Mercury

Brent looks to have put in a small rally and bounced back off my alternative channel line, a parallel line off the previous low turning point. This coincides with support line, now resistance. The market is now heading down to the 6600/6550 key support zone. A break here is very bearish in my book. I have started to pyramid his market.

You may well be right @786Trader there are a lot of fundamentals based theories around so yours is as good as anyone's. My hypothesis is not based on Oil fundamentals but can be summed up in 2 words: Deflationary Depression. Regarding the Dow, this attached is my long term view.

Appreciate the erroneous tag @Foxy but as I have now accessed this thread I thought I would add my 2cents worth FWIW. To be clear, I do not trade the Dax but I do monitor it for congruence/divergence vs other indices. I am currently of the mindset that the Dax was the first of my indices to top out, way back in Jan 2018 and looks to have posted a Head & Shoulders formation with an associated iceline zone between 11,700-900. Stochastic and RSI are over bought, typical of a wave 2 end but there are 3 possible scenarios still in play as follows: Wave 2 (purple) not yet completed, will travel up to Fib67/78% and retest the medium term trendline that was broken back in Oct 8 when the US large Caps turned down sharply. Wave 2 Purple is already in (see Daily chart) and a smaller EWT 1-2 is also done and now the market will drop from here. A break through the iceline would confirm this. The Dax will join the US large caps with a fresh ATH, negating the H&S (SP500 & Nasdaq at least, Dow is not there). The price action from the Jan 18 top could be seen more as an A-B-C retrace (red labels), which supports a strong final rally to a fresh ATH, likely at or near the upper very long term resistance trendline. Looking at the Daily chart there is a strong pair of parallel channel lines, however Momentum is still is very strong negative divergence territory, will take something to reverse this and we haven't yet had a drop sufficient to reset. If scenario 2 is correct then I would anticipate a swift drop through the lower channel line that never looks back (or maybe a short term retest) as this would be a wave 3. So for me the lower channel line break is the key trigger (not withstanding the dreaded fakeout!) followed by a break of the iceline support zone.

GBPUSD at a pivotal point for me, knocking on the door of a 1 hour chart ending diagonal formation after a rally off the Fib 88%, last change for a wave B turn. PMD on the wave B turning point and possible small EWT1-2 in, although a more defined 1-2 could still be on the cards. Regardless a confirmed breakout of the triangle line will be indicative, any longs should have stops just below the wave B turn low. This is aligned to EURUSD and DX at present (see other threads.

This pair remains in a trading range, despite the fakeout and rally . The recent turn was a lower high and the fakeout was a lower low. There is NMD at the recent top and a potential 1-2 bullish retrace that looks to be setting up another round down. I am short off the 1-2 with close stops just above, having taken profits of the previous 2 round trips. Will this one break through to get on with a Bear move as USD sets off on its bearish retrace?

The mirror image of the USD DX is the EURUSD, the pest pair proxy for pure USD. On the Monthly Chart I have a similar potential Flag formation in play as for DX, which has provide support today, along with key resistance level zone. The market put in a slight lower low to turn with a pin bar spike to the flag line and create a double bottom. The is PMD between these 2 bottoms, a bullish sign. As with the DX I might expect a short term EWT1-2 retrace prior to a stronger rally. I am looking for a breakout of the upper Triangle line t confirm the bullish retrace is on and looking as Fib 62% in the first instance as a target, with a chance that the long term resistance trend line might be tested, however by then I will be looking for the turn back into a long term Bear market.

Will it ever end indeed, @Guest Nash. If the market pushes up through the Monthly chart resistance channel line (what I think of as a large picture Flag) then I will certainly reverse my position and go full Bull, which is my long term bias anyway. However just as with Oil (see my recent post on Brent Crude if interested) I expect a significant retrace (bearish) prior to this major rally, based on Elliot Wave Theory. Today we saw a marginal higher high and drop with a pin bar spike (bearish candle price action) that created a double top. Critically price then dropped and closed below my monthly/weekly chart resistance trend line. If it stays below tomorrow this line is still valid, despite the spike through. If this was a turn then I will be looking for a short term EWT1-2 retrace before a strong move down through the Daily narrowing channel line, a break of which will set up that bearish retrace move (bullish EURUSD) that I remain minded to favour. However USD (and associated main pairs) will need to make this move stick now or the USD Bull is on.

