Mercury

After a textbook failed retest of my Triangle line the market then put in a near perfect small 1-2 retrace to the Fib 62%, followed by a sharp drop, as projected by the technical analysis set up. We have seen these crazy robo trading spikes before and almost always they seem to occur at trend changes on FX. So far this is shaping up to be no exception. EURUSD and GBPUSD have put in small 1-2s, which I trade Long, and now we have higher highs on the move up off the spike low. Trading in the opposite direction from a flash crash is psychologically difficult, you need a good reason and strong technical set up with good stop positioning. We always worry more about an event after it has happened (human nature) but how many times has one flash crash been followed by another in close proximity? I can't remember one. So leaning out on this I have gone Long to see if that counter trend rally will finally emerge. time will tell but thus far it is looking promising. Caution and good stop management is, as always but especially so with counter trend trading, vital. The Daily chart shows where I think this move could go, I remain long term Bullish USD so I am swing trading this and looking to get Short major USD pairs in due course for what I project may be a decent long term Bearish play. This ought to coincide with a resumption of the Stocks Bear (there or thereabouts).

So far the Triangle resistance line has held USD, despite all the flash moves last night. EURUSD was more stable as usual. I might expect a small 1-2 retrace on the hourly followed by a larger drop to confirm this resistance rejection that would set up a period of USD bearishness.

Gold and Silver have reached the top line of an up-sloping channel and have bounced back off it. Gold has broken out of a 4 hour chart Triangle and retested just as the market closed for the down time. However in the last hour during the Gold down time the FX market has really kicked off with the Yen making a large positive move against the USD and elsewhere USD rallying hard. Will be interesting to see if this spike in USD translates into a bearish move for precious metals.

DX is the USD vs a basket of currencies shown on IG as US Dollar Basket, AKA Dollar Index (DX).

Well it's definitely going up @Nelsy-Boy... But seriously folks, looks like the Weekly Triangle line on the EURUSD held firm as resistance this time, sending price back down but will it turn back before making a lower low or carry on down? Time will tell. There are 3 overall scenarios: any retrace we are going to get on EURUSD we already have and price will hammer down from here, especially once it breaks through significant support levels. we will see a new lower low on EURUSD (higher high on DX) before another attempt to retrace. we will see a turn any time now that sends USD down with a thump to an initial wave completion (see chart below) Regarding scenario 3, if it is likely then we should see a turn on DX around about the retest of the large scale Triangle line. However this is not a very strong line and I am less convinced when I look at the equivalent picture on EURUSD. Keeping a close watch on price action will be key if you want to try to catch it early but the safer bet is to wait for a breakout from the Triangle on EURUSD (and similar set ups elsewhere on other pairs).

