Mercury

Similarly to GBP and EUR this pair looks to have stopped, and possibly turned, on the Fib 62% support zone. Nice pin bar on the spike through and rally and today (so far) a continuation rally away. If sustained a retest of the upper Triangle line will tell us whether the big retrace rally is on the cards or not this time. A breakthrough the lower Triangle line brings up a retest of the previous low and most likely a bearish move below that, but that is for another time.

GBPUSD decline continues as EURUSD took a slightly more dramatic turn down yesterday. As with EUR, signs are bearish but that is often the case right when a turn is imminent. I still favour the 12,800 mark (Fib 62%) or possible even a bit lower for a storing turn to rally scenario but with price currently wavering at the Fib 50% and with EURUSD at an important point for a potential turn also I am interested to see if any rally price action will ensue off the current zone. On the Daily chart you can see that price has spiked through the Fib 50% support zone and rallied back. There is strong Pos Mom Div at this point and a credible A-B EWT set up in an overall, so-called, complex retrace. On the 1 hour chart things are a bit more interesting. As with EURUSD I have a strong lower channel line (3 clean touches) and a breakout of the upper channel line, that zone currently being retested and a minim ice line off a V pattern spike and rally. A breakout of this Ice line is a good sign and low exposure point to trade Long, I went Long off the Channel breakout for a very low exposure initial trade.

EURUSD dropped beyond the 2 previous lows, suggesting the big drop is on but until lower Weekly support is broken (and for me also that price consolidation Triangle formation) this is not clearly the case. Price is at the bottom of an important weekly chart support zone right now, where the Bearish move has been halted. Is this a pause before a sustained drop or a prelude to a retrace rally? As said, a firm break of support is needed for me to switch to a Bearish footing so until then I will continue to seek to take advantage of a significant retrace rally if it comes. The case for the retrace rally strengthens with each bearish move (counter intuitive I know). Looking at the Weekly Chart I see the following: Very strong Pos Mom Div Decent support zone, price is at the bottom of this as said Consolidation Triangle with a 1-5 EWT wave pattern within the Triangle - one the 1-5 completes a counter trend rally is indicated by EWT However a further drop to the lower Triangle line cannot be ruled out On the Daily chart: Also have PMD Other oscillators are over sold Bottom of the support zone naturally but again cannot rule out a further leg lower On the Hourly chart: Again PMD I have a EWT1-5 wave form down to the bottom of the support zone A potential ending channel (narrowing) and a possible 1-2 bounce. I'd like to see a breakout of the channel and a short term 1-2 bearish retrace (higher low) to confirm and I am seeing similar set ups on other related USD pairs so the scenario strength is building.

So it's likely to be a bit boring waiting for stocks to top out before that crash I'm tracking and other associated moves. During this time I am focused short term on FX and while I wait for GBP and EUR to hit turn zones in a retrace rally I was drawn to this pair, one I track but have not been focused on recently. So starting from the beginning, the long term picture, which is still the same for me as it have been for, well 5 or 6 years now, is that this pair is in a long term bull market. If the current retrace move (monthly chart) is a Pennant, and conventional charting dictates that this kind of formation occurs at the halfway point in a rally, then the current bullish motive wave should continue on up to around about the 18,000 mark (this being a wave 3), after which we would see another significant retrace and a final wave 5. The theoretical top is just the Fib 162% extension and is of no real bearing at present. The alternative scenario is that the Jan 2016 top and spike (pin bar) was a wave C retrace end and the market hammers down but the Pennant break belies this scenario, for now. So what's next? Well we have had a Pennant breakout, after a retrace to the Fib 50% (Sept 2017), which ended with a very strong pin bar reversal and 1 quick breakout zone failed retest but I am still wanting another EWT1-2 retrace before the wave 3 rally really gets going so another retest of that breakout zone, or maybe even a retest of the Pennant line, is on the cards for me. Weekly chart oscillators peaked out overbought at the wave 1 (blue) top in Dec 2018 and since that there has been a period of whip lash consolidation. Looking at the Daily chart I see a potential complex retrace move emerging (Lots of A-B-C whiplash) that should end with a strong bearish move to terminate the retrace. The whole of the Bullish move up to date has been contained in a set of parallel channel lines, which if broken to the Bearish side will bring up that sharp move down. I believe this move is already in play and I am Short from the wave 2 (Brown) area (hourly chart) and stop protected with close stops. It looks like this pair may be preempting EUR, AUD and GBP. While the Pennant breakout zone is a likely retrace ending zone I think the Fib 76/78% may also be an interesting option. While I am tactically Short it is the eventual massive Long play I am keen on catching, but a Short will keep me interested in this pair.

