Mercury

We may be seeing the "Year of the Bear" (my prediction for 2020) start very early, which is what I was projecting based on both the technicals and the deteriorating economic data. With ISM manufacturing out today and ISM non manufacturing and US NFP out next week there is plenty for the perma-bulls to worry about. Surely this can't be profit taking, as this would have occurred prior to the end of the year with traders and their companies seeking to lock in profits to fuel their bonuses..? Doubtless there will be the usual diet of "healthy correction" diatribes but I can't get with the rhetoric of a market fall being healthy in any way (just a euphemism for clearing out the losers). Still it is very early days on US large caps but they are putting in a particularly bearish candle today (if sustained), as is the Dax. Possible ending channel being posted on the Dax, after a lower high vs the ATH, also but that remains unproven. However if you look at the Russell 2000 (a momentum stocks index and therefore indicative for the main driver of the bull market) and the Nikkei and the FTSE100 you see a clearer bearish set up as follows: The Russell 2000 posted a lower high than its ATH (similarly to the Dax so far) and is breaking out of a daily chart narrowing channel with NMD at the turn. A smaller 1-2 has been posted (not marked on the chart below but easily visible), which would mean that a wave 3 has commenced, and the strength of the move so far supports this. Oscillators are heading down out of overbought suggesting there may be much more room for this bear move. The Nikkei has also posted a lower high wave 2 (purple), note all of these markets have risen to the Fib 88% to post these lower high turns but in this case price has broken out of the daily channel and put in a failed retest of the channel and now is dropping away (very bearish set up). Again there was NMD at the turn and oscillators are heading down out of overbought. On the FTSE100 things are not yet as fully developed in this phase, similar to the Dax, although the Dax has dropped hard this morning after the Nikkei capitulation over night. On the FTSE we see another lower high wave 2 (blue) at the Fib 88% and importantly this is the second one as the previous high was also a wave 2 (purple) turn at the Fib 88% off the ATH. This puts the FTSE100 ahead of the other majors in terms of the bearish scenario. A smaller scale 1-2 is in progress (not market up yet) and if price breaks lower then this could confirm the prognosis for a bearish phase that could eventually be confirmed as a major bearish market turn... Overall the signs are good for Bears but we must await US open and a likely relief rally first, which if it turns with a lower high on the US large caps will be more compelling for Bears and a good entry point for Shorts. USDJPY has also dropped through a key support zone and Gold/Silver have rallied strongly, the former approaching the previous high resistance zone. It will be important, I feel, to watch all these related markets to spot turn and breakout confirmations in correlation and as such high confidence points to trade. For the record I am Short the Dax and the FTSE100 and USDJPY and Long Gold/Silver. I will await that pull back relief rally on US large caps before considering any Shorts.

I am awaiting short term retrace moves on Gold/Silver maybe copper and Oil. I see something similar on Coffee right now. Since I caught the top and turn (on the second opportunity at least) I have been tracking the whole move as a potential 1-2 bearish retrace. With the turn yesterday at around the Fib 62% and fast drop away I am reasonably confident of marking this up as a wave B completion and into a wave C. There are several candidates for this to terminate, price action and indicators will be key to spotting the turn but when it does turn the next phase would be a very strong wave 3 rally with many 1,000s of points potential. For now I am short tactically and happy to wait for a few 1000s points to cash and leverage back into long term Long positions. With so many markets potentially waking up: commodities, USD, possible stocks (???) it could be a very busy first quarter of 2020...

Overall it looks like the USD has now indeed turned bearish with both a break and failed retest of a credible weekly channel line and now a break below recent support. We may get a small retest of the recent support break, as with many pairs, but after that then the next major critical juncture will be the 9530 area, a break of which will surely open the bearish floodgates... My lead scenario now it that we have completed a wave B in September and are now entering a wave 3 of wave C, very bearish if this materialises.

