Mercury

Recent price action could indicate an early reversal turn for AUDUSD with a tram-line break. However the tram-line pair s a bit weak in my view and the EW count suggest another leg down as a better set-up. There is PMD on 1 hour chart but not really present on 4 hour chart. I have another pair of tram-lines from the 4 hour chart (blue) that fits with the final leg down scenario (red arrows). Having said all that the break of the grey 1 hour trams offered a very low risk trade with stops just below the recent lows only a handful of point away. A confirmed break of the upper 4 hour tram-line would seal the turn but a rejection at or near this point would suggest the final leg down scenario with a potential end in or around the 7,000 mark as the most likely.

Thanks for that @cryptotrader, before I answer your very good and relevant question, can I ask what you do trade (the name suggests cryptos of course...). Also interested in your too many influencers comment, if you care to open a new thread on that in another area I would be interested in that topic. Regarding the drawing of lines there are 2 main schools of thought in my experience (there may be more I guess). draw lines on the close of a bar (i.e. where price denotes the culmination of the bull/bear engagement) draw lines on the tail end (i.e. the maximum price points) I will generally go conservative with method #2 but I also use my personal experience of charting to find a best fit (most touches on a line), which could incorporate a combination of the above and even some fake breakouts. There is a lot of reading and educational material about on charting and a must if anyone wants to use these techniques but as ever there is no substitute for learning by doing. Some markets are quite smooth (the larger ones like SP500, EURUSD, Gold etc). Others can be more spiky (like GBPUSD, Silver, Oil). It depends on size and whether there are a few big influencers (like Oil). This is relevant to you point about why you do not trade FX. When drawing chart objects I do consider this aspect by tolerating more fake breakouts and spike-throughs on the more volatile markets, also need wider stops for actual trading of course.

I agree your near term support zone @elle. Looking at the technical charts we can see the same Bear run from 2011 that is evident on GBP and EUR however in those cases the Bear started in 2009 with the end of the Credit Crunch and beginning of the Central Bank QE and ZIRP/NIRP era. Australia did not see a recession as such but is heavily influenced by mining and therefore AUD/USD turned with the Commodity bubble peak and has largely tracked commodities down, including the more recent consolidation in a classic Triangle formation, which has recently broken out to the Bearish side, as will many other USD pairs. However another difference with this pair is that the upper triangle line is formed by a long term support trend-line, which it therefore already broken through and has been providing resistance (as is so often the case with Support/Resistance lines). I find this very Bearish. You can see the support zones on the Weekly chart but I am looking for a rally off W1 (Blue) turn in or about the next support zone that may carry all the way back for a retest of the Triangle breakout point. Hard to say where this will happen at this point so I don't see a trade on this pair yet and will wait for a suitable turn. When it does turn there could be a lot of points on offer, however at present I prefer GBP and EUR.

Focusing purely on technicals for a moment, my overall assessment remains favourable to a rally, unless the LT trend-line support is broken. Weekly chart showing a nice bullish pin bar and bounce away from the LT Trend-line followed by a secondary failed test of the same line plus PMD at W2 (pink). Daily chart shows the Blue 1-2 retrace in an A-B-C form, which suggests the next move will be a motive rally (Trend change). We can also see the break and retest of the Green tram-line is so far sustained. The Hourly chart shows a possible Triangle consolidation formation (pink lines) a break of which suggests a resolution to the question of which direction the next move will take. However in the case of a break lower there is a strong chance that a retest on the Green tram-line at 50% fib could halt and turn the Bears. Therefore even if price does break down if it turns again at the 50% fib this will suggest the Bulls are taking control. Ultimately a break of resistance at the 1,210-1,212 area will seal the rally for me.

Unlike the EURUSD and others I think GBPUSD has already turned with a much stronger break through of my Triangle set up. This has been accompanies by a strong drop through a significant support zone on EURGBP, thus proving my bearish stance on this market (alas no final retrace). This Triad set up though supports both my immediate bullish view on GBP and short term Bearish view on EUR. Looking at the Triad is very important when trading related FX pairs to ensure your assessments stack up. On the attached 4 hourly chart you can see the Triangle set up and breakthrough. However I don't see GBP firing off hard if EUR and other USD pairs are not and in fact going in the opposite direction. I'm not saying this can't happen, just that I don't see it as I see a relief rally in the offing on EURGBP. Therefore my assessment is to expect a retrace in EW 1-2 back down to the original breakout for a retest before a hard rally away in wave 3, which will be long and strong and set up the medium term rally back to the 13,800ish area. My approach is to hold my breakout long trade with sufficient stop room not to get taken out on the retrace and add as I see a turn and strong rally. Anyone got a view on GBPUSD? Please share.

Indeed we will have to see @TrendFollower although I don't see Brexit as much of an issue too small to impact. Now an EU/Euro implosion would be but hard to draw a direct line from Brexit that.

