Mercury

FX has been a bit up and down to be worth trading of late but we could be coming to the end of that. I have a short term potential ending diagonal/triangle formation that, if valid, has been broken and retested into last Friday. A strong bound away on Sunday/Monday would be needed to confirm this. A break back through and lower low would set up a retest of the Weekly Triangle consolidation line.

Gold continues to follow my road map with a wave B (green) now completed and a typical sharp move into a wave C. When this is completed we can anticipate a strong rally away in a large scale wave 3 that may run and run. The Wave B turned in the previous rally (wave 1 blue) channel breakout zone and right around the Fib 62%. I expect the wave C to make it to at least the Fib 50% off the wave 1 top, which would also be coincidental with the closing of a currently un-closed gap with the MA200 lurking around the same area. Failing that there is also support around the Fib 62% and the long term supporting trend-line. Note also the Reverse Death Cross. Not the first one in this extended consolidation zone but the first one is often reversed and then actioned again in an EWT 1-2, which is what we can see on the Weekly chart. Silver is showing similar signals except it didn't even make the channel retest zone had fell faster and further, as is often the case. With Silver I would not be surprised to see a retest of the LT supporting trend-line. A bounce off this area with a coincident bounce off the Gold Fib 50% zone would be compelling for me.

Ok could be the right move if the stock markets crash from here or if you have wide enough stops and are comfortable holding against a large draw down if stocks go on an extended complex retrace through to the Summer, which would fit with my lead scenario for Gold/Silver, as outlined above. It all hangs on the probability you have placed on stocks dropping heavily and when vs any other scenario and assessment of other drivers of precious metals markets, some of which are intrinsic to the individual markets (i.e. industrial consumption and sentiment). My view is that precious metals will go on a raging bull run in due course when stocks capitulate and a depressionary recession kicks in that drives volatility in interest rates. Recent comments about a bond rate inversion are relevant to this scenario because they suggest an interest rate situation that is unsettling (i.e. unstable/potentially volatile) but it is not an immediate trigger to trade (except maybe to cash in shareholdings). Things usually happen slower than we might expect. I might expect to see bond prices drop further rather than rise, and maybe heavily, prior to a recession driven recovery. The key determining factor for the bond market is the yield curve. So if you believe interest rates will stay ultra low or negative for ever (the new normal concept being pushed by various economists to explain why their models still work...) then bond prices can rise further. Note: currently they are very high relative to historic levels - past performance does not mean future performance will follow suit, in fact often the reverse is true. However the received wisdom relationship between bonds and stocks (i.e. stocks down therefore bonds up in flight to safety) is not a secure hypothesis. The bond market is many times larger than stocks so any funds flow from stocks is not a material impact factor vs other factors such as state of the economy and interest rates (yield curve). Why is all that relevant to gold? Well a very experience fund manager I was listening to on a precious metals conference a few years ago stated the following was necessary for a sustained bull market in Gold: Interest rate backdrop unsettling (Inflation hedge) Gold rising in all major currencies (i.e. not just a USD relationship driver) Gold capital growth beating the stock market (SP500) So when and if we see yield curves rising (we had a precursor recently) and see the USD/Gold relationship disconnect and see stock markets enter a sustained Bear market we ought to be seeing precious metals in a sustained Bull run. But are we there yet?

Not sure what you are asking @gautamhait

Another corroborating indicator to watch for me is the Yen (stronger in flight to safety, generally). Of late USDJPY has been showing signs of weakening and continues to do so today.

The aforementioned Russell 2000. Not 100% conclusive but highly indicative for me.

Looks like a small final leg up to critical resistance and now a sharp (1 hour chart) bounce back off that resistance. Not yet confirmed with support breakouts but shaping up for a classic ending diagonal/triangle set up. I often take a speculative Short (or Long in reverse set ups) off the touch and go at the potential Triangle top, which I have done here, then fast stop protection move to minimal loss positions and await developments. Another opportunity for a short is the breakout of the lower narrowing channel line. One of my key leading indicators for US large Caps, the Russell 2000, is flashing Red as well. All in all this is performing exactly as my Bearish scenario lays out.