I would like to change the title of this thread as I no longer believe it will be a short drop, although technically that is still possible. I now believe this pair will run some distance and the nature of the breakout of the weekly chart channel is consistent with a wave C (or 3 of C to be more precise). Again a possible short term relief rally and retest of the breakout zone but either way I expect this pair to move rapidly down to test the 12700 level.

USDJPY has broken out of a recent channel to signals a bearish move in line with other USD pairs and possibly, just possible, a bear phase for stocks. Certainly the Nikkei and Dax are looking decidedly red. Might yet get a short relief rally on both/all before the move really kicks off with a vengeance... As will all things USD related I am tipping this one to run bearish for some time and some distance. However I need to see a break of the 10450-500 monthly chart Triangle and associated horizontal support for the long term play to really be on.

Taking stock at the end of the year and thinking about what the new year will bring is traditional in many facets of life. Although in essence artificial for traders as the markets are a continuum rather than bound by the notion of a year (that is more something that professional money managers have to worry about but we retail traders can ignore it) it is none the less a good point to take stock, especially for those of us who seek to follow market participants psychology as people tend to think in terms of defined time frames. For 2020 I think we will see a contrarian USD bearish phase, which may be much more in some pairs (see my alternative GBPUSD thread for one example where I see a potential long term GBP bull market). This GBP bull market would be based in the fundamentals of GBP as a safe haven in a global economic crisis, especially now that the drag of the EU has be definitively remove, as has the threat of a Marxist government disaster. For the Aussie dollar I am thinking of what might happen if we see a commodities led reflation (or hyper inflation) phase in 2020? Australia has a huge mining sector as most people know so if we do see commodities like copper rally hard then the AUD should do well from the associated benefits to the Aussie economy. I do not think this will last very long (i.e. not decades) but maybe a year or so as eventually the piper of central bank accomodative policy will have to be paid and this could manifest as a deflationary recession (see my recent post on my "what is the USD doing?" thread). So if we do find a fundamentals stimulus for the AUD what do the technicals foreshadow?: On a very long term chart (Quarterly/Monthly) it looks to me like the bear market since the 1970s ended in 2000/01 and from then to 2012 this pair has been in an A-B-C form rally to a large scale wave A (purple), which turned at the Fib 62% off the 1970s highs. The move back down to current levels has been in a 1-5 form, which turned with massive positive momentum divergence (PMD), but crucially it did not make a lower all time low, which suggest the phase is a wave B (purple) rather than a motive wave. Overall then this suggest we still have a large wave C (purple) to complete a big picture A-B-C (counter trend) before it all comes crashing down... Looking at the Monthly we see PMD and also divergence on RSI and Stochastic, with both coming out of over sold territory. The Weekly shows a similar set up but before we can get too locked into the long term rally scenario we need to see price break above resistance at the retest of the prior consolidation triangle breakout (circa 7670) and then a new high vs the top of the consolidation phase and then a test of the long term resistance trend line. For the 1-2 (red) alternative scenario to hold I would expect to see a clear A-B-C form to the move up. If the move is a 1-5, even if there is a turn around the 7670 area, then the long term rally scenario is more likely. Shorter term I expect to see a small scale retrace bearish move, possible to retest key prior breakout support zones but I am biased to see this as a strong wave C/3 phase so pullbacks could be shallow across the board as a USD bearish phase holds sway. The alternative USD bull market scenario still exists, although the odds are that we will see a bearish few months before this reemerges. My current thinking is that the likes of EURUSD, USDJPY and USDCAD will enjoy a bearish USD phase before a long term USD rally kicks in and reverses these market but for AUD and GBP things might look a little different and as such if certain fundamentals emerge as dominant (as detailed above) then we could see a sustained rally in these pairs at odds with the bulk of the USD pairs. The potential for AUDUSD is a long term target of 13,000 before a reversal. The alternative scenario has either a 7,670 or circa 8,600 turn target (I favour the latter as this lines up with similar targets on other pairs). Either way AUDUSD looks set for a period of bullish price action in the early part of 2020.