End of 2018 and time to take stock (Short HaHa!). I have been waiting for a big stocks Short opportunity for several years and finally it looks like it is arriving. It could be the biggest Shorting opportunity any of us have ever seen. Some have pointed to Bitcoin but that was not a credible opportunity in my opinion, unless you are a pure gambler. Patience is certainly a virtue with this trading game if you are seeking to catch a big move and it has been on FX too. Having missed the first bearish wave down from April 2018, I have been watching for the probable retrace to get Short for the big wave 3 down. I am also interested in swing trading the retrace and have been attempting to do this for the last few months of this year but each time a possible rally presented itself it broke down to set another lower low. It is very hard to catch a wave 1 termination but another possible turning point is currently presenting itself. Will this be the one? And what might happen next? I regularly relook at my entire assessment to see if anything has changed materially and now seems like a good time to relook at FX. The monthly chart shows the long term perspective and the potential for a long Bearish move, once the retrace rally is out of the way. The Euro had been on a charge vs USD since its inception in 2002 (well the paper currency launch) but peaked in 2008 during the Credit Crunch and since then, as with most currencies, has been steadily losing value against USD. This also comes during a period of increasing turmoil in the EU (in particular for the Euro zone), which has been well covered in other threads but in short the Euro zone has some insurmountable (in my opinion) structural problems including a disparity between the various country economies (the likes of Greece and Portugal urgently need to devalue and Italy and Spain have major issues), inability to operate a true central bank and a wide range of individual country credit rating (resulting in a lack of uniform debt cost). Add to that political turmoil that is unlikely to be resolved any time soon (not least the migrant issue) and the Euro could not only fall heavily but could actually unravel just as the previous iteration, the ERM, did. So from both a fundamentals and technical perspective I see the Bearish trend continuing in 2019. I fully expect the inception levels of sub $0.90 to be reached and quite possibly the theoretical all time lows of $0.63, if not oblivion. But what about that pesky retrace? Not much point in placing a short now unless you are willing to take a huge stop loss exposure, which I'm not. Looking at the Weekly chart you will notice a nice head & shoulders formation in 2017 that broke out through the neckline with a large gap, that crucially remains unclosed. I expect this to be closed in due course. The whole of the 2017 rally is enclosed by a consolidation Triangle formation, a likely Pennant/Flag that was broken to the downside in April. The move down since then is also enclosed in a Triangle that is now on the verge of a breakout into a rally. I also have a credible EWT 1-5 form for the wave 1 (blue) down and I expect the rally to be an A-B-C retrace, which would confirm the overall trend is still Bearish. I also have Positive Momentum Divergence (PMD) at the Nov wave 1 (blue) turn, which can also be seen clearly on the Daily chart. The wave 1 (blue) also turned on a strong weekly chart pin bar, which was coincidental with the Fib 50% off the 2008 high (see Monthly chart). Looking at the Daily chart then I can see that PMD at wave 1 (blue), which is looking strong. The move down to the turn is enclosed in a possible ending triangle that was broken and retested (support held) and then that support zone was tested again and again held and then put in a sharp rally followed by another retrace down, which put in a higher low. This kind of price action is typical of a consolidation phase prior to a strong wave 3 rally and now the market is poised over New Year at the crucial Weekly Chart Triangle upper line. A breakout through this line (which is a must to confirm the retrace) that is fast and long (signature of a wave 3), maybe even with a gap through the resistance, would tee up a run to a wave A of an A-B-C that could ultimately terminate with a retest of the breakout zone of the Pennant (circa 12,300) and the Fib 76/78% but we will have to see how the move progresses to assess the likely turning point back into the Bear. While the retrace may be lucrative it is always risky trading counter trend, especially if you do not deploy swing trading techniques, as trend trading often does not work, unless you get an early A-B and a long C trend. The bigger opportunity is clearly tracking this potential road map to spot the next Bearish phase. However as a swing trader I am more than happy to trade this and related FX pairs and am already Long from previous lows. My trading strategy is to hold those further down Longs for the termination of the A-B-C move and to add on key breakouts for a shorter term trade to the Wave A turn. I will not trade the Wave B but wait to see if I can spot the turn back into the final wave C move and pyramid this to the end of the whole retrace before reversing into the Bear move.

For me precious metals have clearly now turned into that long term rally I have been banging on about since I started this thread. For the record, I am Long from an early turning point and am now seeking to add further to those longs until the first major (Long term timeline) retrace Bear. I currently see an interim retrace in the making, which would be a halfway Flag. This is something I always look out for in all major motive waves. On my Daily Gold chart I have a pair of parallel channel lines and the market has just hit and rebounded down off the upper one. On my 4 hourly chart I have NMD and a potential ending Triangle formation, which if broken to the down side may offer a nice short term Gold Short. More importantly I will be looking for a bottoming out of any retrace to go Long and also I will be waiting to see if a Flag or Pennant forms, the breakout rally of which would also be a good Long opportunity from a purely chartist perspective. Longer term I am still expecting this rally to make the 1360ish area at the neckline and then we will see whether that stops this particular wave (in temporary retrace) or it blasts through. But that's for later. Right mow my strategy is simple, buy the dips BUT need to be careful here as a Flag move could reach the bottom channel line (i.e. a deep dip this time). Also Flags can contain a lot of whiplash so watch out for that. Similar on Silver.

OK @Nelsy-Boy, I don't really trade the derivative crosses much, except for EURGBP, I prefer to stay with the primary USD crosses as I believe the USD is still the main FX market driver so don't have much to offer on those trades. One thing though, FWIW, no one likes taking losses but it is a art of trading so while we don't have to be happy about it we do have to be philosophical and treat them as learning opportunities. Also depending on your attitude to stop exposure, taking a loss does not necessarily mean your overall trade idea is wrong, just too early perhaps OR it may mean you need to think about reversing your direction. All depends on your methodology of course. So net I don't worry about losses so long as I practice good money management and are seeing movements I can easily rationalise as falling within my road maps.

