Mercury

So that was a bundle of Friday fun! Bitcoin turned just short of the Fib 62% (or right on it if you draw it from the first retrace bottom (Purple 2 at 3350), which is a legitimate start point (I usually have several Fib options in play but tend to reflect the most conservative in these posts). The turn was also just short of the lower pennant line, also fairly typical for the final wave to fall short as the market switches from one side to the other (bear to bull in this case). The fast breakout was the place to go long, which I did for my second attempt to trade Bitcoin [the first ended with a small profit as I covered the previous rally once I saw it was likely to make another leg down]. So what next? Having got long and now stop protected at BE I was looking for a break of that 8800 level I had previously identified as critical for bulls to break. It didn't on Friday but boy did it today! A break with a gap is an extremely strong directional indicator. Additionally this gap breakout also took out the Pennant top line. I think I can safely say that we are now in the next rally phase... So what happens next? Well the first question is whether or not the gap will be closed and/or the Pennant line will be retested. Past history might suggest the gap will not be closed, which would make it a breakaway gap, again very bullish. However we might see the Pennant line retested and a failure here would trigger the next phase of this rally. Any Longs at this point would require a stop below the gap to be safe (about 600 points currently). Assuming the Pennant is the correct way to interpret this retrace there there are 2 ways to read it as follows (i.e. it is not a massive 1-2 that suggests an end of rally 100,000+ type destination, I am sure there will be plenty calling these stratospheric levels so I'll leave it to them): If the pennant covers the whole of the rally phase from the wave C (purple turn) and the Pennant marks the halfway point then by conventional charting techniques the project for a rally end is circa 18,000. This would line up as a large scale A-B-C for the whole rally and suggest a lower high vs the ATH. This would also set up a fast 1-5 bearish drop that would carry below the previous turn. However if the pennant is marking only the wave 3 half way point then the 18,000 (or a little lower, actually around the Fib 88%) would be the end of a wave 3, at which point I would expect to see a retrace to wave 4 before a final rally phase that would push beyond the previous ATH. Naturally I have no idea how far beyond, it could go a long way if the previous rally is anything to go by. Scenario 1 is the more normal way of reading it but price action over during the next rally phase will hopefully shed more light. What I can be confident of is that a rally from the current levels to circa 18,000 is almost a certainty (as much as you can say that about anything, just ask the All Blacks - rugby team - about certainties...). Still on the balance of probabilities a Long trade here nets circa 9000 points if you can stomach the draw down risk of 600, seems like a decent risk reward ratio to me..!

I should add, it seems like this guy has a poor money management regime in this system if he is taking too much one way exposure. My skeptical side thinks this is a mechanism to suck in more followers, although in fairness I do not know if he has a monetisation model for his followers or not, maybe this is just his way of achieving external validation...

Err, day trading? No thanks! His roller coaster can be smoothed out if he switches to longer term trading. Day trading is a roller coaster, that's part of that game, especially intra-day. He is right about his emotional pressures, it is because he is over trading (too many traders seeking to generate massive hits in one go). He is wrong that the way to address this is to go back to a small account as he will not have addressed his underlying emotional issues and trading errors, they will emerge again if he is successful (i.e. his account grows). In the end trading is about accumulating wealth over time not about generating a steady income. The opportunities the markets offer are lumpy so you have to be ready to take advantage when they are offered. A big part of trading successfully is to not trade, most of the time.