Both Gold and Silver are still following my road map however both have hit an interesting juncture, which could prove to be an early turning point. I am still favouring the Fib 50% for Gold, a long term reliable Fib level for this market (however it does not occur at a strong price action support level this time so a further deeper retrace could be on the cards) and if that happens then Silver retesting the long term supporting trend line is also on the cards. So much for that, what about the case for the current levels? Gold: Complex form retrace (EWT) completed (that is an A-B-C with internal A-B-C forms on each leg) Pos Mom Divergence at the current price point on Daily and 4 Hourly charts RSI and Stochastic both over sold Credible 1-5 wave down to current price point Bounce off the Fib 38% and associated support zone Potential Triangle breakout and retest then rally away on 4 Hourly chart Similar on Silver, although perhaps less compelling. I might expect a further drop on Silver with Gold holding or rallying slowly. I am Long Gold at the Fib 38% with tight stops just below the turning point for a very low exposure trade. For me this was worth the small loss if Gold carries on down but there may be another chance to get Long on a near term EWT 1-2. And maybe Platinum is showing the way...

GBPUSD also still following my road map. First chance for a rally for me is the Fib 62% zone where the previous channel breakout occurred and a previous retest failed. Chance for a test of strong support at Fib 6/78% cannot be ruled out and this pair is spiky so could easily occur. All aligned to directional price action on EUR and AUD as well.

EURUSD is still following my roadmap. I am tracking another small leg down to the Fib 76/78% to complete an EWT1-2 retrace prior to ta strong rally in wave 3.

Looking a bit further in on AUD it looks like a potential channel breakout that may be followed up by a channel line retest. If this fails then a strong rally could ensue, supported by RBA dovishness. I have market up an initial target of 7650, the zone where the bearish breakout of the previous Triangle consolidation occurred (plus a failed retest) however if this pair gets a strong following wind the consolation Triangle line could be retested around 8000. Could all of this coincide with a similar rally on GBP and EUR?

I haven't been looking at the Aussie Dollar much but now it looks like it is aligning to other USD pairs in a retrace rally.

Comparing the primary USD crosses to this Triad cross is always important for me to check my analytic conclusions from the main USD pairs. My conclusions are that EURUSD is set to rally while GBPUSD will fall a little further before rallying. So I would expect to see evidence of EURGBP bullishness and this is what I do see, which has not changed since my last post. A retest of the Weekly chart Triangle lower line is my lead scenario, with the breakout zone a possibility as well. A short campaign off this potential turn could be very lucrative, although it depends on how other markets are shaping up around the same time of course. The key points of this analysis for me are as follows: It supports my short/medium term view that EURUSD can rally despite GBPUSD falling, although I expect GBP to follow suit eventually. It supports my view that EURUSD will be a big looser and ripe for a major Short campaign

As is often the case, the markets are taking their sweet time to develop against my road maps. There have been some swings up and down since my last post on GBP but overall it is still following the road map. The previous Triangle breakout zone remains the favourite for a wave B turn into a rally to complete the A-B-C retrace. Although with GBPUSD you can't rule out a spike low to the next level. Could be a tricky one to trade. That is why I prefer EURUSD but it is important that there is congruence between these 2 markets for me so I continue to track it and the related Triad cross (EURGBP). The top shout for a rally end is still the 14,000 level for me.

The currency vs stocks relationship does not hold over the long term @Kodiak. If you look at the respective charts there are many periods where there is no correlation at all or stocks go up while currency also goes up. My feeling on this received wisdom is that it only seems to happen when the more important drivers are not present and the market drifts. Much more important for me is the intrinsic driving factors in any market. The idea that short term moves in currency has any material impact on corporate performance, and therefore stock price just doesn't track in practice. Corporates are pretty good at managing exchange rate risk, something I used to do myself. After the current move set (i.e. USD bearish phase prior to a major rally; precious metal bearish phase prior to a major rally; stocks bullishness a last hurrah, prior to a major crash and a related industrial commodities crash) I expect to see European markets fall heavily while their currencies also fall. US stocks to fall while USD rallies but USD will be rallying in a flight to safety as a result of stocks (and other markets) crashing rather than being a driver of said crashes. For stock markets in particular, and especially so these days, the key driver is sentiment rather than fundamentals of economy or the individual company valuations. The days when sound valuation drive the markets are well behind us. M&A and IPO valuations are off the charts ridiculous and corporates have nothing better to do with their low interest debt than buy back their own shares (at the top of the market!). This is the kind of situation that screams sell, sell! Just takes time to crystalise.

