Mercury

Dr Copper is showing a bearish set up for me. After the potential wave B top out we now have a 1-2 with the turn on Wednesday, similarly to stock indices and a fall way, more bearish than on stocks, which may well prove to be an indicator for where stocks will go next. Certainly falling copper (and other hard commodity prices) is bearish for emerging markets and China...

Dr Copper is showing a bearish set up for me. After the potential wave B top out we now have a 1-2 with the turn on Wednesday, similarly to stock indices and a fall way, more bearish than on stocks, which may well prove to be an indicator for where stocks will go next. Certainly falling copper (and other hard commodity prices) is bearish for emerging markets and China...

The perma bulls are fixated on both the Fed and a US/China trade deal to support their continuation scenario. There is a technical set up for this too so I cannot eliminate the scenario and "markets can remain irrational longer than traders can remain solvent" is another saying to take note of. However it is the irrational part that I chose to focus on such that any break in the fragile house of cards will be the black swan. As for me I do not think we will see a meaningful US/China trade deal at all, or at least not for many years. The Fed will probably turn full dove again but in the face of deteriorating global economic data they will only confirm and fuel the panic. I do not think the US large caps have topped yet, although they may have, impossible to tell at this juncture. Therefore I remain with my lead scenario that we will see a bearish phase to set up a final Santa rally to end the bull once and for all. The US large caps have twitched last week but have yet to show a breakdown. early next week should clarify the issue, let's see... I also add the China A50 for a trade deal angle. After a double top this market seems to have put in a retrace to the Fib 88% and now turned bearish. It may be useful to watch both the A50 and the HK50 for clues because if these markets start to drop hard I would suggest no deal is immanent.

The Dax is a bit more buoyant than other non US large caps and has been flirting with a new ATH but failed to break through the Fib 88% recently. The ATH is way back in Jan 2018 on this one and the price action since then is consistent more with a 3-4 and rally as with the US large caps so I wouldn't be surprised if we get a fresh ATH on the Dax in line with another one for US large caps via a Santa rally. However we may also have seen a wave 2 turn that produces only a lower high to come. It all depends on how low the next bearish move goes and what the form is.

Another major market that seems disinterested in following the US large caps is the FTSE100. Remember the ATH in this case was back in May 2018, even earlier than the Russell 2000. In August 2019 we got a significant turn at the Fib 88% off the ATH and a very share bearish phase that looks like a wave 1 to me, that is motive and signaling a trend direction change. What we then needed was an A-B-C retrace and lower high to confirm. Since the wave 1 (blue) turn up the market has indeed moved in what looks like a retrace motion with a possible A-B-C completed on Wednesday last with a top and drop displaying a strongly bearish pin bar candle and backed up with a bearish candle on Friday. Overall that produced a pin bar candle on the weekly with NMD on the Daily at the turn. This also occurred at the Fib 62%. Interestingly the entire move since the wave 1 turn is enclosed in a rising Triangle, which could produce one more slightly higher high and hit on the upper Triangle line to complete a A-E, or spike an overshoot to the Fib 76/&8% off the Wave 2 (purple). This could coincide with a US large caps higher high to end the never-ending bull after a Santa rally. For now though I expect a bearish phase for next week, at least to the bottom of the Triangle. A break of this and the 6960 support level would confirm the wave 2 (blue).

So are we there yet? Let's start with the Russell. Rallies look strong just before the end. That's why the old market saying, "sell strength, buy weakness" exists. Harder to do than say, especially if you are a trend follower... Since my last post this market has been flirting with the Fib 76% but on Wednesday it spiked and dropped and after 2 more attempts to push up (third times a charm, or not!) we then for a bearish candle on Friday. With strong NMD at th Fib 76% this smells like a wave 2 turn to me. If we see a strong bearish move next week then that may be that for the Russell as the ATH back in Sept 2018 will seem like a better bet.

Very happy with my Longs on this one and each week seems to be bringing higher highs at present, long may it continue... If we do get a continuation we may seem some serious movement on a daily basis.

Brent is stuck in a rising Triangle. A resolution breakout to the bearish side may merely be a 1-2 retrace before a strong rally phase (i.e. delete the Triangle lines). A bounce off the lower line may set up another assault on the upper line for a breakout rally. If USD turns viciously bearish then Oil might get a boost, at least temporarily. Tricky one to trade just now and I prefer other set ups so will watch and wait .