I think your cloud is roughly equivalent to my Triangle lower line and near term support so looks like we agree using different methods, which is excellent @Nelsy-Boy. I only use DX as an indicator and am already Long AUDUSD and GBPUSD, the latter took a nice rally this morning. EURUSD is also looking to breakout of a key level. PS:looks like that NZDJPY is working out well according to the pure technical analysis picture with the Yen going through a period of strength vs USD, did you trade it?

While waiting for things to evolve with the stocks retrace (or alternatively a break down through recent support to recommence the Bear) I am looking again as FX and wondering if that Bearish retrace on USD might finally be on the cards. The long term prognosis (monthly chart) remains pointing to a strong rally for me but it looks like we may see a fairly significant bearish retrace to prime the pump for this, possible all the way down to a retest of the neckline breakout zone, although I see that as less likely just now. More likely is a 1-2 retrace, which can been seen more clearly on the Weekly chart where a rising long term trend-line intersects with the Fib 76/78%. But first we need to see a clear turning point. Currently I see a completed 1-5 up to wave 1 (blue) followed by a turn down that bounced off a supporting Triangle line and is now testing this again. There is NMD at wave 1 (blue) and oversold oscillators. On the Daily Chart we can see that NMD much more clearly (and strongly) plus a 1-2 retrace prior to a break and close below the Triangle supporting line. On the 4 Hourly chart that 1-2 retrace is more clearly presented as a 1-5 down and an A-B-C back up, which is indicating that the trend has changed and is now Bearish. A break back down below recent lows support zone will confirm and then I will be looking for an initial A-B to set up a strong wave C to complete the Bearish move. Short term though we should see a strong move down to at least the Fib 38% (9330-9400). Anyone see USD not moving into a bearish phase?

Precious metals did not retrace much, at least not yet but I have stayed out with my turning point Longs stop protected far below. I am waiting for another retrace to begin a buy-the-dips campaign that I expect to correlate to either a period of Stocks bearishness (i.e. even more than we have currently had because I don't believe the market has yet fully woken up to the idea of a major Bear on stocks) AND/OR a period of USD Bearishness. Using Silver to illustrate the technical picture right now I have a sharp turn On Friday off a potential H&S neckline with strong medium term resistance (circa 1500) above. I have NMD present on both Daily and 4 hourly charts at this turn and USD rising. If this pans out I would expect to see an A-B-C form for the retrace to a good turning point back into a Rally, maybe on USD turning Bearish or Stocks turning full Bearish or both. I have used the Fib 62% as a working hypothesis but the Fib 76/78% looks looks stronger support but I will let price action be my guide. On Gold I have a similar set up but without the nice potential H&S formation. I will await events and seek a Long opportunity buying into the dip at an appropriate support zone with other indicators in support. I will also watch out for a short term reversal and strong rally through over head resistance, especially aligned to correlated moves on Stocks and/or USD. With Stop protected Longs already in lower down I can trade Long in a pyramid strategy with confidence. Note: I am fully Bullish precious metals having identified a variety of turning point technicals, including COT data (see my recent COT posts on a separate thread). For me it is only about when to add to my Longs not if this market goes Bullish as I believe it already has. Once we see breakouts from resistance zones it will become all about managing the trend.

I still think USD is going to make a Bearish move before any major rally but I really cannot say whether the current rally is just a retrace of will show a higher high. I can make technical cases for both and I judge them to be 50/50 at present. I can see something similar on EURUSD for instance, with a number of possible retrace points. I would be USD Short biased if not for my assessment that precious metals is due a bearish phase short term, again before a longer term rally. I use the axiom, "when in doubt, stay out". So I am focused on Stocks Shorts and will wait and see on FX. If stocks continue to decline can USD fall? Can Precious metals? Maybe if we get that Flag consolidation on Stocks I mentioned elsewhere we might also get a softening of precious metals and USD but that would mean precious metals are detaching from USD as a driver and aligning to stocks. Hmm, lots to play out and assess over the coming weeks. For now I see 3 scenarios for USD FX: If stocks hammer down in the coming weeks USD may soar through over head resistance We may see a small additional leg up on USD to the next resistance zone, which coincides with the Daily chart Fib 62% and the Weekly chart provisional flag consolidation upper line before that Bearish retrace (red arrows o my chart We may get a retrace turn on the current rally (1 hour chart) into that Bearish move. At present don't really know so will stay out and await price action to reduce the scenarios or increase the probability of one of them. If anything I perhaps favour a short term period of USD strength that drives precious metals and EURUSD down to the next support levels before rallies get underway.