So my fundamentals backdrop to the technical analysis, which is important as otherwise you are trading in a vacuum or microcosm and that means you don't really have a macro set up, is different to your @TrendFollower in that I think the big idea is blockchain not crypto currencies per se (or at least not the ones we currently have). I know you also think Blockchain is the future so we just disagree in the future of the coins I think. Blockchain is an opportunity to raise the financial system out of the dark ages of computing. It would be a wonderful thing if we could get 1 medium of exchange (or barter) globally that everyone signed up to. That could in the end be Bitcoin but more likely it will be a new medium that all governments sign up to and all consumers then use (i.e. the end of national currency). This would eliminate FX trading, which only exists to perform an arbitrage function. This would in turn give the medium an intrinsic value of zero, in terms of how we value currency today. The value would simply be as a medium for barter and local pricing would not be effected (i.e. a bag of flour in India would not cost the same as a bag of flour in the UK in terms of the universal medium). It would also eliminate the inefficiency of currency exchange and the associated risks. More widely the ledger functionality of blockchain would revolutionise the custodial side of both banking/financial services and accounting such that one can see real time where ones assets are and transfer then 24/7/365 to anywhere in the world without the need to wash transactions through a bank account and the associated Fiat currency. Such a scenario eliminates the USD as the global reserve currency, which addressed the issues many countries have with US financial policing (not just the likes of China and Russia BTW). So no one has to set up a competing reserve currency, which would only serve to further complicate an already byzantine system. Of course countries like China and Russia would have to want global cooperation rather than global technology and financial warfare... So lots of exciting and ground breaking opportunity BUT in my experience and more importantly with the lessons of history several things happen repetitively with such revolutions as follows (not an exhaustive list by any stretch of the imagination): There is a wide eyed almost religious fervour among the proponents of the new movement such that they seek to wash away all of the old and replace with their new vision. This never materialises how they envisage it and also the changes take a lot longer than imagined. Here, typically, first mover advantage isn't really. There is a gold rush frenzy surrounding the revolution that results in multiple boom and bust scenarios that smack of ponzi schemes (and there will be some) but in the main are just gold rushes, the majority of which do not pay off. So in this context, at best, 1 or 2 Cryptos survive. There is a major event that causes the first revolution to implode clearing the way for the version 2.0 to succeed, the obvious analogy is the internet boom but you could also look at almost every political revolution too, plus the advent of electricity, railways and so on. There needs to be a major event in the broader current state to allow the green shoots of the revolution to reemerge but legitimised as more mainstream and less anarchic. Ultimately no one trusts a revolutionary (tell that to Jeremy Corbyn! And Labour know it...) This pattern is repeated over and over in history during many technological and political leaps. So put simply, I see no reason why the same pattern would not be followed in this case. Human nature is unchanged. The major event that would be needed in my opinion is a complete meltdown in the existing financial system such that it becomes evident that it is moribund. This paves the way for real change but humans seem incapable of evolving without sever growing pains and indeed requiring a major crisis catalyst or pain stimulus to effect real and sustainable change. Just look at the inability of humanity to grasp the existential crisis currently postulated a climate change but in reality it is a matter of over population, which no one wants to talk about. So within that macro backdrop I see Bitcoin, and other cryptos, as in the gold rush stage, as can be evidenced by the price action. Within that context I can see another large rally phase before the implosion I cited above and if this occurs coincident with a wider financial systems meltdown then blockchain technology will probably emerge, together with a single global medium of exchange, to renew the trust in the system. Alas there will be a lot of pain before we get there. So my trading thesis, which is the same as yours it seems, is ride the waves if you can identify them and get in safely but, and here is where we probably diverge, don't think you are going to ride it to infinity and beyond, rather look for a decent exit for good profits. Those caught in the gold rush fever will never agree with me on this. C'est la vie, I don't need them to.

The target is purely technical at this stage. If the market had completed a retrace back in April 2019 I would have expected the $50 level to be broken and it may yet be as this rally is not yet confirmed for me. My thesis is that the April turn was a wave A not a C and the move down that ended with the massive gap up was a wave B so a wave C is next, which ordinarily should exceed the April high. After than I am looking for credible wave C end and turn zones, of which there are several, including $85 and the Long term Fib 50% zone. I don't need to worry about this now I just need to see if the rally will confirm, keep my stops close and move to break even as soon as practical and let it play out. Then price action will reveal, hopefully, where the market is heading in due course.

Looking like a short relief rally on USD (and associated pairs) that has retested the weekly channel line and failed to break back through. Might get another test but a strong drop from here is also very much on the cards with similar price action on EURUSD, GBPUSD, USDCAD and AUDUSD. USDJPY is still keeping pace with stocks, especially the Nikkei so is still a bit buoyant at present.