Just to position this post, similarly to my previous one, in terms of the big picture, I see the Oct 2018 as the top of the previous rally (just when Net COT was positive), forming an effective Flag or EWT 3-4 retrace (relief rally) but the long term trend is still down from the March 2012 highs for me. I didn't catch the Oct 18 top and drop but I was ok with that because I was focused elsewhere and knew (yes knew) that there would be a EWT1-2 retrace (relief rally), which topped out April 25 with a failed retest of the weekly chart lower channel line. At the time I thought there was a strong case for another leg up but with the recent price action break of the lower channel line the alternative scenario, that April was indeed the top, is confirmed for me. So what now? It is still possible there will be a rally and retest of the lower daily channel line but given the strength of the bearish move these past days that is unlikely. The Daily chart is telling for me, a clear breakout of the recent rally channel. So that is 2 channel breakouts to the Bearish side (1 weekly and 1 daily) with near perfect EWT forms and Fibonacci retrace rejections (50% and 38% respectively). There was strong NMD at Purple 4 (weekly chart) and Pink 2 (Daily chart) and the hourly shows the strength of the move away from the breakout zone plus NMD at Green 2. All in all this is a very Bearish set up, I am short off the 2 key support breaks with stops just above the daily channel. I will be seeking to sell the rallies and am targeting a very large move down, a fresh low past $28 at least and maybe even a retest of the 1998 lows but that's all for much later. For now I am content to seek fresh Short entries to pyramid this market, which could offer a very fast descent.

Bit more to go yet @draa46 but it has certainly stalled on my possible neckline. Given Gold probably has a way to go to bottom out then Silver should drop further, although I expect not by much and a fair bit of consolidation action between current levels and the LT trend line around 1420. It is the breakout from such a consolidation, if it happens, that is of interest for Precious Metal Bulls, especially if Gold is also breaking out of a credible turn point.

Not sure I am following you there @Theassistanttrader as if there is a H&S formation then it is already done, see my Weekly Chart below. Problem is the neckline is far from the usual horizontal, one reason I think there will be another leg up to a final ATH neat the very long term resistance trendline (goes all the way back to the 70s).

NP, perfectly reasonable approach, just don't beat yourself up if it doesn't retrace and jump in at the wrong moment. Got to wait for the next pull back, unless you are ok to wear a large drawdown.

Looks to me like my question as to whether the the 25 April turn was a rally end or a simple retrace may have been answered as Brent price dropped hard through the supporting lower channel line. I would like to see the recent lows broken to confirm but odds are that this market is now heading down. Could this mean that Stocks have also topped out? On my Daily Chart you can see the lower channel line breach, albeit the day isn't over yet... There is very large NMD at the Pink 2 turn point, which was inside the prior channel breakout zone, a failed retest. The EWT count is good to the Pink 2 plus for the green 1-2 as well. A close below the channel line will be indicative but as break of the key near term resistance is needed for this to have legs. On my 4 hour chart you can see the price action since the potential rally top with 3 failed tests of the final wave channel breakout zone short of the 7300 mark. Again NMD at Pink 2 and the price action supports a clear retrace form and channel break. On the 1 hour close up we can see NMD at Green 2 another failed test of the prior breakout resistance zone at brown 2 and then a steady fall away in a Triangle formation until the gap close and drop through both the Triangle and the lower channel supporting line. We have had 1 hour candle closes below the support and may get a short rally retest, which if it fails to break back into a rally ought to signal a fast bear move.

