Mercury

Looks like we got a further retrace all the way to my alternative channel line for a failed retest. Once the resistance zone was cleared this morning we got a fairly swift move away from the retest zone. A break of the next level of support, and prior short term low, will be indicative of a longer term Bearish move for me. Given the nature of Oil price action this one might never look back.

On a brief break from bank holiday family fun and just thought I would stir the pot with an updated Bitcoin post to punctuate the gowning hysteria (or I should say regrowing). From a purely technical perspective, with no skin in the game and only 1 bias, that cryptos are a mania and will end as all mania's do, I see a significant inflection point coming up that may end the current bout of euphoria, just as pundits are making cases for bitcoin to regain old heights and go beyond. I see a classic retrace move with NMD building and the Fib 38% resistance lies ahead. Might even make 50% who knows? All to risky for my blood, more stable markets with great pointage about for me.

Updated 1 hour chart. DX is putting in a rally to near term resistance. If we see the market enter, get rejected and exit this resistance zone there is a good change that USD bear move will occur.

EURUSD is currently following my short term road map as part of my longer term assessment in favour of a significant retrace rally, driven chiefly by USD weakness. Shouldn't have to wait to long for this to resolved one way or the other.

GBPUSD is at a pivotal point on the hour chart for me, a retest of the channel line, previously broken. Might get a small bounce and retest to mirror expected price action on the larger EURUSD. @dmedin, as regards your question, or assertion really, I do not agree that GBP is chiefly moved by Brexit shenanigans in the bigger picture, which seems to be the premise underpinning your position on this. I have 3 main reasons as follows: Currency pairs are driven chiefly, in Fundamentals terms, by the relative strengths of the economies in the cross within the wider geo-economic backdrop (i.e. recession tends to drive strength in certain currencies like the USD). Not withstanding recession, this stength or weakness is most accurately reflected in balance of payments or trade deficit, which is bad for GBP right now and has been for a long time. FWIW this is one of the main arguments the pro Brexit people field (and the most convincing one for me) couched in limitation to the UK's ability to forge independent trade relationships outwith the EU's undoubted bureaucracy and divergent self interest (of the Eurocrat elites that is, not the people). The argument goes that free of this bureaucracy the UK can address it's balance of payments issues head on and more swiftly and that should trade with the EU come to a full stop the UK economy would technically be better off as we spend more with the EU than we get back, hence this would improve the UK's balance of payments. There are plenty of counter arguments, some are even convincing, but there is a lot of hot air and emotion as well. The point being no one really know what the long term impact of Brexit will be so why assume it will be bad? That is just fear of the unknown talking. If I can't figure out what the impact is actually going to be from a Fundamentals perspective I tend to ignore it and let the technicals, based on price action, tell the tale. GBPUSD was going down before and after the Brexit referendum so no change there. That said I do believe, for more Fundamentals reasons that political claptrap, that GBPUSD is heading down. EURUSD is too and more drastically than GBP, hence my view on EURGBP, see separate thread. But markets do not move in straight lines and I am anticipating a significant retrace (AKA relief) rally to "prime the pump" on a long term bear market. Naturally these markets could indeed drop off a cliff from here with a previous shallow retrace having been sufficient from a technical perspective. If that happens then I would seek to swing my bias and go Short on key support breaks. Until then I will follow my current strategy and seek a turn further up to get Short. Perhaps the most important factor in my assessment is that I am anticipating a USD weakness led retrace move across major USD pairs. Note that means it has little to do with the other currencies. The USD is the biggest influence on the GBPUSD cross so why look at GBP much at all? Check out my "what is the USD doing?" post if you are interested in this aspect. So to summarise, within my trading methodology: I do not bother much with short term media news headlines and political twists and turns - you can't predict what the market will choose to react to nor which way it will go as a result (how many times have you heard people say how the market moved in the opposite direction because the news was priced in? Which of course they have no way of knowing either way... This is classic Post Hoc Ergo Propter Hoc thinking, or as Daniel Kahneman has it, thinking fast rather than thinking slow - i.e. lazy analysis, received wisdom and confirmation bias.). I believe markets move in waves that are, to some extent, predictable (or at least may be anticipated and prepared for with key indicators and triggers upon which trading them as a swing trader can be lucrative I am a contrarian at key turning points, so when everyone is saying Brexit, or EU elections, or PM changes will hurt GBP AND it is at a key potential turning point AND my system indicators are showing me a turn is on, I will be at odds with the majority.

Copper has continued to descend. Yesterday it bounced with a descent spike and came back inside another possible lower trend (Flag) line, still unconfirmed though. On the Daily chart the spike bounced just short of the Fib 76% on PMD and although another leg down to the bottom of that support zone is clearly possible a rally from here would in theory be bullish for stocks, in fact if this did happen and price then once again moved back inside the lower Flag line it would be even more bullish. In addition the non commercials COT data is net -22k as at last Tuesday. The non comms have got this market spectacularly and consistently wrong at major turns (naturally enough as the insiders are the miners and refiners - i.e. the Commercials). A -22k level is a strong case for a rally of a temporary nature, such as another leg up inside a Flag. One to watch as next week progresses.