More likely the leading data, which traders obsessively focus on, as does the Fed, US NFP will be hit initially by big corporates cutting costs as earnings continue their downward trajectory and easy money evaporates, thus eroding the share buyback ****. A double hit to stock prices with prices at all time high valuations. The issue of recession on main street and stock price deterioration is not necessarily linked but one key link is the sentiment driver of job losses. I think 2020 will be the year the corporates start to cut costs to balance the book, which will in tern ensure a recession that will drive the corporates into worse trouble, that is the cycle... Add to this the uncertainty caused by the US Presidential election and ongoing trade war bias shown by the Trump administration and it is not surprising investment has dried up and is set to remain dry. So no investment and deteriorating employment on top of already down trending economic data and a manufacturing recession, oh oh! Check the following out: https://www.fuqua.duke.edu/duke-fuqua-insights/cfo-survey-half-us-cfos-expect-recession-2020-election-looms https://www.cnbc.com/2019/12/12/60percent-of-big-us-corporations-say-head-count-reduction-is-coming-in-2020.html

True. This pair has been in a long period of consolidation. After a massive bull run vs USD as Japan fell into stagflation and the Nikkei plummeted (from the late 1980s). In fact if you overlay the Nikkei and USDJPY you will see a decent correlation, except that the Yen has remained relatively strong despite a strong stock market rally, which may have something to do with the fact that the Japanese central bank is the biggest owner or Japanese stocks... Abenomics has held sway for some time now but try as they might they can't devalue the Yen. I suspect this will happen but not as a result of central bank manipulations but a flight to the relatively safety of the USD when all hell breaks loose... Before that the current consolidation Triangle must resolve up or down. My lead scenario is down to set up a Head & Shoulders ending pattern, after which we will see that massive USD rally. Either way a break of the long term down sloping trend line and the associated horizontal resistance will be a key signal that the much sought Yen devaluation (or rather the USD super rally) is under way. Personally I will be seeking entries much sooner than that, let the games begin...

The answer to the question depends on whether you are looking at it short term or long term. Short term we could see some relief rally action, possibly to retest the channel breakout zone. We could equally see a break below support and then a retest of that or price could just break through resistance a head into a major long term bearish move, which I would expect under any short term scenario. So long term I am looking for a major bear move but short term we could see some rallies, which would offer good Short entry on turns at resistance points.

The Loony looks to be about to go on a bearish tear as it approaches a key support zone. I would be looking to sell any credible relief rally.

Does there have to be a special fundamentals reason? Perhaps some gold bugs saw the same USD bear move that I did and decided to front run. Maybe the same bugs foresaw a stocks decline. Or more likely the same fundamental story that started the rally at the beginning of the year is simply still holding sway. This is why I prefer to follow technical signals and trade what I see.

Unlikely without a stocks wobble IMO. USD likely to be important for G/S rally but for this to really take off we will need to see either a large increase in inflation or an economic reversal (which would result in a stocks bear) or both.

OK but the big one for the longer term picture is the ISM manufacturing data on Friday...

Yen strength has gathered overnight as the Nikkei weakened. Now USDJPY is breaking a critical daily chart channel after a series of 1-2 retraces failed to break higher. Next stop should be 10850 area and if we reach that then this will have the aura of a major bearish turn about it.

Dax has continued it bearishness all morning and now has an additional boost from weak US open. It is approaching its daily channel lower line for a breakout test. Meanwhile the Nikkei looks to have broken out after a bearish session last night, which also saw the Yen gather strength for a test of its daily channel. Across the US large caps and the Russell 2000 we seem to have a 1H channel breakout, which if followed up will produce a test of respective daily channel lower lines. Breaks of these will open the way to that significant bearish move (correction or otherwise...) that has been on the cards for a week or more. Now that Santa is back in the North Pole and a slew of US economic data us due out over the next week and a half things could get interesting in a hurry... Predictably the Vix is rallying and may be about to break a trend line to the upside

First support break I am looking for is coming up. This appears to be happening across many USD pairs including, crucially, USDJPY, which may be supporting a period of stocks bearishness as suggested.