Potential resistance break in play, bit more to go to be confirmed but the technicals are supportive. A strong breakout here will align to my road map that targets a retrace rally to about the $80 mark.

Bitcoin continues to follow my road map. The 8800 level remains a vital resistance zone but right now a more important zone of support is coming up. This is an area I highlighted previously as a make or break as I feel a break lower through this area (circa 7200, the Fib 62% level, or between 7000-7400) would suggest a full breakdown in the market and possibly signaling the end is nigh. The fundamentals could be construed as supporting this scenario if you believe the price action is more indicative of a highly speculative mania. Certainly the % or IG traders Long suggests that everyone is eager for another massive rally, despite the technicals... In order for crypto to supplant either Gold as a store of value or Fiat currency as a means of barter the speculation has to stop and cryptos like Bitcoin (well in fact for the ultimate vision to become reality there can be only one really) have to be essentially valueless (in the sense that it cannot be valued in USD). Crypto has to resolve the split personality issue as well. Is it a challenge to Gold or a challenge to Fiat? Can it credibly be both? If we get a major financial system crash in the near term I don't think any of the Cryptos will be sufficiently established to be either. So that leaves speculation for now and such markets are not much different to other speculative financial markets so for now I am leaning towards a bounce off the bottom of the consolidation Triangle (maybe around the Fib 62%) and a final rally. If that occurs then the projection for a rally end is about 18000, which is lower than the previous ATH as around the Fib 88.6% level. However that unclosed gap still lurks around 6000... Interestingly the 8800 level is setting up to align with a break of the upper Triangle line. If we do see a bounce then the next big make or break will be a test of that resistance zone and a breakout of that to the upside should herald a big rally phase.

Breakout!

Whatever about Brexit, deal or no deal (looks like a deal is on the table but the self serving interests of the MPs still have to be overcome on Saturday!) the overwhelming driver of FX at present is, to me, the USD. Currently this looks to have turned into a bearish phase, as suggested above and followed up with price action since. The turn down from the weekly channel line on NMD still holds sway and now the market is at the lower channel line breakout point. At the risk of attracting another ~ankey comment about breakouts, this is the critical point. A breakout through this support zone with a close below is critical to the continuation of the bearish move. GBP pairs will be susceptible to wild moves (probably more risk to the downside if the MPs decide to continue to play silly buggers) so either guaranteed stops or cash in before Friday close would be my approach but other pairs (possible EURUSD might hold some risk too) should not be unduly troubled by a local issue. AUDUSD and CADUSD are also going great guns (nothing to do with Brexit!).

Oh oh! US retail sales growth negative for the month of Sept, vs consensus of +0.3% and last month print of +0.6%. According to economist consensus the manufacturing recession (admitted) will be just like the 2015/16 case where Services and the Consumer saved the day. But Services ISM data is trending down since Oct 2018 (hmm, what happens in Oct 2018 again?), and so has US NFP as it happens, but that's ok, apparently the US economy is still strong...

Stop placement is a critical part of a trading strategy no doubt @DSchenk but I cannot help you with 5mins charts on that except to say if you have indicators telling you to enter a trade and then price action does not follow your plan then you have to get out and seek a reentry at a later stage (or reverse your bias if appropriate). I would always prefer to get stopped out a few times for a small loss and catch the big one I was seeking than hold too far into the red. Of course it all depends on order size and the size of the move you are seeking vs the stop out size and number of attempts. Losses are part of trading, as many of the top traders over the years will attest to, you have to learn how to lose before you can learn how to win, seems counter intuitive but that is also synonymous with trading, in my opinion. Due to the nature of my method and the timeframe I trade in I can't really advise you on 5min chart day trading. I can only discuss the longer term trend situation and suggest that you want to be careful trading against that trend. With respect to the FTSE, and most stock indices, my assessment is bullish in general but with a lot of whipsaw potential while the markets remain in trading ranges. Only the US large caps seem intent on making fresh ATHs, which is not a situation that is sustainable long term of course.

