Mercury

With the breakout of GBPUSD (would like to see a daily close above support there and ideally a breakout through the daily channel line) and EURUSD making up its mind about whether to breakout or not I look at the third pair in the Triad for clues. My thesis is that when both of these markets rally it will be on USD weakness rather than intrinsic strength in either one BUT as GBP has been more depressed of later and with so much negativity around about GBP vs EUR the spring back relief rally will be stronger on GBP. If right we should see EURGBP turn and drop fast and hard and continue to do so for at least as long as the primary pairs rally lasts. And that is what we have seen so far with what looks like an exhaustion overshoot of my daily chart channel line and drop back inside. A drop away from this area is confirmatory of an exhaustion spike, and that is what we got. There followed a small 1-2 retrace, relief rally, which retested the channel line but failed to break back though, and another small 1-2 before a short term channel (1H chart) break and failed retest and then we were off to the races. Recently there has been a consolidation in what could be a small pennant of another 1-2, probably the latter and then a fast break down from this formation to where we are now, testing the lower daily chart channel. If I am right about a period of USD weakness then I would expect EUR to join the party soon and so we may see a relief rally off the daily channel lower line before a confirmed break. Worth watching the Triad to see how things progress over the coming days and during the Jackson hole panto.

Not this time so far, I am in any case Short off the breaks and stop protected at break even so no sweat of it blows back. I expect US indices to drop harder while FTSE and Nikkei go slower now, they are both out of session. Looks like we could be getting that 1-2 retrace turn about now, let's see...

Looks like you were right about another leg up there @Badtrader234, well except for the Nasdaq and the FTSE of course, which is well bearish vs the others. Right now I see the US large caps as having broken an uptrend and hit a short term support zone and in a temporary relief rally. When resolved I expect these markets to break back down below that support level. The NMD held for the markets that did another leg up and the channel breakout was swift and, in the case of the Nasdaq, strong. The fact that the tech market did not follow the Dow up gave me confidence to get short both those markets. Now I see 3 possible scenarios in play, other than a fast break back up through overhead resistance, after the relief rally concludes, as follows: Simple A-B (brown) contained within the larger A-B (green) to set up a wave C conclusion to the rally Wave B (green) was not correct, merely a wave A (red on Nasdaq 4H chart), recent top was a B and now we get a strong and fast wave C to complete wave B (Green) before a strong wave C rally The wave A (Green) was actually a wave 2 and the market hammers through previous lows and my lower channel line and the great bear is on I favour scenario 2 at present but let's see how the price action does... Note also the unclosed gap on both SP500 and Nasdaq. This suggests that both of these levels should be closed before any rally.

What seriously? You mean technical analysis doesn't always go to plan? Crikey I'll have to try something else, let's see, where is the number of my psychic?

Brent just went lower than the early morning low after a nice sell in rally. Looking good to eat the bear this time... Trick is to not get mauled too badly when it is your turn so you are still alive to profit from the next one...

This time?

Its all about the USD. Technicals showed the way, no need for news...

Seems like only 1 in 3 think we will have a recession next year. The consensus is for 2021/2. I agree economists are usually wrong, mostly because the economists surveyed are in he employ of the financial companies and the last thing they want is a flight of capital out of their funds. To call the end of the bull or a recession or worse is a one way trip to your own personal recession, which is why they don't do it. You have to look for the lone voice in the wilderness, the Dr. Doom types. Maybe they are all wrong and we will indeed slip into recession this year! Who knows, that is the point of the thread really, to keep it in mind and be watchful, not to trust to economist surveys.

Or maybe not @TheGuru12, On Silver price is knocking on the door of a breakout of a daily channel, could yet bounce of this but why wait until it has resolved before posting? I am bearish biased as I expect to see a retrace before a big Gold move and the situation does not seem to be set for that yet from a fundamentals perspective. We either need a meltdown or massive CB stimulus and FX wars. Technicals are the same as before but added to this is a 1H chart 1-2 retrace to the Fib 62% on NMD. Similar, perhaos even better, set up on Gold.

That's right @elle, that is why economists are saying it isn't here yet, so do I. We aren't there yet.