Did indeed get a rally and I got Long accordingly but what next. Markets sometimes take off and just run and run but I am not sure we are quite there yet on this market and, as this is likely to be a medium term counter trend rally, there could be a bit of volatility yet. At present I would not be adding to my Long positions until I see a decent bearish retrace and we may have seen the beginning of that late last week. A break of the upper line of the consolidation Triangle is important for Bulls, after which we could see a strong run up to the indicated resistance zones. This scenario would align to my Precious Metals scenario (see Gold post).

Still following my road map. What could continue to drive precious metals lower? Intrinsic market sentiment of course but also perhaps lower USD and high stocks. Hmm! I am seeing a rally in EURUSD (hence lower USD is on the cards and stocks? Could be another ATH on the cards? But if so then not for long as the key support areas for both Gold and Silver come up in fairly quick order. One to watch and wait for a Long campaign that could run and run.

Nearly there! At least in terms of the market finally revealing its true nature. The rally off the Christmas low has been very strong; strong enough to turn many of the perma-bears and MSM copy back to Bullish with Bullish sentiment back at "Greed" levels again. Check out the article below from CNN for an example. https://edition.cnn.com/2019/04/05/investing/stock-market-ahead/index.html Bulls will read this article as confirmation for them, they may be right, at least temporarily, but the article doesn't address the following points for me: Why has the Fed turned dovish again? Could it be fears about a slowing global economy and getting the blame for a crash by raising interest rates? The Donald is certainly position for this... "Some concerns remain. There are still questions, for example, about how much markets have priced in what is set to be a disappointing round of first quarter earnings." Well how could that be priced in? The markets have rallied... And are nearly at all time highs again! "Earnings for S&P 500 companies were expected to decline 4.1% as of Thursday, according to FactSet. If this happens, it would mark the first year-over-year decline in earnings for the index since the second quarter of 2016." And yet, "Analysts generally believe that companies have adequately managed expectations, and markets have already baked in weaker numbers." Wait a minute, the article just said there were concerns about this. And if they had baked in such a decline how come the markets have rallied? Surely earnings drive price? Ah! maybe therein lies the problem... "most market analysts expect stocks that perform well in a strong economy will continue to do well throughout 2019." Err why? Are they expecting a continuation of a strong economy or are they saying said companies will perform well in a stagnant or deteriorating economy and if so why? Could it be financial engineering? Does they mean company share prices will perform well or company earnings? "A so-called yield curve inversion, in which short-term rates jump above long-term rates, has preceded each of the last seven recessions. Many investors are brushing aside the flip. [...] "It tells us what we already know, which is that a recession could come in two years," said Jason Draho, head of Americas asset allocation at UBS Global Wealth Management's Chief Investment Office. "The markets could still perform quite well before then." Could is the operative word, they have no idea when they just know it will come so they kick the can down the road. But hold on, earnings are falling, err... Or course analysts are not paid to encourage investors to get out of the market... "Peter Boockvar, chief investment officer at Bleakley Advisory Group, said the divergence between rallying stocks and depressed bond yields may have an easy explanation. Maybe it's "just as simple," he said, as the flattening of the bond market curve reflecting the current slowdown. He added that the stock market may just think these issues are temporary, and a "rebound in growth" is coming soon." Maybe? May? He doesn't know, no one does. What if there is no rebound in growth? Earnings have been under pressure for quite some time and Corporates have emptied their war chests propping share prices up for a few years now. And by the way, nothing in the financial markets is "just as simple as..." "The consensus view at present seems to be that US economic growth will slow but will not go negative 2019. and the second half of the year could be stronger economically than the first." In financial forecasting circles we call this the "hockey stick" forecast. It rarely, if ever, comes to pass. "Seems to be"? Well is it or is it not? "JPMorgan Chase CEO Jamie Dimon said, Employment and wages are going up, inflation is moderate, financial markets are healthy [under what measures I wonder?], and consumer and business confidence remains strong, although down from all-time highs." But markets don't always reflect real economic conditions, and volatility in the fourth quarter may be a "harbinger of things to come." Well at least he hedged his bets a little right at the end... Hmm, maybe he is not so all fired bullish after all... As a contrarian I love these kinds of articles. I need to see them to be confident a turn is on the cards. This is a critical indicator for me, not to trade but to get ready to pounce on any likely move that triggers all of my other indicators. So much for that, what about the only thing that matters, market price movements (Dow, SP500 & Nasdaq charts below) - this is a case for the Bears, I'll leave others to make the case for the Bulls: Weekly charts are looking like a possible symmetrical Head & Shoulders may be on the cards (LS/RS at same price zone), IF price turns back next week. Looking at the LS back in early 2018 a sharp weeks rally was immediately reversed and exceeded the following week (Sell strength was the order of the day back then, will it be again on Monday?) Daily charts continue to reflect a very significant negative momentum divergence (Also on RSI and Stochastic) with a retest of the narrowing channel breakout off the all time high underway. Dow ended Friday with a drop to a rising Triangle support line and a Daily chart pin bar, that could turn out to be a reversal signal. There is an un-closed gap below and the whole of the move since before the Christmas Bear is peppered with gaps, all closed, which is a sign of volaitlity and agitation in the market for me as Bulls war with Bears. I see no reason to expect the current un-closed gap to remain so. There was a Death Cross (50MA cuts 200MA going down) during the pre Christmas anti-Santa Claus rally (🙄). This has now been reversed but this often happens before a second Death Cross that is the true harbinger of doom. The driver for this is a large scale EWT 1-2 retrace, and we may have had a huge one now. On the 1 hour chart the Dow is knocking on the door of a Triangle breakout to the downside. However SP500 and Nasdaq are not. Divergence is another sign of that market agitation I was referring to above in the context of price gaps. The Nasdaq is a bit more buoyant that the others and we could see a double top (i.e. a slightly lower low) on this one before the end. Any turn between where we are and the previous all all time high is an effective double top for me. So that's case from a Contrarian Bear but the market will decide in the end, all I aim to do is be ready to react to confirmation of my signals and set ups. Setting up to be an interesting week or two, be careful out there!