I was of the mindset that Copper would retest the long term trend line before resolving its long term direction. We may be seeing some bearish signals on the Daily chart but this could be a short term move. If I look at the longer term time frame charts the set up does look bullish, very bullish. This is consistent with the reflation trade thesis and may signal a broad reflation of commodities both soft and hard. There is a potential breakout of a monthly/weekly chart Triangle retrace phase to the upside currently in play. We should see a retest of this breakout, which would then decide the matter one way or the other (although I would not be surprised to see a so-called hard retest, which is a penetration back into the Triangle before another breakout). This is also consistent with a thesis of mine such that we may see runaway inflation (Central Bank manipulation driven) prior to a deflation. In other words the hyper inflation and deflationary depression argument would be settled by both being right in turn with the hyper inflation triggering a reactionary deflation. Normally copper is seen as an indicator of economic strength and therefore of stock market moves. However these are far from normal times. The commodity peak rally to 2011 coincided with only the first phase of a major stocks bull market. The subsequent commodities crash did not produce so much as a ripple in the stocks bull, such extraordinary support did central bankers pump in. Could a major spike in commodity prices, at a time when other economic indicators are trending towards recession, actually be the straw that breaks the camels back for stocks as their materials cost base grows uncontrollably and hits profits? What would be the response of corporates to this? Price increase to consumers (hence the inflation effect that would be swift and impossible for the central bankers to control); hiring freeze and eventually job cuts (labour is the only major cost companies have direct control of, other than investment of course, which is at rock bottom these days). In such an environment there will not be spare capital for share buybacks (opps! there goes one of the major US large cap drivers...). 2020 could turn out to be anything but business as usual. The Chinese have a curse, "may you live in interesting times!". They may be writing books about this in time to come and for the open minded swing trader it could be both interesting and profitable if volatility returns across a broad spectrum of asset classes...

Not seeking to trade Brent at present, the entry has been very difficult to spot with a lot of whipsaw action where as Gold/Silver and FX is much cleaner right now. However I do feel that Brent is into a rally phase in ling with my medium term retrace scenario to the $80-85 level, which may be part of a broad commodity reflation action as some commentators have been calling. In addition to all of the technicals I have posted on in this thread that supports such a view we now have the addition of a Golden Cross on the daily chart. Note also this comes after a prior Golden cross and reversal, which is quite common during a consolidation phase. It is the second cross that usually produced the rally. Short term we will probably get some bearish moves but these should provide buy the dips opportunities for me.

Of course but you have plenty of perma bull posters... I also think there is equally a good chance of a sustained bearish phase after such a strong rally, don't you? Not really, also not predictions, merely scenario possibilities. The level of pull back is far less that a "normal 10-20% correction after all and we have seen several bearish pull backs over the past few years, all of which I have traded successfully... Not sure what you mean here by speculating??? Perhaps you didn't read my post completely...