Yes it tells me that anyone who posts in opposition to you or Trendfollower is likely to get harangued. You haven't changed in the years I have been away. It tells me I should simply not react. So I wont henceforth.

@TrendFollower, Why don't you make yourself a nice cup of "macha tea" and reread all of your posts in response to mine, "with an open mind" over the Christmas break and try to see why I might be fed up with your technical bashing. You will see that far from a critique of a trade idea it is a constant and unrelenting diatribe on why using technical analysis is BS (or perhaps more correctly why the way I use it is, which is worse). I never asked for a critique of my method. I do not criticise yours, in fact I too am a trend follower, anyone who isn't is crazy. I asked for opinions on the trade ideas I offer up but I don't get much of that. When I offer an opinion on something like Bitcoin (a perfectly credible opinion I might add) your head almost explodes in your response, just because you don't want to believe I could be right - now who isn't accepting a critique? (and I'm not even criticing your position, just offering an alternative opinion. I don't need nor want a critique of how I came to my views on a set up, rather I ask whether others agree or disagree based on their own methods. The reason for this is that if there is disagreement that may be pause for thought and if there is agreement then the idea is likely to be stronger. I am all to happy to have meaningful exchanges on pros and cons of anything to do with trading in the trading strategy section of the forum but I am not interested in the kind of discussion that seeks to minimise what others are doing, successfully I might add, as the Stocks play clearly demonstrates. Post on these forums are a gift and they should be treated as such. Perhaps the reason we don't have more people posting is because they don't want to expose themselves to such "critique" as you offer.

OK @TrendFollowerso you are blaming my posts for your error, which is why you are so negative, not to say angry. Although at the beginning you were encouraging the community to get Short Oil while not getting Short yourself because you were focused on a Crypto Long... Fair enough but posts on this, and any forum, are an invitation for a discussion and not a recommendation nor should they be seen as an opportunity to try and win an argument nor to try and big ones own system up vs someone else's, which is what you have consistently done with your technical analysis bashing. You clearly do not know sufficiently enough about technical analysis to denigrate it, or maybe you have tried it in the past and couldn't make it work. It is fine to have an opinion but not to turn that into trolling behaviour. You have forgotten the reason I first posted on this thread. I, among others, was asked by @PandaFacefor my opinion on whether he should go long, this was back in October I think. I said I though the market had turned bearish and while I couldn't rule out another higher higher retrace I wouldn't go Long. That at least turned out to be good advice. I also stated that I don't really trade Oil and later that I was focused on Stock indices Shorts and precious metals Longs as a much better opportunity that Oil, which it seems you have belated joined me on... As we have seen from the last Oil Bear this market can just run and run. If you believe it will do so get Short. For me it does not meet my criteria for a high probability low risk trade. There is an end to it, I will not post on Oil again unless or until I see that retrace, but probably not even then.

That's what you believe @Caseynotes, I understand that and am not trying to dissuade you of that belief, especially as I am sure breaking news is vital to day trading as it does seem to produce short term movements. However I believe that the markets make the news and not the other way around. MSM gets the message last, in fact I use MSM headlines as a contrarian indicator. The thing that moves the market is sentiment. For sure news does act on that sentiment but it is a lot more complex that Donald Trumps twittering. It is a series of news, worlds events, policy changes, prices levels, risk/reward attitudes, Fear vs Greed (which acts in strange and unpredictable ways - hence bubbles and manias). I choose to ignore daily wittering and focus on the long term building pictures, using tried and tested tools to map the sentiment drivers of the markets. I find this clears the noise out of my analysis and helps me see the woods for the trees. For example there was no news that triggered the Oct market tops in stocks, although plenty in the MSM scrambled around for reasons. So what? It doesn't matter, there was no bell tolling, no announcement of the end of the trend, there never is. I am not saying you are wrong in following news in your trading but you seem intent on proving that I am wrong or that you or right or both. Surely it matters more whether trading is successful? Anyway that's all I'm going to say on this subject the market will show us is due course. As for me, on Oil, I would not take along term short at this point because the risk of a retrace rally is too high. I would only consider a Short if the market retraces to a good level and only then if there were no better trades available. If the marker does retrace to a good level for a turn back down then it will fit my long term analysis road map and that signals a very long drop.