UK CBI Distributive Trades Survey data is interesting this time, not for a short term trade, not what I do, but more because the data was so negative (-49% vs consensus of -11%). Traditional "wisdom" is that this is bad for GBP so sell right? Well maybe, maybe but I think GBPUSD is more about USD than GBP these days. Why is it interesting to me? Well it is a strong signal that all is not well in Retail, which chimes with the general zeitgeist out there for me. Is this a Brexit thing? No one really knows but the reality is that retail has been under pressure for ages and not just in the UK. For me it is additive to the general picture overhanging the world economy in terms of the chances of a recession. There was an interesting piece on Real Vision this morning that touches on where we are in terms of recession etc. Interesting take on alternative signals of consumer pressure (US based) and views on the inverted yield curve. Most interesting piece is the relationship between Oil price spikes and recession triggers, not the first time I have heard this. Short term he is saying we aren't there yet but he is not saying don't worry, just worry later. Very interesting hedge idea, heard this in another context as a potential long term buy. https://www.realvision.com/tv/shows/trade-ideas/videos/oil-vs-the-yield-curve

Maybe a bit heretical given the rally yesterday, I'm sure Bulls are gearing up for a Green day BUT looks to me like we could be seeing a wave A (or 1) conclusion. I have a solid supporting trend line on most main indices, which if broken would be indicative of a bearish move. At present I am labeling this an A-B but lets see. I also have a 1-5 up and NMD at the potential turning points. With the high so close this represents a decent risk reward equation with low exposure for a tactical Short. Thoughts anyone?

A break of ST support looks immanent after a Fib 62% failed retest of the previous channel breakout zone. A break hear is indicative of a larger retrace rally end and then comes the long awaited bearish phase on USD.

Central banks keep options open - stop the presses..! Could it be they don't know what's going on? And haven't a clue what to do about it anyway...

I'd call him bland rather than level headed myself but you have to remember that these guys don't get paid to rock the boat, in fact the opposite...

Really? Does anyone on the forum think the markets have priced in Armageddon? Surely asset prices would be on the floor if that were true..? We need shock and awe in CB policy, is that levelheaded? Maybe more, less levelheaded commentators is what we actually need...

Ah! I misunderstood the nature of your posts @dmedin, seemed like you were negatively disposed. All I can say is it is easy enough to get the basics and then expand into the more complex structures but it take a lot longer to practice it, make mistakes and learn from experience. Even following someone is not a solution as even professionals get it wrong from time to time, actually quite a lot. Best way is to post your analysis maybe and ask for a critique (from fellow EWT analysts not naysayers, they will sap your mojo if you let them).

OK that didn't work. As the man says: So the Bear got me this time but actually for a small profit so I'll take that. But the market came up to the Fib 88% around the EIA oil stocks data release and turned there. Given the low exposure with stops just above the previous high (a break above this changes the immediate scenario I am working to) I went Short again prior to the data release and moved stops to the current high after the price action settled down. As is often the case the data suggested a rally and the result was the reverse... One reason of many I don't trade the data releases just the subsequent price action as part of my road map. So maybe I will get the bear this time, dunno, let's see. That is the nature of trading. No guarantees, nothing is fool proof. I can't control data, the market players, sentiment of the market. I can only control myself and my own analysis. In terms of the technicals, the resistance zone remained strong and the overall thesis and long term technical set up is unchanged for me. Even a break above the previous high would not necessarily change the long term picture but it would necessitate a relook. So far that is not necessary. As well as the resistance zone there is an A-B-C, which is not that clear cut and minor NMD. Not the strongest set up but still a potential bearish turning point and so it turned out to be, so far. If this move is to turn into a wave 3 bearish phase I would expect it to move down quite smartly. If not, well let's wait and see.

Agree @ChrisN and @dmedin that is pretty much what I had already posted in my Gold/Silver rally thread, except that mine was a more simplified version of the same thing. At the time I couldn't decide if it was a 1-2 or a pennant consolidation (chartist rather than EWT technique) and the retrace did not go as low as I had expect; although it worked very well on Silver, which is one reason I prefer to trade Silver. As ChrisN said, great example of a classic complex retrace, EWT analysts will lap that up every time and get Long the breakout, which is what I did. But hey, if it does't work for you fair enough, find something else that does.

Don't think 2 makes a group...

LOL @ChrisN, yes please do let us know if you get euphoric and what you were taking... Agree your assessment of on the FRED. It seems we are aligned in most things except the EWT phase. I think the fundamentals and technicals support both as both are end game scenarios. If your road map turns out to be a wave E then you will exactly align with mind, I think. Your Wave 4 (A-B-C) would suggest a lower low, which would be something different to me but let's examine that on another thread when and if it happens. For now we agree we are at or close to the end of the bull cycle, let's see how it evolves. BTW I am tactically long the FTSE from last nights low, gotta keep am open mind when trading and take the opportunities that present themselves...

But of course the Bull argument now switched to, "yeah but the recession doesn't come until X months after the inversion and the central banks wont let it happen, "never fight the Fed" and Trump wont let it happen in an election year and on and on, summarises as "this time it is different". I think this time it will be exactly the same as every other time, except worse because the expansion was far greater than before. Don't fight the Fed? I say don't fight history. As regards the Eurostoxx, I've seen that one trotted out recently a few times. Bottom line is Draghi's policy, which BTW might prove illegal in German (talk about a Black Swan!), is making it impossible for banks to make money. Not a great economic model that... I think banks will be a huge buy when the dust settles, the ones that survive that is...

