Mercury

Brent is looking like it may be confirming a channel breakout and trend reversal with a small bearish retrace done and higher highs. Looking for a close above ST resistance. PMD on the turn above the crucial $50 level (actually on the Fib 88%) and oscillators have plenty of upside before being overbought.

For those interested in the FTSE100, which did not put in a new ATH but is showing strong evidence of having topped out much earlier and being in a proto Bear market, the recent rally closed a gap at the top of a resistance zone and then fell away. This completes a retrace rally in A-B-C form and the turn occurred on NMD. As with the Dax it is early days and I will be looking for a further drop in motive wave form followed by another relief rally to turn at a lower high to really get the Bear party started.

Looks like a wave 5 top has given way and broken through the lower channel line. This is all very short term at present and naturally the perma-bulls will be talking up the dips, why wouldn't they? However if we see a short drop followed by a retrace rally that turns with a lower low and the right price action then we could be in for a more sustained drop. Early days but many such moves begin with a strange overnight/Asian session move, which we certainly got. Given the set ups and the rather lackluster price action from the Bulls I has a feeling something like this might happen so I was up waiting for the Japan opening and am Short on the first candle drop. Let's see. This time it could be different... 😉

Yes and long term support around 10,750

Used properly TA isn't for making predictions but merely identifying opportunities and triggers for trades and stops. People on this forum often talk abut TA a a single thing, it isn't. There are many forms and combinations used by many types of traders, the most basic being support/resistance zones. The S&P500 E-mini futures index is the biggest single traded vehicle in the stocks world, it does move the market, as do EFTs. Another erroneous received wisdom point is that TA is self fulfilling or that TA analysts/traders seek to "move" the market or expect the market to be moved by their TA. This is a fallacy oft stated by critics who don't actually use much TA (or don't recognise that they do...). Most TA, I might say all really, seeks to map the recurring sentiment that drives markets based on human nature, which never changes. This is where EWT, Wychoff theory, Dow theory etc is rooted. The markets do not move because of TA, it is merely a way to map and visualise price action. Markets are only ever moved by sentiment (chiefly greed and fear and the tension between these two). This is a misrepresentation. EWT practitioners can be contrarians but can also be trend followers and swing traders. They can be long term or day traders.

I am only going to answer this one last time, which I already have in the post you commented on. IMO, if you are a short term trader then go with the flow if the market breaks to the upside. As a long term trader I see too much downside risk so I seek other markets with a better risk reward ratio. That does not mean that I cannot see stocks rallying hard but to buy here does not meet my system rules so I do not take the trade. Do you have a system with rules that suggests you should go long? If so great, horses for courses. Unlike some other Forum contributors I do not mind if other people see things differently, I do not feel the need to ridicule opinions that clash with my world view, which always strikes me as quite insecure and betrays a clear bias... (BTW, I am not suggesting that is what you were doing with the above quote.). So net, feel free to use my post to help you decide to either go Long or Short or do nothing, depending on how price action moves in the coming hours and days and on how it fits with your own system, which is the ONLY thing you should be using to decide to trade and in which direction. If you don't have a system then devise one and practice it, ideally in demo, until you have a high degree of confidence in it.

GBPUSD put in a rally off key support, so often the case on a lower low test into such a zone of support/resistance. However now price seems to be bouncing back off the upper limit of a short term channel and if this is merely a consolidation phase of the slightly better than expected UK data over the past few days then price could shift back into a bear phase that at least retests that zone of support and likely breaks it. Tactically it is far better to take a Short here with low exposure than to Short into the support zone on a lower low test.

Gap closed at the Fib 88%, very deep retrace that could be a Wave B conclusion in A-B-C form. If this proves true then we should see a period of EURO relative strength vs GBP BUT will this be driven by a strong rally in EURUSD or a stronger bear move in GBPUSD..? Safer bet may be on EURGBP.

