market looks much more like a pure retrace and we may have seen the top of that and a breakout of a Triangle formation, with a retrace rally to retest this channel.  However the current turning point would also be consistent with a parallel channel, which could indicate a new rally high to the Fib 76/78% zone.

In short then, it will be important to track all the related markets to sport where market turns are happening in coincidence to get a handle on this thing.  I would love to believe we have seen the tops now but I feel there is another twist int he tale to come yet.  End of May/early June should be an interesting time.  Sell in May and go Away, this time for ever...?

NASDAQ-Daily_140519.thumb.png.2800339ecf66484dd6cf460f74f0842e.pngFTSE100-Daily_140519.thumb.png.98b358962654a9f66898a7605b8b1488.png

  • Like 1

Share this post


Link to post

So far looks like a turn off that support I was talking about has occurred.  To secure this move I would expect to see a small retrace back down, maybe to retest the lower channel line, which is looking like a decent channel at the moment.  A bounce off this would bring up one of the 2 scenarios I mentioned earlier, a retrace to a lower high or a rally to an fresh ATH and end of the Bull.

NASDAQ-Daily_140519A.thumb.png.5657967e5f01eedf6f13b60abae3fc82.pngNASDAQ-1-hour_140519.thumb.png.984f8c52adc8bb31140d416dde735252.png

Share this post


Link to post

Textbook Bounce and small 1-2 retrace to Fib 62% and then rally away, next stop 8000 and then we will see.

Traded this on the Dow as there looks to be more upside if the Dow is to make a fresh ATH.  27,500 anyone?

NASDAQ-1-hour_150519.thumb.png.e55886c09abf8631b4886e1fd3ae3901.png

Share this post


Link to post

After a small bounce off the potential parallel channel line (potential because it only have 2 touches including the recent one so not conclusive), the market has hit a retrace period.  Short term support will be important to see if this brings out the perma bulls.  A break of the overhead resistance signals a trend to fresh ATH for the DOW at least and likely all the US large Caps.  Other markets seem to be in retrace mode (i.e. will not see fresh ATHs as these markets have already peaked).  If this latter is true then the retrace price action is a better signal of an across the board rally end than the ATH points for obvious reasons.

My lead scenario is for fresh ATHs on US large caps coincident with critical resistance point retrace turns for other indices.  Secondary scenario is that end of Bull market has been seen and Dow put in a H&S top.  This will be indicated by a break below current short term support on the Dow.

DJI-1-hour_170519.thumb.png.e9c5338026d348b1314f5a26d5cab04e.pngDJI-Daily_170519.thumb.png.db3ebcc98d45b3966fe4199d7ef06809.png

Share this post


Link to post

Turning back to the Nasdaq for a minute I am seeing an interesting development on the 1 hour chart in support of my Daily chart road map (as posted last Tuesday).  The end of week price action put in a lower low and dropped on the final hour of live trading, typically a Bearish signal, but in an end of rally stage there is often a lot of whipsaw action as Bulls and Bears slug it out.  The potential for an A-B-C retrace within a Flag consolidation is high.  If the market breaks down to the lower (speculative) line and turns around the Fib 50% and then rallies up through the short term resistance then the Flag will be confirmed.  So what?  Well the flag often marks the halfway point in a rally (+/- a bit) and is this is proven to be a Flag then the end of the rally would be, wait for it...

8000!

 

 

NASDAQ-1-hour_180519.thumb.png.77d7820baad0d95c7f307ed6a8c1de23.png

Share this post


Link to post

Not a Flag on Nasdaq, rather a deep retrace and bounce off the lower channel line, making this a firmer line of support with 3 effective touches.  The Dow did make a pennant and is now breaking out and approaching the upper resistance of a short term range.  A breakout to the upside should bring up a fast rally, probably to fresh ATH to close the gap.  Same for Nasdaq.

NASDAQ-Daily_210519.thumb.png.fe3344b20b5899b6ea29874b5f1558e3.pngNASDAQ-1-hour_210519.thumb.png.687198d0d6e7709a9712306d8655912b.pngDJI-1-hour_210519.thumb.png.bcb050f628f22862da57888b328d2777.png

Share this post


Link to post

@Theassistanttrader

Great question and a H&S on the Dow is a scenario I have penned in and perfectly valid, albeit very shallow so not exactly a strong one and therefore not one I would rely on at this point.  I would need to see a break of the recent lows (circa 25,200) to be confident of that scenario.  Had all the other US large caps also described a H&S there would be a stronger case but SP500 and Nasdaq made fresh ATHs.  The gap never getting closes point is what Chartists refer to as a breakaway gap, they are rare and occur at major market turns and significant continuation breakouts.  They are rarely right at the top of the market though (Nasdaq and SP500).  The Dow gap is not quite at the top so in theory this gap could be closed without a new ATH and keeping the H&S intact.  Other indices appear to be in retrace mode and not yet completed so my assessment at present, subject to continuing price action confirmation, is for more upside before this all shakes out for the Bears.