It is common but not always the case that a breakout will put in at least one, sometimes 2 retests of the breakout zone. This depends on where in the cycle we are. If at the beginning of a trend change, where markets are composed of more bull bear push me pull you, this results in more retests. If in a consolidation continuation part of a cycle, within an established trend there will be fewer or no retests as the broad bias is in the direction of the trend. These actions can take years on some markets, for instance the 2016 breakout on Gold retested the zone twice across several years with the second forming a right hand shoulder of a Head & Shoulders formation (Aug 2018). After that there was a smaller, faster breakout and retest in Sept 2018 which precipitated a rally phase and then we had a Triangle consolidation that broke out on 31 May 2019 with no retest at all. This breakout looks similarly strong compared to the 31 May 2019 breakout and also similarly it is a breakout from a Triangle consolidation phase, apparently (needs a higher high to confirm). The best way to trade these breakouts is to identify them early and trade at an earlier turn in the chart formation (i.e. a turn on the lower support line/zone). This I call a preemptive trade because the breakout has not yet happened and may take a few attempts. The second opportunity is the breakout itself and here if you have some confidence you can take a chance on a slightly early entry (i.e. buy on a dip prior to the breakout (or a 1-2 retrace on a 1H or 4H chart), which is what I did once I spotted the Triangle on Gold/Silver). The third is the breakout itself. After that you must wait for a dip, which may or may not be a retest of the breakout zone. You can see this pattern on FX right now, with the breakout and retest completed at the end of last week. In terms of Gold/Silver we have 3 scenarios from here (other than a total reversal into a longer term bearish retrace, possible but less likely now): Retest of the breakout area Small scale 1-2 retrace that does not reach the breakout zone and then rallies higher The rally carries on fast through the resistance zone formed by the recent high where it may put in a retest of that zone as so we begin the process again. Any Long now would either need a very close stop, which renders it almost certainly a loser, or a long stop past the breakout zone. A buy the dip Long could have a credible stop below the bottom of the dip, if you can spot that in real time that is...

Despite the US large caps progression into the santa rally and the Russell 2000 life accordingly the Dax and Nikkei have remained in doubt. the FTSE100 did stage a rally but remains under the previous high at the Fib 88% and therefore still in bearish/sideways territory. I remain unconvinced by the rally and so does the Vix it seems as it held onto its levels and even rally a bit towards the end of trading this week. Most of the markets put in a bearish end yesterday and potentially at key resistance points. There is nothing conclusive as yet and so early trading next week will be instructive. I have a cheeky short on the Dax at present but currently I am favouring USD pairs and Gold/Silver as trading vehicles over stocks.

I think we should see another leg down to complete a decent retrace move before the long term rally resumes, although clearly a premature (vs my projection) break of the recent highs (14225) would reinstate the long term rally.

The Gold and Silver bugs are justifiable excited just now with a breakout of a potential triangle consolidation (albeit also a 50% retrace on Silver). We could yet see a bearish phase before a breakout rally above the previous highs, which could retest the Triangle, at least on Gold (much shallower than Silver). Once it does break above the previous highs though surely the all time highs come into focus and, if some commentators are to be believed, way beyond that. Gold/Silver at these levels would make this a much better trade that Short stocks in the event of a collapse as there is no barrier to the upside. I have far more confidence in a Long Gold/Silver trade than Short stocks. The technicals supported the original breakout, which I wrote on at the time and now a consolidation continuation pattern looks to be a decent bet. I am Long both from before the Triangle breakout but looking to Silver as a far greater potential ride once the trend direction is settled.

I retain my Yen rally vs USD long term scenario as posted at the beginning of this thread. My feeling is that this pair will join the others in a USD driven move that could see a completion of a long term Head & Shoulder pattern on the monthly chart. After than the Yen will weaken considerable vs USD and Abe will get his dream Yen devaluation but that is a long way off yet. Ideally we should see stocks weakness to help push the Yen higher but it may not be necessary. If and when it does breakdown this pair may offer even more potential than some others, or at least a secondary chance to get in on the USD bear move for any who miss the current one and/or a chance to switch vehicles as GBP may also offer in due course. Prior to that, as with GBPUSD, there is still a decent chance of further USD upside here so care is needed and a clearer signal is required to trade Short. I am not yet in this particular pair.

Looks like we did get that Flag retest and bounce, although with a lot less conviction than other USD pairs. This is consistent with my EURGBP analysis, which favours EUR in the short to medium term. I am sticking with my assessment of a weaker rally to maybe 13800 area from here, followed by another bearish retrace and them maybe my alternative set up will take precedence and breakout through the long term resistance channel to the upside, surprising the conventional view that the UK and sterling is on its knees, a view I do not share. However I am more cautions on this pair right now as an alternative scenario with has the market retesting the weekly channel line down around 12500 is still on and also consistent with my EURGBP set up. My positions on GBP are light and with close stops.