Gold/Silver is in a bullish retrace but of what sort? If USD and stocks turn bearish for a while then I would expect the rally to be reinvigorated. I have an adjusted EWT set up accordingly, which consist of a complex retrace form, a set of A-B-Cs of which we are in the final wave C but it looks like being in an A-B-C form itself. If this plays out then expect a retest of the Triangle breakouts or higher before a reversion to the Bear retrace. I think this scenario would occur if we see a sharp bearish phase on stocks in the coming week or two and then a Santa relief rally to bottom out gold/silver (top out stocks).

SO USDJPY made a higher high and I am forced to redraw my Triangle, c'est la guerre! But stocks took a little stumble and this pair put in a potential Doji candle on Friday. If this is backed up with a bearish candle on Monday/Tuesday then a break of the lower Triangle line may be on. I am Short with a close stop above the recent high.

EURUSD was all set to drop way past recent lows with a slightly lower low but a flourish of buying came in to reverse the trend with a significantly bullish candle. We have strong PMD on both the daily and 1H supporting that bullish move late on Friday. I might expect a little retracing back down on the open tonight/overnight but if we then see another turn and rally I will get more confident of the snapshot preemptive Long I took on the 1H pin bar and seek to add. If my GBPUSD bullish scenario plays out then like as not we may see something similar on this pair. However the macro case is less strong for EUR in my opinion with the EU being hurt by the actuality of a UK departure (remember the UK is the 5th largest economy globally, I look forward to the UK government with a majority flexing its muscles a bit more in negotiations). In addition the Eurozone is well underwater in terms of interest rates, whereas the UK is still positive and will likely start to increase interest rates to get investment inward, thus goosing the GBP. If the Fed continues its dovish path then the EURUSD will likely get a boost, just not as big a boost as the UK.

In relation to my recent GBPUSD bullish scenario post, USD (DX) appears to be keeling over bearish, although we have seen this a few times now so lower lows are required to confirm. You could wait around until it breaks below 9650 I suppose but the set ups on GBP and EUR are good so why wait when you can get in with low exposure? USDJPY and USDCAD may also be showing some signs of turning bearish, which would provide the strength needed to support a wave 3 call. We have NMD at the wave 1 (blue) [note this may not be a wave 1 but a wave B that takes the market down to a much lower level, maybe 8000, which would be consistent with my GBPUSD bullish scenario, more on that another time]. The turn occurred at the upper line of a Triangle consolidation, consistent with a wave B retrace. The bearish drop is a wave 1 (hmm, could be an A-B-C I guess so not conclusive yet). Now we appear to have a credible retrace to a decent resistance zone and a bearish candle on Friday. As I said I really want to see a lower low but for now I maintain a cautious bearish stance on the USD, at least on GBPUSD and EURUSD with others yet to confirm. Any significant bearishness on stocks would probably send USDJPY crashing if there is already a USD bear mood about.