FWIW @DSchenk, and it may not be worth much as I don't look beyond the 1H charts typically, I see the FTSE100 rallying to break 7250 to join other indices. The issue you have right now is the FTSE100, bizarrely, seems to have been held up by the very strong GBP but ultimately the FTSE and the Dax and doubtless others, all wait to see what will happen when the US large caps open. So if you are intent on trading in the morning (European time), as I think you seem to be doing from your past posts, you are likely to hit whipsaw price action as the main moves seem to come from 14.30 (uk time) onwards.

Whatever man, there is an old saying, "he who laughs last laughs best". What I was offering DSchenk was my opinion, no need to laugh at it, you can just disagree, respectfully, or maybe you can't... FWIW, @DSchenk, back in 2016 I though that might be it, many people did, but it turned out to be a consolidation, which the charts revealed, that's life, still there was a good bear market phase to profit from, which I did. I have been long biased stocks since the consolidation became apparent but watching for the potential end. Now, since 2018, we are again in a period of either consolidation or termination. Time will tell which it is. If one is not open to both then one is locked into ones bias. What was it CaseyNotes said recently? "Once founded they hold their 'opinions' like it was a bar of gold". Buy the dips strategy in the face of such global economic deterioration seems like such a thing to me. So actually this all goes to prove my point, in consolidation phases, better be careful.

PS: @DSchenk, forgot to say, Gold/Silver - Short; USD - Short; Coffee - Short; Stocks - Flat; Oil - maybe Long but yet to trigger.

Brexit Schmexit! After the referendum result was announced the FTSE went on a tear, along with all the other stock indices. GBP was hit, although that was due and GBPUSD already well in a long term Bear market as a result of poor balance of payments, notably especially with the EU. Short term fluttering aside the biggest driver for the FTSE100 is the US stock indices as a reflection of the sentiment towards the global economic conditions, which are deteriorating, fact! My view is that we are at the end of a major bull cycle so trading stocks is especially risky now until the direction is clear (that could yet be another final bull surge to a blow off top BTW). Just look at a long term chart for any of the major indices and you will see that they have been in consolidation, albeit with new ATHs on US large caps but only on these, which is a notable divergence. Since Jan 2018 the Dow is up 290 points (yes just a measly 290 points), buy and hold? I don't think so. There have been some fantastic medium term tradable swings since then and the best and fasted have been bearish but you need clear triggers to spot the swings. One thing you could consider @DSchenk is either standing aside until things become clearer or trading another asset type until things become clearer on stocks. USD has been the asset to be in since Jan 2018, Gold since Aug 2018, Bitcoin since Dec 2018, if you have the stomach for it. That said, I am clearly coming at this from a longer term perspective, very definitely NOT from a day trading perspective but when I did try day trading stocks I could only make it work when I traded with the main trend (i.e. knew which way that was headed) and avoided consolidation ranges as there is too much whipsaw price action.

Hedgeye, among others, are expecting/projecting a bad earnings quarter based on the trajectory of earnings and macro data. What would happen I wonder if poor earnings was followed up with a further deterioration in both manufacturing and non manufacturing ISM data at the end of October/beginning of November? What would happen on the non manufacturing ISM slipped below 50 ("Hey man, services is fine! Don't worry, buy the dips..."). The killer blow will come when jobs data finally crumbles, not because that drives the economies into recession, there will already be there, but from a psychological perspective lack of job opportunities and security is what most people see as a recession, including financial markets. And if you are feeling bad about you trading system not working out too well just look at Neil Woodford! If this kind of event, plus the US online brokers dropping commission to zero isn't enough to suggest that the wheels may be coming off then check out the ASOS results. Wait a minute? I thought the consumer was still strong and retail was merely suffering from a switch to online? Hmm... https://www.bbc.co.uk/news/uk-england-50066615

Oil looks like it is about to breakout into a bullish phase as per my previous outlined road map. Chance of reversal is still there but when it does breakout I think it will be fast and strong. I guess weakening USD can provide additional stimulus as well. Long term I thin Oil drops below current levels but I am now more sold on this happening via a strong rally phase, possible as high as $80 before a wider financial collapse pulls it back down, along with a decimation of stocks. As with the USD we are probably looking at the end of the year/Jan 2020 before this plays out, based on current projections. Bear in mind we could see a stocks "correction" in the meantime but the road maps on stocks are difficult to read at present, as one might expect in an ending phase.