So are you Short Oil now?

While the other markets sort themselves out (USD, precious metals retrace? Stocks which way short term) I was drawn to the EURGBP market as it has been at a critical juncture for a while. Having rallied on cue from the lower long term Triangle consolidation line to the upper one the question became would it break out up or be pushed back. We have now had 2 repulses, the recent one last night/this morning. This market looks to me to be heading into a Bearish phase, as least for now. Oh and for the avoidance of any whining, I am Short at the Turn.

Surely if the question is will it continue the slide then the obverse of that question is will it bounce? As for the Techncials there is every reason we will see a rally in Oil, the question I am posing myself is how to see when it happens early enough to profit. Not that is that big a deal for me, it is more relevant to see where any significant counter trend rally might end to kick off the next leg down, which could be a very good Short. That said, Oil is a funny 'ol market, dominated by a small number of big players (the Commercials) so if there is one market that might never look back it is Oil. The Commercials are the smart money in the Oil business, no one knows it like the Exxons, Shells and there ilk and OPEC of course. Best to trade with the Commercials on this market for me. The Non Commercials (Financials) were net Long (Futures & Options) in early Oct just as the market turned, which is fairly typical as a contrarian signal. Now they are back to their usual position of net Short but that has begun to unwind a bit (Rally on the horizon?). As to the Fundamentals, well I freely admit I don't know enough about Oil, which is why I rarely trade it, but overall it seems to me that the "oil wars" are not done yet and with such a heavy weight player as OPEC being a fractious organisation, with the Shale producers angle and with the overriding push to develop alternatives to Oil perhaps the general pressure is downward. Then again, what do I know? The Market will reveal all in due course as usual.

So Brent took another leg down, luckily for me I did not commit to a counter trend Long previously, preferring to wait for the next Short opportunity. However I continue to monitor this market and have have just noticed a strong bounce off Weekly chart support, which IF it concludes the day as is or better will show a pin bar reversal (obviously not yet done). The current rally put in a small 1-2 and then rallied again. There is very strong PMD on all charts. The safer bet is to wait for this to play out and a breakout of the channel (note I have adjusted my channel definition to contain the recent rally to 7 Dec). I have taken a spec Long close to the pin bar bottom and rally on the small 1-2 retrace and rally. My exposure is very small with a stop just below the pin bar low. Let's see what happens next...

Agree @Caseynotes with your implication that using COT data in a contrarian fashion exclusively would get you into trouble. The key to using any piece of information and technical analysis is when to use it. I put all my elements together to contextualise it. So only look for the contrarian set up when I think the trend is over. Otherwise I follow the trend. When these conversation happen some people seem to think the two are mutually exclusive. They are not. As to front running, it isn't because I wait for turn signals (i.e. that a turn has happened). I did not trade the Oct top, I didn't know it was a top at that point. It was only when I saw the price action on the next rally top (lower high) that I got interested. Then I shorted and as the move developed started pyramiding by selling into the rallies. I have not been shy about sharing this on the forum. So we are coming up to US open and we have has a direction change in advance. I got the FTSE100 wrong, it didn't turn at the 62% it turned at the 76/78%... Let's see if it sticks or not...