Perhaps we will get this soon... The Dax is at another pivotal point with potential coronavirus headwinds seemingly the news of the day and yet stocks kept on rising. Someone asked me how this is happening as in any other era such events would produce a significant correction but hey it's not real economics or business earnings or profitability or going concern robustness (that's about zombie companies), it is about central bank liquidity, period! Unless or until that falters or faith in it falters the rocket to the moon continues, because this time it really is different! 🙈🙉🙊 For me, as it has been since around mid 2019, the risk of a major and swift capitulation is too great for MT/LT Long trading, only swift scalping and day trading makes sense, which is not my bag so good luck to those that are into that. On stocks I am waiting just below the water line for the inevitable bear phases. And if PMs are about to rally with USD still strong then maybe stocks will drop on the same sentiment drivers... So much for the so-called fundamentals, on the Dax right now I see the following from a technical perspective: Dax is at a critical juncture that ought to decide whether this is the end of a wave 5 or the beginning of a major wave 3 rally. Price is at a medium term resistance trend line that has been active since late 2018 and is in new ATH territory, which is also end of wave 5 territory of course... However there is a long term trend line (purple) that may offer resistance to a longer bull scenario. If the Summer 2019 deep correction was a Flag and the chartist rule that the Flag marks the halfway point in a rally holds true then price is currently at or about the end of the rally, which is coinciding with that MT resistance trend line (light blue). If that correction was a 1-2 (red) then the wave 3 has likely much further to rally yet. Note final wave 5s (AKA ending channels) are tricky beasts with all the usual "rules" out the window. A plausible 1-5 (blue on weekly chart) can be labelled, which would put the market in a final wave 5 of wave 5. On the daily chart there is a plausible 1-5 (green) off the Flag breakout and another 1-5 (pale blue) in the wave 5 (green) up to were price is currently sitting, waiting for the US markets to open. There is NMD on all time frame charts below monthly (the monthly is typically not relevant) and other oscillators are in over bought zone across the board. The stage is set for a bearish reversal but we would need to see short term channel breaks to the downside and other indices also showing similar reversal patterns. Is this conclusive, absolutely not until we see an actual price action response. Clearly the over exuberant madness can continue and even if we do see a turn on the Dax I wouldn't be surprised to see a correction and rally to new ATHs on the US large caps as the melt up doesn't seem to be done on the crazy Tech stocks yet... Ya pays yer money ya takes yer chances... Or not and stay on the sidelines until things become clearer...

Is that Gold/Silver reversing? For a bearish scenario the break lower ought to have spurred on some significant selling but the bugs seem inclined to buy in at every opportunity, smacks of the stocks euphoria. Still don't see a wider global cause for concern longer term but the coronavirus could, I guess, be spurring on a bit of buying. I wonder whether there is a potential signal here portending a bearish phase for USD and/or stocks? There is no technical issue with PMs staging a rally and then falling back to earth that mau coincide with a stocks correction before a further push up into the melt up proper. The current price action on stocks seems a bit static, albeit up, but it is not yet going on a rampage that one would expect from a breakout into a major new bull trend maybe this is about to happen but if so then PMs would be expected to drop too. Once I see such a reversal I cover and wait, which is where I am now on PMs. Needs to break to new lower lows for me to get interested again. I am, as ever, alive to the possibilities of a stocks bear phase...

Looking good for Gold bears...

Looks like Gold (and Silver) may be turning. USD remains strong and share indices continue their melt up. I suspect PMs will drop fast as some point and only get back to that much tipped Bull run when there are fewer people calling it and Stocks (and likely also bonds) capitulate. For now looks like a consolidation channel has just been broken in the 1H after NMD at the turn and an A-B-C wave form. Looking for price to start below the channel and then break lower to confirm.

There are 2 technical ways to look at bitcoin price action now. The first is a series of buy the dip patterns that ought to push price back above 10,000 and on to test 14,000 in short order, as laid out in my previous post. The second is that this is the end of this particular bullish phase and a deep retrace is on the cards before that bull market takes over again. I don't see a long term bearish scenario at this juncture. The technical set up for scenario 2 is like this: We have has a breakout of both a strong channel and H&S neckline at the turn of the year The rally has been strong and fairly relentlessly bullish with a few pull backs but no significant retrace The form of the rally can be described as a 1-5 (motive - i.e. direction of the longer term trend) After a 1-5 motive wave we usually get an A-B-C counter trend move There is NMD on daily and 1H charts at the recent turn at resistance zone. The move back down was sharp and looking like a rejection of the resistance test. It is at least 50/50 now and if we get a close below today than some form or counter trend move can be anticipated. It could retrace a lot further than people think, most being now bullish again as a result of the breakout and rally I am guessing. A firm break and close above the resistance zone would be needed to revert to scenario 1.