Most commentators seem to be of the opinion that the GBP is going down, down, down vs pretty much everything else. I have been of a similar bias, at least in terms of GBPUSD but more due to USD strength than GBP weakness, not so much on EURGBP, (see my Triad thread for details of why I think EURGBP is going down long term). As a contrarian by nature my interest is always piqued when I see the majority talking up a "one way bet", as is occurring on GBPUSD and I look to see if something else may be about to occur. So what if the Brexit issue is finally resolved on December 12th? This would mean a Tory majority (or workable partnership with the Brexit party perhaps). The Tory campaign strategists seem to be doing their best to lose this election with a series of well covered gaffs, starting with Rees-Mogg on Grenfell; then a series of mishaps with candidates turning out to have made ill advised statements in the past; then BoJo himself trying to justify comments made in journalistic articles; then a manifesto that turns the funding taps on and is clearly un-affordable; and finally getting caught up in fake claims such as the number of "new" nurses they will hire and sticking to this despite being found out. It is as if they don't want to win... If true they are being undone by equally or greater catastrophic campaigns by the Lib Dems and Labour, the latter of whose errors are no numerous and calamitous I don't have time to write them all out but just watch Andrew Neil's interview with Che Corbyn and you will get the gist. So net a least worst result of a Tory victory is probably on the cards and therefore Brexit happens in short order. One uncertainty resolved, for the next 5 years at least... If Brexiteers turn out to be right and the Remoaner Armageddon scenario is false then the UK (inc Scotland as no further referendum is likely in the medium term) can make its own trade deals, address its balance of payments and deficit issues and reinvigorate its economy overall, subject to whatever deal with the EU is eventually done, if at all... But what happens if a global economic shock, recession, deflation, stagflation, hyper inflation, call it what you will, occurs? Well spending plans will go out the window for a start as survival will be paramount. Interestingly enough some traditional Labour supporters are not going to vote for Labour this time on the basis of their spending plans and poor track record with the public purse. So it seems the people may already get the need to be careful with the national finances even if the politicians don't, yet! But we should remember that, although it may not seem like it, the UK is the fifth largest economy in the World, surprising given the heyday of the Empire is long gone and so is British manufacturing. Still there it is. Add to this that the UK has its own currency, a venerable one that still has the air of security about it in many parts of the World. Add to this that the UK is, in my opinion and in the opinion of many people from overseas whom I know, the worlds strongest democracy (note I am not British so this is not a nationalistic view). Add to this that the UK will have just left the protectionist, undemocratic EU (Brexiteer view and view of many non EU members) and be a stand alone offshore entity. Add to this that the UK is about as open and business friendly a jurisdiction with a reasonably low corporate and person tax rate (not if Corbyn/McDonnell have anything to do about it!). Add to this that the UK has one of the preeminent world cities in London, a place where many overseas people like to stash their cash in property, listed companies and bullion vaults and the case for a flow of funds into the UK under a global economic shock is very strong indeed. So that's the fundamentals case, and open to debate of course and full of what ifs, but what do the technicals look like? Looking at the quarterly chart (including a long term chart - not shown) since the 1950s (and before, as the British Empire declined) GBPUSD has been in a Bear market that has roughly dropped in a motive wave to the 1984/5 all time low. After than a drawn out A-B-C retrace that hit the Fib 62% off the 1950s high point occurred at the credit crunch, which set up the current bearish phase. Note this has precisely nothing to do with Brexit, although joining the EU may have had an impact..? During the credit crunch GBPUSD dropped sharply then went sideways until 2014 (2 years before Brexit!) before dropping again. In fact we could view the Brexit referendum and everything that has since occurred as the final phase of the Bear and not the trigger. What if the drop in the immediate aftermath of the Brexit referendum was the end of the Bear? We often see an exhaustion spike at the end of a motive wave, and this would certainly qualify (note many people though it a flash crash but maybe an exhaustion spike is more correct?) What if the entire move so far since the ATL is an A-B (red), then the next phase would be a large wave C rally that will break the resistance trend line (see monthly chart) and carry one for some time to come. Looking at the monthly chart the 2016 bottom occurred at a confluence of 2 possible supporting trend lines after a 1-5 motive wave off B (purple). The end of the move was in Oct 2016 and occurred with a then all time net negative Commitment of Traders (Futures & Options) print (-94k) and record total Short positions (-147k) with a significant pin bar (see weekly chart). A few months later we got the all time lowest net COT reading (-113k, -147k shorts again) and then the market rallied away. Looking at the weekly chart I can see that pin bar that prompted a 1-5 wave rally (exhaustion spike?). Normally a 1-5 is a motive wave (long term trend direction). In my bearish scenario I marked this out as a potential Flag formation but is doesn't sit well in the context of the rest of the price action, being too long. After a 1-5, if it is a motive wave 1, we tend to see an A-B-C retrace and at present it looks like this is what we have seen with a turn in September of 2019. This ended with a pin bar reversal, quick 1-2 (green) and rally away through weekly trend line resistance. Note also that the COT print just before the reversal was a net -107k, large but not all time but still a classic contrarian signal, which I traded long. At first I though this was a retrace move but the current consolidation does not really match the likely route for an A-B-C retrace that would end inside the long term resistance trend line (monthly chart) so my new lead scenario is that this consolidation is setting up for a much stronger rally that would break that monthly trend line and carry on for the foreseeable future in a large wave C (red). Note at all major turns significant positive momentum divergence and over sold oscillators are also present. So net I think this more bullish scenario fits both the technicals and price action and the contrarian bias plus there is a fundamentals case, subject to what happens in the election. If the Tories do not win a workable majority (with or without Brexit party help) then all bets are off, or at least we may seen more consolidation or whipsaw until things are resolved. If Labour win, in any form, my Bearish scenario is likely to kick in big time as they look to explode the deficit and consign the country to another year (likely much more) of uncertainty and divisive politics, and that's before they get stuck into their long term Marxist state creation. The most important election in generations? Not wrong...