Net, the H&S on the Dow is valid at present but so is another ATH.  My approach is to look across all related markets (US large Caps, Russell 2000, Dax, FTSE100 and Nikkei plus USD-DX, Gold/Silver and HG Copper) to spot congruence of major turning points and/or breakouts to signal the markets have peaked or trends changed.  What is helpful here is that, to me, some of these markets have already trend changed so I am looking at retrace price action rather than ATHs.  The former are much easier to call obviously.

 

My current assessment is as follows:

  • Dow: possible H&S but fresh ATH more likely, subject to ongoing price action.
  • SP500: top of the market possible but fresh ATH more likely, subject to ongoing price action.
  • Nasdaq: top of the market possible but fresh ATH more likely, subject to ongoing price action.
  • FTSE: Top already in.  Wave 2 retrace likely in but one more leg up is possible, if wave 2 in then smaller retrace is due before big drop
  • Dax: similar to FTSE, Dax was the first to top out
  • Nikkei: Topped way back in Jan 1990 so on a completely different track but of the recent rally since the central bank interventions in 2008/9 to delay the credit crunch collapse (bias alert!) I believe this market has also topped and is in retrace.
  • USD -DX: has already bottomed out and is in long term rally but currently toying with a retrace bearish move prior to the main event.  Further breakout to the upside through key resistance would negate this scenario.
  • Gold/Silver: has bottomed out and is in retrace prior to a major rally.
  • HG Copper Topped out during the 2011 commodity peak but the recent rally has also topped out and is now in a Bearish trend.  However, since August 2018 this market has been in retrace rally mode, which some would refer to as consolidation.  I am not yet sure if this is done.  Could be another major rally to about the 30,000 level prior to a turn and drop or could drop through the 2018 lows to signal a major economic downturn and therefore stock market crash.

That's how I see it, I have threads on most if not all of the above if you want to see more detals, how do you see it?

 

Share this post


Link to post

@Mercury

I'll just base my analysis on the DJI SP and NDQ

 

How I view it is that the DJI will reach 26150 (IG cash instrument price) to form its right shoulder before it's next significant leg down. With the SP and NDQ forming a sort of double top and complying with the down leg. 

 

However, tomorrow or day after will decide if there is a change in trend, if Mondays close price gets taken out lower then the significant leg down will begin.

Share this post


Link to post

Not sure I am following you there @Theassistanttrader as if there is a H&S formation then it is already done, see my Weekly Chart below.  Problem is the neckline is far from the usual horizontal, one reason I think there will be another leg up to a final ATH neat the very long term resistance trendline (goes all the way back to the 70s).

DJI-Weekly_220519.thumb.png.0ee1102bad7d4439f771f4907a0661f0.png

Share this post


Link to post

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Our picks

    • Post in Indices
      "UK retail sales at 9:30 and US durable goods at 1:30. Strong bear day yesterday though only Nikkei tested key support levels." Stay up to date on how the indices are moving and have your say.
    • Post in Successful strategy?
      Analysis of 43 million trades by DailyFX showed that 61% of trades are actually profitable (when looking at EURUSD specifically). Read more about that and check out their Podcast here. Have any questions? Ask away.
        • Thanks
        • Like
    • Brent Crude rally ends, time for the big Bear!
      "Looks to me like my question as to whether the the 25 April turn was a rally end or a simple retrace may have been answered as Brent price dropped hard through the supporting lower channel line.  I would like to see the recent lows broken to confirm but odds are that this market is now heading down.  Could this mean that Stocks have also topped out?"
      • 7 replies
    • Post in Dax & Dow
      What are your long term opinions on market movements? "As for the Dow above 26k lets rock and roll long. Below 25k time to get more aggressively short in my eyes."
        • Like
    • Post in US 500 - Potential Shorting Opportunity
      What's your trigger for opening a trade? Discuss with others on the Community, specifically about the US500: "I think there's a potential possibility of shorting S&P 500 brewing.  I want to wait to see if the 20 MA does drop beneath the 50 MA."
  • Member Statistics

    • Total Topics
      6,746
    • Total Posts
      31,149
    • Total Members
      40,993
    Newest Member
    John_Mac
    Joined 24/05/19 11:56
  • Posts

    • End of May sees the end of May. You missed a trick there. 
    • After the check at the pivot dax moved on to tag R1, currently back to join dow mid way between pivot and R1 awaiting the US market open. May be a tame Friday afternoon and into US market close as it's a public holiday in the US on Monday as well as UK.
    • You may well be right @786Trader there are a lot of fundamentals based theories around so yours is as good as anyone's.  My hypothesis is not based on Oil fundamentals but can be summed up in 2 words: Deflationary Depression. Regarding the Dow, this attached is my long term view.  
    • @ mindthegap Did not agree with much of the  linked you tube video. Thought he was full of it to be honest. BS with a sprinkling of useful truth.  He may have been to Asia but completely failed to understand them. Foxconn make Apple devices in China because there is no way Apple could make them as well, as quick or as cheaply in the US or even Mexico. For example. So either prices go up or Apples margins go right down. Plus everyone is paying more for anything made in china, including simple items like shoes. Not inflationary at all. Ever considered China may do to Apple what Trump has done to Huawei. Trump is a bull in China's shop. And we will all have to pick up the tab.  
×
×