And for the record, 12 months ago I was trading stocks long so I think you need to check your fact... Perhaps you were thinking about 16 months ago when any sane trader was bearish stocks...

No the greater potential IS to the downside unless you believe stocks will double from here, do you? The issue I pointed out was when. I don't know when the worm will turn but I chose to follow the basic principle of but low sell high and by any measure the stock market and the bond market is high (well higher than it has every been!). So to be clear, I am not calling the top, I was merely responding to the point made by @dmedin about potential. And to reiterate a point I made previously, if you are a day trader then buying stocks and getting out within the day or a couple of days may be fine for you but if you are a longer term trader the risk is too great and there are other less risky market opportunities around.

Certainly possible but then again if the market is in a melt up then there is really no telling where it will end and the next pull back would be a complete reversal...

So Brent remains above $50 and as long as it does the contrarian rally scenario is alive. From a fundamentals perspective it is hard to see why Oil is indeed falling while apparent economic activity "might" be ticking up, at least temporarily. There is a strongly held belief, borne out by history, that high oil prices preface a recession and related bear market so if we follow that then we need a strong rally to kick off the recession. I don't see electric cars and alternative power sources miraculously appearing in the quantities needed to make Oil redundant any time soon so demand is still there and we all know the cartels need Oil at certain minimum levels to remain profitable, and the market is dominated by these players. From a technical perspective the price action is still within the structure on a complex A-B-C pattern, which would suggest a strong wave C rally to come soon. A break power than $50 would negate this scenario. There is a strong channel on the current bear move, a break of which would be a powerful signal for a rally. and PMD on Monthly, Weekly and 1H charts, not Daily though, which may mean another leg lower is needed. Perhaps the most interesting technical structure is the long term Triangle that has encompassed price action since 2009, which conforms to a massive A-E, the market now being in the final wave down. Charting convention is to fade or trade the extremes of these formations but it being so large I think a hold or break of near term support is a decent trade, just don't know which way it will break but I prefer the rally set up, marginally. Long term I think we will see very low priced Oil driven by a collapse in demand as the global economy craters to clear out all the ponzi scheme central bank policy, after than who knows...

Arabica looks like it is due a relief rally. Might happen of the current short term support area or could drop a little lower before it breaks into a rally. Longer term I see this market making new lower lows and breaking into my market bottom zone past 8000 (or 80 cents if you prefer) before the big rally I was tracking. I think that overall the big reflation trade that some market players have been talking about is suspended rather than cancelled and will require that USD bear market to stimulate it. So for now I see further commodity bearishness but longer term I see a big bull market coming. From a technical perspective I see the following: The price action since late 2014 appears to be in a descending channel (or triangle) conforming to a classic A-E EWT wave count. That would place the market in a final wave down that should retest the lower channel line at or lower than 8000. The monthly PMD still holds with a lower low; the development of theweekly/daily indicators remain to be seen. The current bearish phase may be conforming to a 1-5 motive wave. This would be confirmed by a relief rally that marks the wave 4, after which a final wave 5 would be indicated. The wave 3 may be hard to spot but likely candidates include right now and down to the 9350 support level. We might even get a short relief rally before another drop that then kicks off the wave 4. It is hard to spot the wave 4 turn right now so it might be better to wait for it to happen and then seek to go Short to ride the final wave 5 down. If wave 4 gets back up to about 11,500 to close the gap then there would be a decent amount of point to get in the final bear phase and trading with the motive trend is safer than counter trend trading.

Storm Ciara is keeping me indoors by the fire with plenty of time to think about the capital markets for a change. I find myself in a quandary on Gold/Silver with credible scenarios in both directions. I am still minded to expect to see a strong bearish retrace before things really get going and if USD and Stock indices keep going up it is hard to see the big Gold bull taking off. The only thing that would either lit a fire under Gold (temporarily or longer term) might be Coronovirus concerns. I saw a report today which suggested that the death toll so far has exceed SARS. But again I would expect to see stocks fall, which they may temporarily but I don't see a credible top on US large caps yet, although you never know, that is the essence of a Black Swan. For now I will wait and see how things develop and for better trading signals. I would really want to see Silver breakout of its Triangle to get behind a big rally and I am minded to trade Silver rather than Gold on a big bull move so still plenty of potential to catch the bull yet, not need to rush in.