Not sure I fully understand your question @Trevbeats so if I have got the wrong end of the stick please let me know. In terms of chartist patterns, this is well documented charting techniques (e.g. consolidations, retraces, Head & Shoulders, Double top/bottoms etc.). In terms of other technical analysis that I overlay onto basic charting techniques (e.g. trend lines, Elliot Wave Theory -EWT- etc) that is partly a visualisation technique and, in the case of EWT and charting techniques, a means to map market participants sentiment as it expresses human nature (Fear and Greed). People who use such techniques believe that while history may not actually repeat itself the circumstances impacting decision making do and human nature is largely unchanged over time. Therefore market participants (people, even those who program the algos) react in similar ways to similar circumstances through the lens of the Fear/Greed seesaw, which itself is a form of fight or flight. One reasons large financial institutions (and some smaller players too) attempt to deploy purely algorithmic trading mechanisms is to avoid this fight or flight emotional overlay. Inr eality though the programmers are human and constantly adjusting the algo parameters and we are not talking about machines or AI making up their own mind here as Algos are not AI and in fact humans, some surmise, are also algorithmic machines, just biological ones. This is at the heart of studies like Kahneman's Thinking Fast, Thinking Slow. I cannot speak for the markets as a whole, except to say that there are many methods being deployed so I don't buy into the self fulfilling prophesy argument, at least not as a general rule. At best I think all macro analysts and long term position takers have a road map in the sense that they have an entry and exit sketched out but not all will have it on a chart as I do.

Early days but Bitcoin appears to be motoring after a V-Bottom turn with a bounce off the Weekly/Daily supporting trend lines. Looks like a retest of the upper retrace/consolidation line (Triangle) is on the cards.

Depends on where you entered. If you entered Long below the weekly channel line, ideally on the first retrace (12200-12400) then holding stop protected at BE is the right strategy for me. If you entered above the current price, well I would already be out but we may be seeing an FX turn this morning. My method rules enforce taking losses quickly on a reversal vs my route map and seeking a reentry rather than holding a deeper drawdown in the hope it turns eventually. Lose small win big. Regarding 1H vs Daily, I have found you need to look at both but best to ignore 1H sudden candle moves and focus on the trend as it is reflected on the Daily. This is for longer term trading, obviously shorter term traders may be all over 1H candles.

Don't follow you. GBPUSD is currently in consolidation.

This pair looks to be close to completing the current bearish phase and turning back into a rally. At present I am seeing this as a counter trend relief rally. I have a 1-5 form for the bear move with a Flag at half way and PMD at the current turn. Can't rule out another leg down further into the support zone but in any case I am not seeking to trade the rally but rather the next bearish phase. What I am using this analysis for at present is to support the case for a EURUSD rally and my expectation for GBPUSD to remain flat in consolidation for the short/medium term.

Thanks for that @CharlotteIG, my analysis is similar in that I have a turn and breakout on GBPUSD and current consolidation, probably in a Flag, which suggests a continued rally on breakout. I believe this is overall a counter trend rally and the long term trend remains bearish. Naturally the UK election, Brexit new referendum or not, Marxist based government or not, Scot,and indyref2 or not is cause for concern but I imagine USD weakness might supersede this to some extent. My EURGBP analysis is indicating a period of EUR dominance to come soon, which may also be attributable to the UK political situation, at least short to medium term. therefore I prefer to trade EURUSD rather than GBPUSD, although I did trade the initial breakout but have cashed for profits.

Coffee appears to have staged a confirmed breakout, early days and we will need to see some strength for the rest of the week to be more assured. Ignore the purple line on my daily chart it is a weekly line that doesn't map well on PRT (quite a weakness that). It more closely aligns with the blue daily trend line, as you can see from my post on Saturday last. We are seeing a bit of opening weakness but nothing concerning as yet and a break higher will be very encouraging.

Brent has been making an effort to breakout to the upside but failing so far. After a deep retrace within a rising wedge we now have a smaller, shallower retrace that seems to be providing a base for another test of that key resistance area. With Brent an eventual breakout is likely to be fast and strong. USD weakness might provide some additional impetus here.

Predictably the Yen strengthened overnight as the Nikkei spiked and dropped. But USD may also be turning, which would provide a double impetus for Yen strength. After a top and turn at the top line of my daily chart Triangle pattern we have seen a potential breakout of the lower line and now a possible failed retest with a spike through overshoot at the Fib 62% (spike to Fib 76/78%). The retrace was in an A-B-C form. Let's see if price follows up with a confirmatory drop away...