@dmedin, good question, thanks for that. I do use candle patterns to some extent but only as corroboration. For example, after a major turn I expect a small scale 1-2 retrace before the meat of the first big move (a wave 3). I look for the first top and turn and label it wave 1 (the brown label in my previous chart). The candle patter is bearish as you suggest and there was NMD on the 1H chart. But I do not swing trade such small moves. I am a longer term trader not a day trader. If I was the latter I might seek to go Short there yes but my strategy is to wait for the retrace and go Long, which is what I did. If I am right, and I have not been for ages on this market, then I will get a long and strong breakout rally that is what I am chasing. An alternative approach would be to wait for the next breakout above the wave 1 resistance level and/or a breakout from a shorter term channel (see y 1H chart below) and/or a breakout of the weekly channel line. All depends on your strategy and attitude to risk.

I heard something similar @cryptotrader, couched in terms of not calculating risk properly and pricing it appropriately; disaster waiting to happen. @dmedin, scary as it is my personal conclusion is that the scenario you paint is an inevitable conclusions of the massive debt fueled expansion since Bretton Woods was revoked by Nixon in the early 70s. It will not be because of Trump or Brexit of Hong Kong or the Yellow Vests or any one thing (these are just symptoms) but a natural conclusion of the longest expansion cycle in modern history. The system doesn't work. It needs a reset. Alas we will have to suffer before we get it I think... As someone who came up during the last major recession (not 2007 that was just a blip by comparison, no I mean the late 80s through to mid 90s) I have some knowledge of what hard times are. I was also a kid during the 70s oil shocks and that was no picnic either. Since then though we have been in good times. When the music stops it will be truly awful, that is why I am no longer invested in the stock markets. Cash and bullion only. For those us older than 30 it makes no sense to hold on at such a top. Unless you believe this time it is different...

@ChrisN, I think the GDP decline measure is more of a political short hand convention, so on the one had you are right about the 2 quarters of decline. However, the National Bureau of Economic Research (NBER) is the font of all recession call wisdom, in the US at least. They define a recession as follows (excerpt from an old article - 2003): "A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades. Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The traditional role of the committee is to maintain a monthly chronology, so the committee refers almost exclusively to monthly indicators. The committee gives relatively little weight to real GDP because it is only measured quarterly and it is subject to continuing, large revisions. The broadest monthly indicator is employment in the entire economy. The committee generally also studies another monthly indicator of economy-wide activity, personal income less transfer payments, in real terms, adjusted for price changes. In addition, the committee refers to two indicators with coverage of manufacturing and goods: (1) the volume of sales of the manufacturing and trade sectors stated in real terms, adjusted for price changes, and (2) industrial production." I highlighted 2 phrases: The first means that at the point we tip into recession everything looks good, which it broadly is not at face value and certainly there are many people trying to tell us so but they are all Bulls or have a reason to keep people invested... (in my opinion!) The second means that GDP is largely irrelevant In fact it seems that we can have a recession without negative GDP, who knew! In a RealVision interview recently, part of their recession watch series, there was a guy who had inside knowledge of the NBER (can't remember his name but I think I posted on it previously), who defined a recession, in terms of data sets, as follows, in line with the NBER: Real business sales (Trade and manufacturing) Industrial production Employment Real personal income (net of government transfers) General economist and professional observers consensus seems to be that, in the US, the first 2 are either in recession territory or under pressure and so is #4 (much of the job expansion has been in the gig economy with people needing more than 1 job to make ends meet because salaries are poor). So only employment itself remains and, as Real Visions Recession Watch points out, employment is the last measure to turn. Other economists seem to think that while industry is in recession, the consumer and services are not and anyway the US economy is largely services in nature. But what do they service? If people stop buying stuff then that is surely the tip of the iceberg? From there it is a negative spiral that feeds on itself. Just because we got out of it in 2015/16 doesn't mean that will happen again. This time it is different? I doubt it. One thing is universally true, after every boom there is a bust. Just ask Gordon Brown what it feels like to think this time it is different. This is the very essence or capitalism and maybe its Achilles heal @dmedin, you are probably right that it need a rework but we will only get that after a sufficiently painful crash to make people see we need it. So net, GDP is not something I bother too much with, except to watch short term volatility around data releases. I can't measure the other stuff, only look at the facts around me and what professionals who do have access to this data are saying with an open mind. BTW, I see lots of evidence of retail under pressure in the UK, if someone is hoping the consumer will save us think again... On a separate note @ChrisN, you are right about not rising to the bait of people being down on your method, it is just boring and irritating, I don't read their posts and don't engage anymore because they don't actually want a conversation, they just want to win an argument. Waste of time and energy. Positive debates on the other hand, an exchange of ideas, even if we disagree, is a good place to be. Let's have more of that please... And trade ideas, that would be good right? Discussing trade ideas regardless of what method you use to get there...