FX is too tricky to trade just now for me, I am waiting for more clarity with some key breakouts or clear pattern retraces. While USD (EURUSD) looks to have started to firm up on a direction I remain in doubt about this and wonder if we will see yet another twist in FX before the large scale retrace I have been patiently tracing for may months g. Meanwhile there is a possible clearing of the mists on GBPUSD for me, still to be confirmed by price action, which is suggesting a Wave A-B is in play. I do not know yet whether or not the wave Bearish move has started, we may yet see another leg up to the Fib 50% first. In any case I am not seeking to trade this B but rather to spot the rally into the final wave C of the larger scale retrace. I am liking another retest of the breakout zone for a wave B conclusion. If this materialises it could herald a similar move on EURUSD and hence some short term strength in USD. I am expecting GBP to go through a period of relative weakness vs EUR as well.

Gold and Silver are broadly still following my road map. I have added what I believe is a strong channel (both upper and lower lines have a lot of price turn touches). The breakout zone of this channel offers the favourite options for a wave B conclusion (Also Fib 62%), with Fib 76/78% not that much further up this represents a strong resistance zone for me. Silver and Gold are showing some strong congruence in pattern with similarity of Channel and breakout. Wave A looks to be concluded now it remains to be seen how the potential wave B plays out. I am not really key to trade this retrace as I am waiting for a long term rally signal to go Long and there are better short term trading opportunities elsewhere in my view. So long as my road map set ups remain intact I am content to track and wait.

Not sure I could be quite that definitive at this stage. Nasdaq and SP500 have made new highs on the current rally while the Dow has not. The Dow was much stronger in the previous phase so we are seeing a lack of convergence between the US majors. In addition the Russell 2000, a bell weather for momentum stocks is tracking similarly to the Dow, having not made a higher high in this rally yet. I couldn't call which way this is going to play out next week but the stock indices do seem to be at a pivotal point just now. A turn down on Sunday/Monday would trigger a Bearish phase. A turn up would not necessarily trigger a resumption of the Bulls until key resistances are broken.

See a recent article posted by the same Cramer @elle was referencing I believe, posted below. I won't comment on it except to say 2 things: one, without a lot of talking heads talking up the market at turning points I would be nervous - contrarian turning points can't be mainstream; two, the idea that anyone, any institution, can control (or cause) a recession or a boom is total nonsense (Gordon Brown discovered that the hard way). Humans love to explain stuff (to rationalise); feel they can control their environment and, chiefly, seek to blame people for bad things (It must be someones fault or else things are too chaotic to comprehend - well they are, that is what chaos theory is all about). In reality, I believe, it is group think and herd mentality that causes booms and busts. And this is driven by the above mentioned human desire (need even) to rationalise. What institutions like central banks CAN do is amplify the cycle by intervention. Americans are the ultimate purveyors of the so-called free economy but the level of intervention since Greenspan (not just Bernanke) is hardly a free economy. This intervention, which is now a global phenomenon, has staved off the crash and reset that some believe ought to have occurred as a result of the credit crunch and amplified the resulting boom to bubble proportions. The inevitable bust will be, as a result, much more painful that it would have been in 2007. In fact we might now be touching bottom and beginning to come out of it but instead we may have 10 years or more of depression to content with. The reason people like Cramer et al have a ready readership as no one wants to believe what I have just written above, it is too awful to contemplate. OK believe what you want to believe if it make you feel less emotionally fragile but surely the logic of it as a credible scenario would lead you you plan for the worst..? As for me I plan to take full advantage of the Bear when it comes in my trading account to offset other impacts elsewhere, why wouldn't I? https://realmoney.thestreet.com/investing/stocks/jim-cramer-it-is-time-to-burst-the-fed-bubble-thesis-14862451