I am not trading this pair at the moment as the bigger rewards are elsewhere but it is instructive to corroborate my assessments of the related USD pairs. I think we have seen the completion and breakout of a Flag formation that, if correct, would signal a wave ending in and around he 8500 support zone. Subject to the price action to get there this is currently looking like a wave 1 down that should trigger a counter trend wave 2. The turn of the wave 2 would be an excellent place to get Short this market as then a long and strong wave 3 should ensue, that could be worth over 3000 points. All in the future though.

Like several USD pairs (especially GBP) USDCAD executed a sharp turn and reversal at the end of last week with a lower low vs the wave B (brown) and a small 1-2 (grey) to kick things off. This has occurred after an extended period of whipsaw price action,which appears to have resolved in favour of CAD. Might we also get some bullishness in Oil as well as USD weakness? If so this one will run and run. I believe we are seeing a fast wave C here, which will run faster and longer than other pairs, which are still in an initial wave A. This one could be the pick of the bunch and could carry much further than the 12700-800 area I have as an initial target, especially if oil get bullish in a big way...

EURUSD looks to have turned but we have seen this before only to suffer a reversal and fresh lower lows within the weekly chart Triangle channel. Therefore, while I am Long and will hold and add on any credible pullback and rally price action, I need to see a break of that upper channel line to get confirmation that the trend has switched to a counter trend rally. The price action on other pairs and DX is encouraging that this time is the one. While I think GBP will rally stronger there will be a reversal phase (check EURGBP) at which point we may see EUR rally harder while GBP goes bearish for a time (not like there isn't plenty of political risk about that could drive that!)

The parallel channel breakout was confirmed in fine style yesterday with a close far above the breakout zone. I had already gone Long much lower so didn't need to sweat that but the confirmation suggest to me that the Fib 62% is a likely target for a wave A of a large retrace that could test the long term resistance trend line up around 14000, which would also be the Fib 76/78%. As I have mentioned on my EURGBP thread I have been anticipating a contrarian GBP rally against the Euro, while the MSM zeitgeist called for parity, and we are getting this rally big time now (I think 85p is a reasonable medium term target before any serious counter trend rally. This means that GBPUSD will rally further and faster than EURUSD, which is certainly the case at present.

Breakout from the short term support (crica 9820) precipitated a strong move on most relevant USD pairs against the dollar, with the notable exception of USDJPY, which remains correlated with stocks (particularly the Nikkei) for now. I am expecting this move to continue to break the lower channel line and make at least the Fib 38% for a wave A of a retrace that will probably take until the end of the year to complete, but let's let the market decide timing, which we will read as price action. We could b entering quite a period of FX volatility as this slow grind up for the USD has given way and doubtless there will be some panic reversing as the dollar bears take over.

While the Euro and the GBP are in stasis, the latter unsurprisingly given the strong move yesterday. AUDUSD seems to be staging a breakout with a higher high this morning. There is still plenty of resistance to get through but the signs are promising for a string rally phase. I would like to see a break of the 6830 area and then a test on the upper daily channel line. A break of the latter will surely confirm a bullish phase. On the Daily chart you can see the channel, forming a Triangle with 3 solid rejections on both the bottom and top lines. The final wave down was in a 1-5 that culminated with an effective double bottom and PMD. The turn has been backed up by a 1-2 retrace to the FIb 62%. On the 4H chart you can see an additional ending channel that was broken and then price put in a failed retest of this channel line before rallying away. We now have a slightly higher high than the wave 1 (brown), and strong rally price action, which is suggestive of a wave 3. Should at least test the upper daily channel line, if not break out.

Looks like that 8800 resistance level is key. Price was rejected back down sharply off this. At this point it looks likely we will see another leg down, another test of the lower Pennant line and likely an important line of support (circa 7400).