@TrendFollower, agree with your assessment of the Gold bull, except for one detail, the bull started well before the credit crunch (I don't call it the financial crisis because that is yet to come... And note that therefore all my assessments are predicated on this most Bearish sentiment!!!). During the Gold bull to Aug 2011 all major commodities ran up in a massive rally and then peaked out. Oil, Copper, Silver, they all posted the same moves and then peaked out and dropped back almost as dramatically, why? No idea but there are lots of opinions about... The favourite one is China... Whatever, the price action charts tell us that the bull was a bubble that burst in dramatic fashion. During this time there wasn't much correlation between commodities and stock and the likely reason for that, in my non professional opinion, is the market generally is not operating in "perfect" conditions because of unprecedented central bank interference (manipulation!). If anyone else was doing this the SEC would come down on them like a ton of bricks!!! In terms of fundamentals then the only thesis I have is that we are about to return to "real" fundamentals as stocks bubbles start to deflate and then burst. Commodities have already led the way down and the bond market is getting shaky as yield curves rise. The VIX is at rock bottom and that never lasts, unless this time is "really different"... But I haven't heard any credible thesis as to why time Gordon Brown would e right about "no return to boom and bust". And even he now is fretting about another crisis... Now central bankers are trying to slip quietly out of the party... If or when this all happens then Gold returns to its ages old role as a store of value. Gold really is nothing other than this if you consider it, as it has virtually no industrial use because of its uniquely chemically inert nature, which is also why it is a good store of value. I don't buy bitcoin and other Cryptos as an alternative as it is too alternative at present for most people's taste. I do expect Cryptos to fail, as many new technology booms do initially only to find their true value out of the ashes of the first bubble bursting (that is blockchain for me). We have already seen the main part of this but more will come leaving something else to rise out of the ashes of the real financial crisis to come. I'm betting this will be governments taking control of blockchain for paperless money and maybe even a new accounting model (The Institute of Chartered Accountants in England & Wales are studying blockchain for this exact reason). Regarding Gold technicals, I can't really teach the entirety of the methodology I use here but suffice it to say I combine a number of well establish technical methods including: Elliot waves Classic charting patterns (inc price gaps) Momentum divergences (Positive - PMD; Negative - NMD), also sometimes RSI but only as a supportive. Support/Resistance levels (don't really care if this is because of supply/demand dynamics or not) Tram-line trading (i.e. momentum moves contained within a pair of diagonal parallel lines until there is a breakout) Fibonacci retrace levels, often align with support/resistance zones Commitment of traders data (US only) - contrarian stance vs Financials, I trade with the commercials Price action I don't need all to align but the more signals I have the higher the probability of the eventual trade I take (If I am reading it right! But this is trading so can always be wrong and have to guard against that. So to answer your question specifically, for Gold I have the following technical set up (see previously posted charts) An overall concept of why Gold could turn into a long and strong Bull A long term supporting trend-line, being well respected (see monthly chart) A massive peak in Gold and retrace to the Fib 50% level (typical for Gold) in early 2016 where it bounced off that LT trend-line and rallied up to what I think is an EW1 before retracing again. There was strong Positive Momentum Divergence (PMD) at the 2016 bounce point too. The next retrace went down to the Fib 76% in what I believe to be an EW2 (purple 2). It described an A-B-C form, which is indicative of a retrace move rather than a motive (trend direction) move, which goes in a 5 wave motion according to EW theory. Such a deep retrace is associated with a trend direction change and prepares the market for a large motive wave in the opposite direction. The next rally didn't make a higher high, which is a warning, but so far has retraced in A-B-C form to the bounce off the LT trend-line in Aug 2018, this time with a spike through and bounce away pin bar (Price action - Bullish). There was strong PMD on the Daily chart at this point. Additionally this retrace came back to the Fib 62% from the previous high (Purple 1) and Fib 76/78% off the most recent high (Pink 1). After this there was a short rally and the current retrace (so far in A-B-C to blue 2). This culminated (so far) again on the LT trend-line with an inside bar formation (Price Action) this time and then rallied up to break the Daily chart tram-line pair (green lines) that had contained the retrace down from pink 1. This break and failed retest (so far) is also bullish if we get a sharp rally away (still pending). Add to all that a potential Head & Shoulders formation on the Weekly chart with a neckline around the 1450 resistance zone, which will also eventually be a great trading point if we get a rally up to there. That is a lot of positive support for a strong rally for me BUT there is also a scenario where there is a return to the Fib 78% area (monthly/Weekly chart) for a slightly lower purple 2. This would mean a break through of the LT trend-line, which would be Bearish. So at this point I would be less certain of the set ups. Got to be aware of all the scenarios (and try to find the one you haven't spotted yet...). Also got to play the market price action no follow your biases out the window (this is where money management comes in!). In terms of how I traded this. Previously I swung traded the 2016 50% fib bounce and the W1 retrace. I did not manage to get in on the pin bar in August but have traded Long at the blue 2 point and recently at the green tram-line retest area. My lower trades are stop protected at break even so I am running low risk on the retest zone trade only. If we see a sharp rally away from this zone I will be in full-on Long term long trading campaign mode, swing trading the big moves. Happy to discuss any individual aspect of all that off specific questions or better still any alternative views!!! PS: looks like a bit of a bounce this morning, will it be sustained through NFP? Probably get the usual volatility OR a rapid rally away.