Gold is getting a small bounce but is that on the back of stocks Bearishness, USD apparent strength or something else. I can't really tell right now and unless Stocks are following my #2 scenario (see USD indices, are we there yet thread) I can't really see this as the end of the larger retrace. So I remain with my previously posted road map. This rally will, under that scenario, either trace a wave B from here or give us another small leg down before it does. After that comes a longer wave C to complete the retrace, possible as low as a retest of the prevailing long term supporting trend-line, which would suck in a lot of precious metal Bears, prior to a long, long rally. For precious metals I feel it is important to watch USD moves in the short to medium but overall economic and stocks moves for the long term. The Negative Momentum Divergence is still dominant in the technical set up for me but Stochastic is over sold so a period of bullishness is likely, remains to be seen whether this will turn back down before a higher high or run up to hit the the overhanging resistance first before any medium term retrace. This uncertainty means precious metals are not a good bet right now for me. I am content to hold Longs from way down for the long term, having cashed some on a dual bet strategy. I am waiting for this current pattern to trace out before looking for additional Longs but I will not be taking precious metals Short nor swing trading in what I expect to be a volatile (whip plash type - not the good type) period and view the set up as too uncertain. I would rather look to swing trade stocks and main USD FX pairs that Gold/Silver at present.

Are we there yet? I think so but it is not yet conclusive. The turn on the Dow occurred just below the Fib 88%, which was a very strong retrace rally indeed. However all the signs of the turn were there with a pin bar off the upper narrowing channel line and then a lower high retrace (where I went short). The Market then broke out of the channel to the downside (another bearish signal) and went on a strong drop that stopped after bad economic news (US NFP), hmm... There have been some minor divergences on shorter time-frame charts, a signal that the trend is weakening. However that strong late reaction rally suggest a further retracement is likely before the next phase of the bearish move. I suspect this retrace may carry as far as a retest of the channel breakout. Of course no one can 100% discount the marketing over exuberance continuing to a new all time high but I don't see that as the highest probability scenario at this stage, there are too many economic headwinds for me. This is my scenario 3. The other 2 scenarios I have in play are: this will be a drawn out struggle between Bulls and Bears that will drive a so-called complex retrace with a lot of whip lash (we have certainly had that so far) before the Bulls will eventually realise the game is up and then we turn into a massive wave 3 down The game is already up and the turn down into the big one has just happened Time will tell, for now I remain Bearish, I will hold my Shorts and await events.

The USD is still in consolidation, as is EURUSD unsurprisingly. These things take longer than one expect usually. So the question remains, will it break up into a long term rally or down into a significant retrace before hitting out on that long term rally. Note I do not entertain the scenario where the USD goes into free-fall from here. Main reason is that I am pessimistic about the long term outlook for the global economy. We have had it too good for too long and all the signs of a major recession (or worse) are there for me (including paid for economists saying it wont happen... yet!). Stock markets and economies (at least on paper!) have been fueled by central bank policy, which I believe will be studied intensively in the future and declared a disaster. Recently central banks have made a halfhearted attempt to pull back from their policy excesses, because they likely know in their respective guts that the economy has not responded and to continue is futile, they cannot get the inflation they are seeking to erode the debt excesses. The Eurozone economies as a whole are a basket case. China is flagging, unsurprisingly as they have been overheated for too long and (in all likelihood) being incorrectly represented in official data (although of course no one could prove that so let's say I take the prudent approach of discounting the official data). Emerging economies are struggling with USD denominated debt burden. Even the US economy is not as rosy as it seems, but likely still more stable than most. Trump policy seems to be to pull in to a US defensive posture to further stabalise it. Brexit is not helping the EU cause but is not the driver of their parlous state, the Eurocrats are terrified that the UK might be more successful outside that in, which they may well be, if for no other reason that they will not get plled down in the Eurozone meltdown that is, I believe, inevitable. The Eurozone economic model is not stable and therefore not sustainable and neither is the currency. In terms of policy, the central bankers must know that the end is nigh but who wants to be seen as the one who triggered the fall..? The alternative to carrying on is to admit error and reverse, which would trigger the very thing they have been trying to fend off, a depressionary recession. But to carry on with the same strategy that has not worked bears all the hallmarks of the theory of insanity often attributed (erroneously perhaps) to Einstein - "doing the same thing over and over again and expecting a different result". And they are not alone in this. How many times have we read the great and the good say "that this time it is different" or talk about the "new normal". LOL! Now the ECB seemingly wants to open the pumps again... Oh Oh! So much for the fundamentals, which can only supply the backdrop for me. I need triggers to trader so I use a technical analytical method to frame the fundamentals into real-time price action. The DX move up since early 2018 has described a Triangle formation with significant resistance overhead now including the Fib 62% and a cross resistance point (2 or more trend lines intersecting). That this occurs at the Fib 62% level may be indicative of a major inflection point. There is significant negative momentum divergence (NMD) in play just waiting for a final trigger to push price into a Bearish move. The EWT count has yet to see a significant 1-2 retrace. Previously I had thought the Nov 18 top might be the wave 1 top but another leg up is now on and that critical inflection point now comes into sharp relief. Looking at the Daily we also see a more recent Daily NMD plus other oscillators firmly over bought. On the current rally the desired 1-5 form has not yet completed, so a bit further to go perhaps to test that resistance zone. On the EURUSD chart you can see the same Triangle in reverse and in this case of course PMD. Net I expect another leg up on DX (down on EURUSD) before that significant EWT1-2 retrace, the termination of which will signal the final turn to complete the overall bearish move on play since the Credit Crunch. When this triggers (i.e. a massive USD rally) it will likely coincide with that stocks crash I have been banging on about for a few years now plus the precious metals rally I am seeing signals of all over the place. So that's what I think, does anyone have a materially different view? I would love to hear it.