@Foxy Although I can't quite see it, I assume you are suggesting the trend line is telling you that was a fakeout. Maybe on a 5 min chart or something but if you remove the 1 hour trend line does it still look like a fakeout? Couldn't it just as easily be a natural zigzag. I would say nothing is yet conclusive on stocks 1 hour charts right now but it depends on your trading horizon, as you imply. As I don't day trade I am waiting for something more substantial. Still the point I was suggesting to you is that where you draw the lines is important and zooming out helps to put things in context.

How sound is the line @Foxy

As mentions in my Brent Crude post just now, if USD does go through a period of weakness and Oil does rally then those 2 major drivers of USDCAD should result in significant CAD strength (i.e. USDCAD bearish move. The market moves of late certainly bear this out and now this pair is at a critical juncture. A breakthrough to the downside here suggest that significant bearish move is on the cards. The benefit of entering early at the top of the consolidation zone is obvious but going Short on the breakout with stops just above (sufficient to guard against a retest) is also worth considering. Note: not all breakouts retest. If the EW 1-2 has occurred inside the consolidation zone the breakout can be hard and fast and never look back. Wave 3s are like that and I think this is a wave 3.

Small 1-2 retrace after a channel breakout (slightly adjusted lower line). Retest failure on the lower 4hour/hourly channel line. NMD at turn point (Green B) Large scale Flag resistance line held firm (2 short term test failures & 2 spinning top candle price action Daily candle not yet finished of course but is encouraging in context and multiple USD pairs at turning points. Drop below the 9730 level would be encouraging and if this is a wave 3 it should move pretty fast.

@Theassistanttrader Great question and a H&S on the Dow is a scenario I have penned in and perfectly valid, albeit very shallow so not exactly a strong one and therefore not one I would rely on at this point. I would need to see a break of the recent lows (circa 25,200) to be confident of that scenario. Had all the other US large caps also described a H&S there would be a stronger case but SP500 and Nasdaq made fresh ATHs. The gap never getting closes point is what Chartists refer to as a breakaway gap, they are rare and occur at major market turns and significant continuation breakouts. They are rarely right at the top of the market though (Nasdaq and SP500). The Dow gap is not quite at the top so in theory this gap could be closed without a new ATH and keeping the H&S intact. Other indices appear to be in retrace mode and not yet completed so my assessment at present, subject to continuing price action confirmation, is for more upside before this all shakes out for the Bears. Net, the H&S on the Dow is valid at present but so is another ATH. My approach is to look across all related markets (US large Caps, Russell 2000, Dax, FTSE100 and Nikkei plus USD-DX, Gold/Silver and HG Copper) to spot congruence of major turning points and/or breakouts to signal the markets have peaked or trends changed. What is helpful here is that, to me, some of these markets have already trend changed so I am looking at retrace price action rather than ATHs. The former are much easier to call obviously. My current assessment is as follows: Dow: possible H&S but fresh ATH more likely, subject to ongoing price action. SP500: top of the market possible but fresh ATH more likely, subject to ongoing price action. Nasdaq: top of the market possible but fresh ATH more likely, subject to ongoing price action. FTSE: Top already in. Wave 2 retrace likely in but one more leg up is possible, if wave 2 in then smaller retrace is due before big drop Dax: similar to FTSE, Dax was the first to top out Nikkei: Topped way back in Jan 1990 so on a completely different track but of the recent rally since the central bank interventions in 2008/9 to delay the credit crunch collapse (bias alert!) I believe this market has also topped and is in retrace. USD -DX: has already bottomed out and is in long term rally but currently toying with a retrace bearish move prior to the main event. Further breakout to the upside through key resistance would negate this scenario. Gold/Silver: has bottomed out and is in retrace prior to a major rally. HG Copper Topped out during the 2011 commodity peak but the recent rally has also topped out and is now in a Bearish trend. However, since August 2018 this market has been in retrace rally mode, which some would refer to as consolidation. I am not yet sure if this is done. Could be another major rally to about the 30,000 level prior to a turn and drop or could drop through the 2018 lows to signal a major economic downturn and therefore stock market crash. That's how I see it, I have threads on most if not all of the above if you want to see more detals, how do you see it?