Retrace road-map still intact despite today's rally phase. Flag break resistance zone was retested and failed, which sets up a nice pair of tram-lines. I expect a drop down to one of 2 possible turn points, which US NFP should reveal tomorrow. Obviously a break through of the lower level at that time is suggestive that the Bear turn has already happened. Conversely a turn and breakthrough of the upper tram-line will suggest to me that my road-map is correct and I will then be looking for a strong motive wave rally back to a suitable zone of resistance before a turn back into a long term Bear phase. You can also see strong PMD on the 1 hour, which supports a rally bounce scenario (also present on Weekly and Daily charts). Let's see...

my Gold trade Long is looking a strong contender. Maybe Indices softness and USD potential weakness? Maybe portfolio balancing with a risk off mindset. Who knows. Point here is the bounce off the LT supporting trendline and the subsequent break and failed retest if the Daily tram-line, together with PMD at the right points and price action rally today are building the probability of a long and strong Gold rally in my view. Looks to be a better bet than most other markets at present.

GBPUSD now following EURUSD and AUDUSD down in line with my road map so far. If this pair is to turn back into a Rally then there are 2 possible near term zones of support. A break of the Triangle (Pink lines) would be a strong indication that the rally is on, especially after a touch in one of the 2 support zones. I am reminded one again that this type of analysis is evolutionary and mush adjust to price action, hence the update to the 1 hour chart (note the higher time-frame charts remain unchanged at this juncture. Price action over the next few days will tel the tale I feel. Is anyone trading this pair (or any FX)? Do you have a view to offer? Please do!

Are we seeing a EURGBP tramline breakout and retest? If so this offers up a sharp rally opportunity and we should also be seeing a related drop in GBPUSD as this pair follows the earlier moves of EURUSD and AUDUSD, which is exactly what appears to be happening right now.

Gold is in retrace following the break of the Daily chart Tram-line. A failed retest of the breakout zone sets up a strong rally away in my opinion. I wonder whether this could be fueled by a turn down in USD..? Similar but more exaggerated in Silver, as usual. Anyone trading Gold/Silver? Got a view? Please share.

Like it @Caseynotes although there are may relationships at play all at the same time. For instance there is another view I read recently that money shifts between Dow and Nasdaq in a tech vs big industrials type of play. I would observe too that the Dow has been lagging the SP500 and certainly the Nasdaq since the Feb 2018 turn back up in that the SP500 put in a new all time high earlier. This is not surprising if you believe that this rally is largely Tech led as SP500 has more tech in it than Dow. I believe the one to watch for clues to the overall rally health (or lack thereof) is the Nasdaq because the FAANG led this up and will lead it down in my view. Might get a spike into Dow as Nasdaq drops but then Dow will follow as sentiment crumbles from Greed into Fear. This is all big picture of course, have no clue what it means for the next few days...

Agreed @TrendFollower and nor am I. What I was suggesting is that the buoyancy on copper is often an indicate for stocks to follow, and similarly in reverse. So only need to watch it not call it.

If Silver is about to breakout in a wave 3 this could be a rampaging move for both Gold and Silver

So looks like Gold is approaching a potential break out to a rally point.

High grade Copper (AKA Dr Copper - because it has a PHD in Economics...) often preempts stock indices moves (alas not always, not crucially in 2011 but that has as much to do with central bank interventions as anything else). The 4 hour chart seems to be showing a Flag break to the upside (TBC) but if this does break and then breaks the near term resistance levels then stocks may not be far behind... Always worth checking this out even if you don't trade it. Thoughts as ever keenly sought

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.

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.

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...)

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.

GBPUSD makes a fresh low on this bearish move but I still believe this to be a retrace prior to a stronger rally to complete a larger time-frame retrace back to about 13,800. If I am right about the Flag breakout then this is roughly halfway, which indicates a termination of this move around 12,800 (but could end sooner). Whereas EURUSD has a decent Positive Momentum Divergence (PMD) on the 4 hourly we don't see this so clearly on GBPUSD, which added weight to my view that GBP will turn later and/or go deeper than EUR. If this all works out then there could be 1000 or so points in the offing on GBPUSD in the coming weeks prior to a resumption of the Bear.

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.

I agree @TrendFollower that if Gold breaks below the recent lows and my long term trend-line then 1175 is the next line of resistance, however it is even more likely, in my opinion, that this market will drop lower than that if the rally doesn't materialise. If and when stocks do capitulate the Bull gold will return to favour as a safe haven I am sure, even if only because of habit and herding instinct. USD will be the other safe haven, maybe also CHF, linked to gold. Perhaps if crypto had a few years to mature it could be an alternative but it is not mainstream and is too volatile and unknown for most people, other than the early adopters. But I am not a fan of Cryptos and predicted the Bitcoin drop, I'm sure there are some archived old posts of mine on the subject from before, so you have to take my comments in that context. I do believe that the Crypto bear is not over yet and am not sure Crypto in it's current first generation will survive, although block-chain probably will. As you say it will be interesting to see but I won't be trading it...