US indices are at or have broken near term support zones. Given the nature of the bearish moves I am viewing this as a trend change. I am not saying pile in, markets move in zig zags as we all know. I am Short from key breakout points and stop protected at Breakeven. I will be looking to sell into rallies at key resistance zone turning points with close stops above those turning zones. My medium term targets for this move are around the Fib 62% or 76/78% support zones. Depending on the nature of the move and the sum total of signals at these turning points I will assess whether a swing or hold approach (or indeed a split approach) is indicated.

Russell2000 makes new lower lows and breaks support zone. This index can be a it of an advance indicator for the large caps, it certainly looks like it this time.

Nasdaq is setting up nicely for a strong bearish move, as are the other US large Caps. In the case of the Nasdaq through the recent relief rally was stronger, penetrating back through the channel line to top out at the Fib 78%. This was coincident with the top of the prior gap, a zone that supply/demand theory would have as a strong buy/sell point. The theory goes that a gap leaves traders behind and when the gap is closed this traders will dive in. In this case the bearish move was fast and strong, closing the gap with little chance for traders to get in. The relief rally topping out where it did offered those traders the chance to get in. Looks like they were predominately Bearish... I am particularly keen on these types of set ups where several methodologies combine to show the same result. For me this adds credence to my Bearish stance at this juncture. I am anticipating a fairly substantial drop from here.

There has been a lot of chatter about the Bullish nature of the stock indices and about bias etc. As a Contrarian I love that. I also use the COT differently as a result, looking for a lob sides bias in the market place. So far it looks like the Dow (and other US large caps) are leading the way down. The Dow is my main vehicle and turned without making a higher high and has now broken the narrowing channel support line with some force and closed below key support zone on the hourly chart. We could see some retrace rally action in the run up to the close today and I will be awaiting the end of day position on the daily chart to assess whether this is a confirmed turn. but so far it looks good. The key for me was to get Short early, which I did once again at the wave 2 turn on key resistance and on breakouts of the channel lines. The Sunday evening opening Gap was a key factor for me in determining a Short trade as I felt reasonably sure this gap was not a breakaway and so would be closed. One it was closed I narrowed stops to guard against a reversal (the kind of thing we have seen at the other resistance points on the rally up so far). Thankfully the market carried on down. At this point I will be holding my Shorts stop protected at break-even and deploying a sell the rally strategy until I see signals of another medium trend reversal OR a break of the Christmas low, whichever presents itself. Obviously in the case of the former the indicted action will be to cash Shorts and swing Long and in the case of the latter hold for the long term. First though we need to see a confirmed trend change. Some interesting factors for technical traders to note: Dow didn't make a higher high but Nasdaq and SP500 did. FTSE100 has been weaker, making a turn 15 Feb. Dax and Nikkei have turned at much lower levels that the US large Caps, which have also turned at different levels (Dow being the strongest making it all the way to the Fib 88% or thereabouts). This divergence but turning at respective important resistance zones is instructive. Oil and precious metals seem to be in congruence with stock indices at present, the former in particular perhaps. There were no data releases to trigger today's US indices turns... There was no material news that I can see, although I expect the usual attempts at post hoc justifications. Whatever you views on all that there is no denying that a turn looks likely, subject to today's closing price action. Dow 1 hour chart attached, similar read on others but the Dow (and Russell 2000 actually) were first to go.