EURUSD may be at a turning point, certainly not far to go below to the recent low. The triangle breakout, redrawn since my last post, has retested the breakout zone and failed to break lower. We may yet get another retest. A break of the overhead resistance could be swift and reveal a strong move up into a final wave C of the retrace rally I have been stalking for many months. It always surprises me, through it shouldn't, how long it takes a move to evolve and trigger once I have identified the possibility. Patients is certainly a virtue vital for successful trading, and one we rarely hear people talk about. Obviously a break below the recent low requires a reassessment.

My road map on EURGBP has worked out exceptionally well, and I made some good gains on this one, but I have been expecting a strong retrace and retest of the Weekly chart Triangle breakout zone for some time and looks like this pair have started this retrace journey. The EWT count to a wave 1 (green) is sound and there was strong PMD and positive divergence on RSI also. Now a possible A-B has been posted with a higher low so a further rally is indicated. If GBPUSD falls, as I have suggested in a separate post then EURUSD must rally (or fall more weakly).

So far GBPUSD is following my road map from mid March. Looks like a Wave B (green) in the an A-B-C format. If we get a lower low the breakout zone support level is a likely turning point. Question though, can EURUSD rally while GBPUSD falls? Well the reverse has happened so why not. To check this I look at the final leg of the Triad (EURGBP), see separate post.

Hi @uow513, thanks for the comment. Perhaps it is perseverance more than patients... I try to be patient but wish I was more so. For me the trick is not to assume I am right when I eventually go into a contrarian position but stop protect carefully and actively. In so doing I am aiming to live to fight another day if/when I get a reversal, which can happen a lot when stalking a major trend reversal. US stocks is a good example of this recently. No risk, no reward! I persevere with a road map until it is proven incorrect, after which it is folly to stick to the initial view. We are not quite there with USD, although it is getting close. A break out down through key support would probably be enough for me to reverse my position. There is a technical scenario which supports a EWT1-2 retrace having already been posted, albeit a small one. If stocks commenced a major turn and central banks start pumping the money printing and revert to lower interest rates then all bets are off. I anticipate an interesting few months ahead in this regard, Brexit is a side show, except insofar as it puts the focus on the EU instability.

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.