Not a Flag on Nasdaq, rather a deep retrace and bounce off the lower channel line, making this a firmer line of support with 3 effective touches. The Dow did make a pennant and is now breaking out and approaching the upper resistance of a short term range. A breakout to the upside should bring up a fast rally, probably to fresh ATH to close the gap. Same for Nasdaq.

USD has remained in rally mode but is it motive or just a retrace? The market has just hit resistance in the from of a monthly flag resistance line and ST Fib 78% level with EWT1-5 plausible and NMD. A breakout of the ST lower channel line is encouraging for the USD Bears. A break of the Daily chart supporting channel line would confirm a medium term trend change. The EURUSD is bouncing off Fib 76/78% support zone and although there is scope for another leg down for technical reasons I feel like this is a turn I want to be in with close stops guarding against than final leg scenario.

FX seems to be all about USD strength, although I remain on the sidelines to see whether this materialises soon or requires a large retrace to "prime the pump". One thing that is certain is that EUR has been stronger than GBP, which is exactly according to my road map for this pair (see previous post). The retrace is in complex form, lots of whipsaw, but now has raced into the wave C and has shot straight up towards the 2 resistance zones I had previously identified. At present I am still tipping a retrace of the long term Triangle consolidation lower line but first we will see how a retest of the breakout zone. Long term I am tracking GBP strength vs the Euro with massive structural issues within the Eurozone (fiscal and political) as fundamentals backdrop.

PS: forgot to add, net COT data hit triple digit positive (+128k) on Tuesday last, just as the market spiked and dropped, a contrarian dream... Silver continues to deteriorate into negative numbers. This supports my view that Gold will now hammer down faster than Silver in a catch up move as the non coms unwind their Longs pronto.

Gold and Silver just got simpler for me with Friday's price action. Since my previous post both of these markets have dropped hard and Silver in particular has closed below my potential neckline, albeit marginally and at support. Gold still has some way to go to catch up on Silver. I see the likelihood of a rally from here as low given a dearth of appropriate signals. I still believe it is more likely we will see a rally in precious metals when stocks eventually capitulate, although it could begin first in safety assets as Bulls begin to shift Bearish, the first movers so to speak. I remain in favour of Gold turning around the Fib 50% and Silver retesting the long term supporting trend-line. I will continue to track all my indicators to see if I get an across the board buy signal around these points. Although not at all predictive it does seem like markets in general are trending to a resolution, one way or another, around about the end of May...

Turning back to the Nasdaq for a minute I am seeing an interesting development on the 1 hour chart in support of my Daily chart road map (as posted last Tuesday). The end of week price action put in a lower low and dropped on the final hour of live trading, typically a Bearish signal, but in an end of rally stage there is often a lot of whipsaw action as Bulls and Bears slug it out. The potential for an A-B-C retrace within a Flag consolidation is high. If the market breaks down to the lower (speculative) line and turns around the Fib 50% and then rallies up through the short term resistance then the Flag will be confirmed. So what? Well the flag often marks the halfway point in a rally (+/- a bit) and is this is proven to be a Flag then the end of the rally would be, wait for it... 8000!

Yet another leg back up in consolidation but this time a higher high, which has created a complex 1-2 retrace pattern (see 4 hour chart below). This afternoon this market hit the Fib 88%, quite normal with these types of retraces, which offered a very low exposure Short. The market duly turned and has run down fast, offering a few additional Short points and is currently continuing to trend down. A breakout of the daily trend-line would be a good bearish sign. Note, big picture, this is a retrace move so could have some whiplash in it yet.

USD continues to thwart me, best laid plans and all that, but swing trading is all about dipping in and out until you catch the move for me. The secret is not to lose big on this stuff. EURUSD is at yet another critical point, the Fib 76/78% (short term move). This is coincidental with a previous price gap, a point where not all orders were filled so they may be this time... We have had a small bounce rally here this morning. A break about near term resistance (11190ish could be interesting especially if it happens fast and strong.