My EURGBP Short trades have been going well. My current assessment is that a major breakout to the Bearish side has occurred with the break of the Triangle. There has already been a short term retrace and retest of the Triangle so Shorts above this zone are good holds. However we could easily see another significant retrace and retest occurring over the coming retrace/consolidation continuation period that I believe will be a feature of the markets in general until the Summer. It is clear that GBP has been stronger than EUR of late but looking at the EURUSD and GBPUSD charts I see more potential for EUR rally (as in a stronger rally). Obviously if this occurs EURGBP will also rally. If we do see such a retrace any turn back off the Triangle line or breakout zone will be a very good shorting opportunity.

Didn't see your comment until today @psycho so any comments are obviously with the benefit of hindsight. I had wondered if this rally would make it to the potential Head & Shoulders Neckline up at around 1360 but the market looks to have fallen short of this. Regardless I was expecting a large time frame EWT 1-2 retrace , which I believe has just started. This could take a bit of time to play out, although the move down on Silver has been fast. For me such a move is likely to be volatile and, if it coincides with my lead scenario for indices (a complex retrace) could play out towards May. Note that on Gold there was a spike on the COT data with the Non Commercials jumping into net Longs just as the market turned. As a contrarian this is a good signal of the end of a rally, I exited my Longs shortly thereafter. I will sit this out for now and await a confirmation of a retrace completions before looking to get Long for a Long, Long rally. BTW: although I have shown Silver retrace terminating at the neckline breakout zone this is indicative only at this stage, as all my road maps are, and I would not be surprised to see the long term supporting trend-line retested on Silver.

The overall USD picture looks like a retrace rally to me. I will be watching for a turn down on this market to coincide with key USD pairs. Although not surprisingly there is an unbroken Triangle formation as with EURUSD to contend with and an overhead long term resistance trend-line, which could result in a higher high before a retrace.

The current rally seems to have stalled, as with GBPUSD. Currently I see this as an EWT 1-2 retrace. This pair may already have put in the A-B. I am looking for a rally off key support to add to Longs. Note this pair has not yet broken out of the Weekly Chart Triangle, which means a trend change is not confirmed for me. Any trend change will, I think, be a large scale retrace only. A conservative approach would be to wait for a Triangle break out. However if the 1-2 retrace plays out a Long at a key support turn with tight stops would be fine for me.

Momentum definitely appeared to be slowing @cryptotrader but as is often the case it took a while to reach a tipping point. On the Hourly chart there was a Neg Mom Div at the recent high. I think the current bearishness is a retrace EWT 1-2 to set up a further rally. I am looking for a further drop in A-B-C form before considering adding to my Longs. Although as EURUSD hasn't yet broken out of its Triangle channel (and charting convention has it that you trade the breakout) we may yet see a breakdown. For now though I am Long biased so will look to go Long off turns at key support levels.

Ha! Thanks for that @elle all grist to the mill I guess but like you, I trade what I see. I needed to see a Bearish end to the week and we didn't really get that, out of hours trading on FTSE, Nikkei and Dax was overly strong vs the live US indices. However the Dow, which is my main vehicle, is still showing a failed retest of my channel line. I would be a lot stronger on this set up if other indices were showing similar reactions but they are not, especially the Nasdaq. In the case of the Nasdaq it could be on for a double top, which is consistent with the Bulls not being able to give up the belief that the central bank fueled run will go on forever ("The new normal"). I will await Sunday opening with interest to see if we get a Bearish start to the week or fresh highs on this rally (another leg up).

Dow Hourly shows the 1-5 down to a potential wave 1 and the A-B-C retrace with turn and strong bearish move off key resistance.