As both EURUSD and GBPUSD fall I am tipping GBP to be weaker on the basis of the EURGBP charts, which are signalling a rally phase. After a decent bearish wave a relief rally is the next most probably phase. Long term I am bearish on this pair.

Already Short. I see this as going much lower than 12,700. At least to retest the weekly trend line that was previously broken, which could occur around the Fib 76/78% level if the A-B-C retrace scenario hold. My lead scenario is for this phase to be a wave B after which comes a strong wave C. However one can't rule out a lower low, which is what I see on the EURUSD and with EURGBP set to rally further GBPUSD could easily drop like a stone in the short to medium term.

It seems to be all about the mighty dollar these days, well in truth when it is never? Previously I though the USD may have topped out (DX) and be heading into a bear phase but recently, chiefly because the price action did not fit with a bear, I have switched to another leg up scenario. I think we could see DX up at around 100, which would be another hit on the very solid upper channel line and the Fib 76/68 resistance zone. After that, if USD turns down again, I see that bear phase coming into play for the medium term (6-9 months). This scenario may do all sorts of weird and wonderful things for commodities, precious metals and indeed the wider economy, especially for emerging markets swamped in US denominated debt. The so-called reflation trade could be back on for commodities once the USD bear hits in force but for now that seems to be suspended across all commodities. A large USD Bear could also be a catalyst for PMs to get bullish again, with or without a wider global crisis scenario, but prior to that a bearish PM scenario persist in my analysis and macro fundamentals assessment; I just don't see where the catalyst for a large bull move on PMs is going to come from unless this virus thing gets out of hand and/or stock collapse, the latter of which seems unlikely short term but perhaps more likely medium term. Therefore I am minded as follows: USD up for the short term (couple of months time frame, maybe shorter) Commodities down (definitely softs and things like copper may rally initially in relief fashion before falling to key support) - more on this later. Oil however may buck the trend and rally because generally we need to see higher oil prices for a recession to kick in, based on past performance but again more on this later. Stocks may get a bit whipsaw like for a while but generally will complete a melt up before an actual recession kicks in to drive the collapse that is surely inevitable. So looking at DX charts I see the following: On the Monthly chart USD was in a strong bear market since shortly after 9/11 and then turned on a long time frame Head & Shoulders, with the Head around 2009 when the Fed threw the kitchen sink at the Credit Crunch and kept on going with this policy, until around 2017 that is and the USD promptly dropped. The rally was not a clear motive 1-5 though, more like a retrace in A-B-C form, which was stopped around the Fib 62% off ATHs in 2017. The bear drop was in 1-5 and the current rally has been a staggered affair with lots of whip saw from about mid 2018. The move since the 2017 turn down looks more like an A-B to me than anything else, which suggests that when the wave B completes we will see a fast bearish wave C. However I think the bigger picture is a wave A up to 2017 and the current move is a large wave B, that could retest the H&S neckline, around he Fib 76/78 before the wheels come off the global wagon and there is a massive flight to the safety of the USD. So short term Shorts on USD pairs but them go Long on appropriate turns for the medium term (6-9 months maybe) before it Long, Long, Long USD but by then I see Stocks collapsing and Gold/silver in that massive Bull market everyone is talking about. Thoughts anyone?

Bearish scenario is holding. A close below 12,900 will be supportive. EURGBP is rallying on cue. EURUSD also breaking lower and USDJPY has reversed back into a rally towards closing that gap. The only pair seemingly set to buck the trend is USDCAD, hmm, I wonder if that would signal something for Oil...

USDCAD at the top of the LT channel. Breakout or hold? Pressure on USD today it seems with USDJPY down and GBP and EUR holding at key support. I wouldn't put it past CAD to reverse here for at least another round trip to the bottom of the channel. NMD on 4H and 1H and 1-5 on the rally (FWIW).

Of course it was the right thing to do in 2009...