Well @Caseynotes going against the large speculators is going with the other side (i.e. the Commercials) so really it depends on which you think is the smart money at a given point int he cycle. As the large specs are mostly trend followers, a contrarian seeks to go against them (with the Commercials) at key markets turns, which is what I have done, let's see if it turns out to be successful but as I am stop protected and in credit so I will be fine even if there is yet another Bull rally. Of course it differs if you are talking about intra-day moves vs whole month moves so maybe we will always be at odds and both comfortable with that. The only thing I note is that even in my day trading days I always wanted to be with the long term trend, actually it was this that got me into long term trading. As to what is driving the current market price action, be it a Bull death struggle or just a consolidation I neither know (not smart enough to call that) nor care so long as I successfully identify price action and get in on the move successfully and with low exposure, which I use technical analysis for, successfully in this case. However, I do not trust only to technical analysis but position it within a fundamentals assessment. I have read some smart people talking about Trump's actions as being more about an effort to curb China's tech boom as a direct challenge to the US on this rather than a re-balancing of actual trade. There are plenty of fundamentals factors out there over and above what is being played out in the media right now so I don't need to get hung up on Trump's every utterance. In terms of definition of Bull or Bear, I agree and disagree with your view. For a short term trader maybe you can go with your approach to it but for long term traders the long term assessment is vital to ensure you know whether you are trading with the trend or counter trend. Each bearish phase since the 80s has been a counter trend retrace of a long long Bull since Bretton Woods, although you could argue that the 2007 move was motive and a full reset was curtailed by the central bankers actions, which then fueled the current bull phase. If that is true then this bottom (2009) could mark the end of any reset crash or maybe it continues on to do what it might have done without central bank interference in 2009. So for me we are at the end of a very long cycle and the down turn will be shorter in duration but of a similar price quantum. Appreciate that you go with the flow, not issue for me, but again, I have not heard a credible case either based on Fundamentals nor technicals for why stocks are a buy right now.

Ah! You and I use COT differently @Caseynotes. I look for the contrarian signals that everyone is on one side of the boat then run across to the other side. I look at the rate of change on the Net. The net high occurred in Oct and has been unwinding since (i.e. going Short). This always happens at a major turn. Same thing happened in late Jan to end Feb so you could be right regarding a bottoming out except for the fact that the SP500 was stopped at the first significant line of support in Feb 2018 but this time has broken through critical support levels. The Bear starts at the top and turn, we just don't call it a Bear until after the fact. This is why we keep getting swing rallies, people still have hope that the Bull is not dead. Until there is a higher high and an higher low and strong rally away it is a vain hope in my opinion. You need a signal like that to buy. Price action alone screams Bear! Surely anyone buying into this is gambling that this time it is the same and their buy the dips strategy will still work? I see no buy signals on any chart time-frames (I don't look below 1 hour as that is day trader territory). I see a wall of red as the chart below shows and an ice line that is no a big fat line of resistance for the SP500. I see the Santa Claus rally hope evaporated. I see the end of the year account closure fast approaching and the panic taking hold in the pro ranks. I see interest rates rising in the form of the Fed base rate (although the 10 year T-note rates is dropping off a bit, now at 2.75 but may be flattening out). I see the Vix has popped up to 25+ from lows of below 12 end Sept and crucially just above the early Nov levels. The only thing I still see is buy the dips strategy in play causing small rallies for me to sell into. I'd love to hear the case for a reversion to the Bull market other than this time it is different and buy the dips will win out but no one is offering that. Anyone got a case for the Bull they would care to share?

Another sunny morning and another round of buy the dips into the US open and then the hammer is dropped again? How many times before the market sentiment turns 180? We may not even make it to the US open this time, US futures are not really responding and the Dax traders seem reticent to follow their FTSE colleagues at present. As I posted last night on my US short thread, the SP500 has broken through and closed below a critical ice line support. Dax and FTSE100 did this a while ago and the Russell 2000 has also done this. The Dox is sitting right on its similar ice line and the Nikkei poked through but didn't close below its ice line last night. Only the Nasdaq remains above. In the face of this and a (for me) confirmed bearish trend) how can Long sentiment on the FTSE100 be at 75%? (rhetorical question!). We are now at Dec 20, the Thursday before a fairly long market break and a calendar year end account assessment for professional traders. Surely they can't be holding out for a Santa Claus rally to boost their bonus or more likely get them out of trouble..? When the sentiment does catch up with actual price action, look out below! For good form I advise that I am heavily Short Stock indices.

Looks like last nights Fed move was all the retrace we are going to get on this one at present @elle I see your stop run as a pin bar reversal on the Daily chart. Price poked up just above the previous high, which if a confirmed turn is a weak rally. Now I return to me longer term set up but I can't help feeling we have to watch out for another retrace before the USD Bearish move really gets going. I am preferring AUDUSD at present as a more manageable market with respect to new led volatility. Although I should point out, for good form, that I only have a few small positions in FX just now as I am heavily focused on Stock indices Shorts and precious metals Longs.