Looks like we may be at another potential turning point. The last one didn't hold for US large caps, which have just made fresh ATHs overnight BUT they did for the Dax and Nikkei with FTSE100 and HK50 remaining suppressed. Importantly the Russell 2000 made a fresh high to a potential wave 2 off the ATH to complete a retrace at the Fib 76%. All of these indices are turning this morning with the Dax remaining below the possible exhaustion spike level and turning at the Fib 76/68% after an A-B-C retrace pattern. The FTSE is interesting too in that price seems to be contained within a developing Triangle consolidation after the wave 2 (purple) retrace off the ATH. Note also both a short term unclosed gap on the most recent rally phase on most of the indices and an additional unclosed gap further down. These gaps will most likely be filled before any further significant rally. All of this points to a short to medium term period of bearishness before any potential Santa rally this year and then maybe we will see a resolution, one way or the other...

Regarding the Bearish Gild/Silver scenario, I forgot to add that short term USD strength and further stocks rallies might be likely coincidental scenarios. It wouldn't take much, i.e. doesn't have to be a strong rally on either or especially both. My analysis on both USD and stocks is supportive of such a slow grind rally but the impact on Gold/Silver could be much more definitive and trade worthy in my opinion. Other than Coffee and maybe Oil if there is a breakout I can't see much better opportunities, if you can't stomach going Long stocks.

While I am in a reflective mood after that coffee post I am minded to look at the perma bull argument that centres around the trend being strong. My first reaction is, well of course it is, it always is just before the end so duh! I looked back to the most recent similar bull market, the one into 2000 as this was also momentum/tech driven in the main and the first chart below (bull market to 2000) is interesting to me because of its similarity to the second chart below (bull market from 2009 to present). Note that the inception of the 2000 bull was the Black Monday crash in 1987 and the current one started with the credit crunch crash. The different being in the current bull the need for artificially created liquidity via permanent QE and ZIRP/NIRP is eye watering. This is the recovery that never was and at some point we are going to get an "emperor has no clothes moment". Chart #3 shows what happened next in 2000 (a 50% drop!). Note the break of the monthly MA 20. On the current chart MA50 looks to be the one to watch, maybe also an indicator of the extent of the asset price inflation and continuing financial engineering (or some would say manipulation) that kicks in when the MA20 is broken. Here is the thing with stocks. They need a reason to go up. They don't need one to go down. All that is required for a keel over that leads to a crash is a loss of confidence that morphs into panic (otherwise knows as Sentiment). When there is no reason for stocks to go up they either go into consolidation until a new reason emerges or they drop until they hit a price that is deemed cheap enough with all other things being unchanged. The internals of the indices are also interesting. The sluggish rise has mostly been driven by defensives, with some continuing momentum thrown in. Some commentators point to this as an opportunity for a further rally phase as investors switch out of defensives into growth, this is the basis of the continuation theory. But some of the high yielding stocks like tobacco are clearly in a bear market, unlikely to return to their high water mark, ever! This doesn't strike me as a balanced and "healthy" bull, more like a stamped getting to exhaustion. And what happens if/when bonds finally crack and yield curves go up? One of the reasons for massive buying of stocks is for yield and a bond price crash would make bonds much more attractive as a lower price and higher yield. In the past bond markets have tended to precede a stock crash and then precede again, by some way, a recovery. Several professional technical analysis have been suggesting diverging paths. There are some who are going with the continuation view of another rally phase. There are some that are calling tops but there are a lot of bearish analysts that see a final melt up first, which would allow everyone to be right except for anyone calling a top now. I am leaning towards the melt up scenario myself but with an eye open for a fast drop from here, that may either mark the top or set up the final rally phase. I find it hard to see a melt up that is US large caps only so I will be watching other indices for clues as we end the year. There is a host of data that supports the bearish case and this builds with each passing month. At some point we will get the straw that breaks the camels back but we wont know that until we have the benefit of hindsight. The only things that seem to be driving the stampede appear to be US/China trade deal tweets (I mean not even hard facts or actual progress!) and Central Bank liquidity provision (rich keeping the plates spinning). At some point they start falling... So in summary my assessment is that we could see a turn next week or the week after and this could mark the top but more likely is a final correction before a melt up blow of top. I do not see a sustained bull phase because the fundamentals aren't there, Perma bulls are betting on Trump and Powell, pretty thin gruel for me. I will not consider trading stock indices Long at this juncture, there are better risk/reward opportunities around (emphasis on risk here). I will wait patiently in the tall grass like a good bear and act on triggers (i.e. not try to preempt as this too is highly risky). PS: if you look at the COT data for the S&P500 (the eMini) you will see that it went net negative last week. The last major net positive was Oct 2018 and the Christmas recovery peaked in terms of net COT in April 2019 and has since been trending lower. Not the stuff of Bullish dreams, but maybe this means there is a splurge to come, who knows...