Quick update. Looks like a small 1-2 retrace is in, followed by a breakout through the channel. Might get a quick retest next week before the rally takes off, assuming there isn't a push back down into the channel with a fakeout.

So much for the targets, what about the chances of the retrace rally actually sticking? My technical case for a turn is as follows: The channel, which may now be classified as an ending diagonal, has been broken through and with some force. Prior to that there was a spike drop to the lower channel line and rally away in a pin bar, which is visible on the Daily chart (this is crucial as candle indicators are more reliable on the bigger picture chart). This spike and rally also brought price back inside the lower monthly/weekly flag lower line, which if it holds to the end of next week will be telling. And there is Positive Momentum Divergence at the spike turn Need to see a breakout from the Weekly upper Triangle line to be confident of a rally. Short term we haven't yet seen a small scale EWT1-2 bearish retrace that would set up a stronger rally phase so I am looking for that to add to my turn position. The most likely retrace level would be around where the previous channel was broken, depending on where the current rally actually tops out, if it hasn't already.

@nash3 If you have seen my EURUSD post it will probably answer your question but in any case see below for the DX view. I assume your view on a 9500 is based on the parallel lines you have drawn. You will see from my charts below that my equivalent upper line is drawn differently and I don't see a credible parallel so for me this is a narrowing channel, which will resolve with a breakout one way or the other, not withstanding a fakeout, all to common these days. Similarly to EURUSD there are a number of credible retrace support zones, the first one being a very long term level, albeit one that has been broken through significantly twice relatively recently. My monthly chart is perhaps more interesting, to me at least, as it describes the case for the USD Bull. I don't see a scenario where DX falls back down through 8000, I'd say 8500 is the floor of any bearish move and this is unlikely at present. Nevertheless another test of the lower flag trend line cannot be ruled out until there is a breakout of the upper one so it stays in my scenario list to be tracked. More likely then is a retrace to one of those levels on my Weekly chart to set up a rally through the Flag and on up. The next likely scenario, still a high probability given current price action and market uncertainty, is a breakout to the upside from here.

@nash3 If you look further back into the thread you will see the build up over time but to summarise: I don't know, of course, how far any retrace would go, if indeed it even happens. There is a perfectly reasonable scenario supporting a breakout of upper resistance into a long term rally, indeed I am biased to exactly this long term USD rally for a variety of reasons but chiefly it is a scenario of flight to safety while simultaneously the Eurozone meltdown (that Draghi has been desperately trying to stave off) materialises. See my Monthly Chart below for long term perspective (note the saying, "the flag flies at half mast"), hence a projection to the 5000 level but there is a long way to go before I get truly interested in that target. Elliot Wave Theory holds that markets move in wave patterns [1-5 or A-B-C]. If you believe, as I do, in the USD long term rally (see my thread on DX - "what is the USD doing?") then we are, perhaps, due a retrace, although as I said the market could breakout out through resistance from here so this is only 1 scenario. Assuming that the retrace scenario is correct then, after we see a confirmed break to the downside on USD (rally on EURUSD), the questions becomes not if but how far will it carry. I use a number of analytical techniques and indicators to determine the end of waves and the retrace waves are easier to spot as you are looking for a turn in a key resistance zone. So what are these zones for EURUSD, on my Weekly chart below you can see some of them as follows: The first target, once there is a breakout, is the Fib 38% (circa 11650). For me this is a minimum expectation but price action will reveal all as it progresses so this is just a projection not a prediction [some people get hot under the collar about what I post, for reasons passing understanding, so I find myself having to repeat that I don't make predictions]. However just above the Fib 38% is a large long term resistance zone that stretches beyond the Fib 50%. The top of this range (crica 11850) represents the second target. Then there is the Fib 62% at 12,000 (nice round number), my personal favourite. Had the market turned earlier, when I was previously tracking it, I favoured the Fib 76/78%, which coincided with the upper monthly chart resistance channel line and the breakout of the previous rising and narrowing channel. Although depending on how long the retrace takes and how fast the final wave runs we could see a hit on the upper trend line yet. My plan is simple, though never easy to execute as with all things trading: Identify the wave 1 turn, have had a few attempts at this so far, and get in early Pyramid on a breakout of key resistance Move stops to break even so I get into a no loss position Manage the trades through my expected road map to the pre identified potential rally end zones and then, Exit for profit and use this to fuel a long term Short campaign. I also watch the GBPUSD and EURGBP pairs in a Triad to assess relative movements. Overall On this I expect GBP to rally harder than EUR, which, if correct, would suggest one of the earlier targets on EURUSD. As ever it is all about watching the price action unfold.

That retrace didn't hold so now I am looking at a deeper A-B-C form retrace and a slightly amended alternative channel line plus a zone of support now turned resistance for the next line of defence against a bullish backlash. I think I am right in saying that Brent Crude is open on Monday but as it is a bank holiday in both the UK and US volumes might be lighter than usual and strange things can happen when volume is light...

1 hour chart showing a bit of a nod to the downside. Not conclusive yet but indicative.

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.