Mercury

Has the Aussie D just put in a turn into a big rally? Looks like USD is now firmly in a Bearish move after yesterday's Fed dog and pony show. AUDUSD is looking like a nice alternative to the usual suspects (sans any Brexit BS). I have a potential turn on the Fib 76/78% zone on the Daily chart, which would constitute an EWT wave B, after which you get a strong wave C rally. My medium term target would be around 7700 or 7900 but let's see how the price action plays out. I am long at the Fib zone, stop protected just below.

SO there is that rally I was talking about, courtesy of the Fed. It looks to me like a retrace is more likely rather than a higher high but let's see how things shape up in the coming days.

There is a real risk of a rally off the Fed release today, whether that brings up a fresh higher high or just a retrace remains to be seen. If we do get this then watch out for a precious metals drop in the opposite direction.

And when did you short Bitcoin, what level?

@TrendFollower what do you trade?

Oh dear! So it all going to happen again and stock will run hot again eh? But thanks for proving me right there that Bitcoin is the biggest Mania of them all. Nuff Zed...

I don't trade Crypto period! I consider that you have to trade what you are comfortable with. I have been watching and waiting for the biggest shorting opportunity any of us are likely to see and have Shorted that. It is about keeping your power dry for the right opportunity. Crypto is a Mania, I wouldn't touch it with a barge pole, neither Long nor Short, but that's just me.

Bitcoin et al continue to drop with no end in sight. It is a mania not a bubble. Who will buy bitcoins if they hit the Death zone? Everyone who is pro bitcoin is in and will be seriously under water...

I have been waiting for a USD Bearish move, which I believe will be a retrace rather than motive move (i.e. a counter trend move) for some time but so far it hasn't arrived. It goes to show that patience is a massive virtue when it comes to successful trading, that and careful money and risk management whilst seeking the right set up. I have re-looked at USD using the Dollar Index as a guide and come up with the following assessment. Long term (Monthly chart) the overall picture of a major USD rally remains unchanged at this juncture as nothing in the fundamentals or technicals has materially changed and a rally is consistent with my Bearish bias for stocks and the Euro (Fair warning on my bias!). The market bottom is the Head of a Head & Shoulders formation with the Neckline as the upper part of a coiling Triangle. The breakout of this Neckline/Triangle produced a very strong and fast rally. I think the long term chart now shows a potential consolidation Flag formation (very strong lower line in terms of unsuccessful retests of this line as a supporting trend-line), however the upper line is weak. If correct then we may expect the upper line or thereabouts to offer resistance that pushes the USD into a Bearish move. This Move could either return to the lower Flag line or bounce of nearer term resistance to set up a retest of the upper line. Looking at this on the Weekly chart you can see the latter retrace scenario in the form of a coiling Triangle 1-2 (pink), 1-2 (blue), which, if correct, may retest the channel breakout zone at the Fib 76/78% level before rallying away. However the Pink 2 could easily be a wave A that would result in the alternative scenario proving correct but I am not too worried about that at present as both scenarios as Bearish and price action should reveal which one is valid in due course. The Daily chart shows a possible road map for my lead scenario. A drop in a form that shows an A-B-C pattern that culminates and rallies from the Fib 76/78% would be a strong indicator that the big USD rally is on. I will be looking for correlations from other markets for this potential USD rally plus Fundamentals support such as deteriorating global economic conditions.

I am fully committed to stock indices Shorts at present but it pays to keep an eye on other markets and keep reassessing the overall economic condition. I remain patiently waiting for a significant retrace on Oil before I would consider a Short as the risk of getting caught in a Bear trap after such a strong Bearish move is too high and anyway stocks offer a better probability Shorting opportunity at present. I have adjusted my Big picture Weekly chart set up to a narrowing channel (AKA Triangle) that was broken out of during the current Bear move. I am looking for a relief rally in retrace form to retest this break out zone (Fib 62%) but would also be watching price action as any retrace approached the Fib 50% area. But have we even seen an end to the Bearish move? On the Daily chart we have seen a bounce off key support after a fakeout and then a breakout of the upper channel line. This after a classic 1-5 EWT wave count down. On the 4 Hour chart I can see the potential Wave 1 turn (Pink), with PMD, followed by a series of 1-2 retraces inside a Triangle formation, known as a coiling triangle. A breakout of this Triangle either way would typically be fast and strong. I am leaning to this breakout being a rally because of the long term assessment (above) plus the fact that this coiling price action has posted a higher high and 2 higher lows AND everyone is Bearish. If I were to trade this market short term it would be to go Long on a breakout of the Triangle formation but watch out for a Daily Chart A-B (i.e. a strong bearish retrace, maybe to retest the breakout zone) before a final wave C rally. Because of this potential whiplash I will either not trade until a Short set up reveals itself of swing trade the A-B, more likely the former.

Or it could rally off LT support zone despite news (or maybe the thought of a new PM is sufficient impetus for a relief rally?). All I am looking for is a counter trend relief rally to set up a much large collapse (or rather a USD Bull vs everything!).

So Gold and Silver both made higher highs and then promptly reversed (a typical risk) in line with both a similar reversal on stocks and a rally in USD. One thing to note, people often talk about correlations between markets as one driving another but for me this is more about data and signals rather than cause and effect. There is something driving all these markets but I am less concern with what it is when conducting technical analysis than the fact of the correlation itself as portrayed in price action and what signals it might give me between markets. I am now expecting a retrace bearish move on precious metals, which continues to align to a bullish retrace in stocks and a rally in USD. Being mindful of the regular risk of such a reversal on the making of a fresh high (in particular the price action set up we can see on both precious metals and stocks - i.e. a 1-5 wave completion) I closed out all my short term Longs (Shorts on stocks) holding only my longer term trades located much further away from the price coalface. I will seek to reenter after the current retrace moves complete and turn back. Using Silver (a more active and therefore easier market to analyse sometimes than Gold), on the 1 hour chart we can see the current move up. The recent top is a secondary wave 1 (brown) and next we may get a retrace to any of the suitable support points below after the initial A-B is concluded before a rally away. But looking at the 4 hourly chart I could construe the whole of the move up from 30 Nov as one wave, in which case the red labels could be correct. So if the brown labels are correct then there are several turn points as detailed on the 1 hour chart and if the red labels are correct then I would be looking in the first instance at the Fib 62% (red fib drawing) around about 1430 (although with Silver being so volatile it could go lower than that). I see a similar picture on the Gold 4 hour chart. One thing remains clear to me, until Silver breaks out above 1500 and Gold 1250-60 anything is possible so I will be holding my long term Longs stop protected at break even and waiting to see how all this plays out before considering another Long (I would not be going Short precious metals at this juncture). I will also be watching stocks and USD for turning point clues.

Brent has bounced off the daily chart channel-line and now put in a small 1-2 retrace, followed by another smaller 1-2 and then rallied away this morning. This is fully in line with my large scale retrace projection (currently targeting circa 7,200 but let's see how price action progresses on that). There was PMD at wave 2 (brown) turn with other oscillators supporting. Last nights opening gap was closed this morning so the prognosis is set fair for a continued rally phase (wave 3 or 3 - the strongest). Note however that this is overall (in my opinion) a counter trend rally and therefore will have in all likelihood an A-B-C form (large scale) but if it becomes a complex retrace there there will be a lot of whiplash so caution trading it is required. We also await the EIA data at 15.30 today.

Having retested the Daily chart upper channel-line and rejected back into a rally Brent is now poised for a significant move in my assessment.

Looks like a decent reversal pattern at the upper weekly chart triangle line, complete with an overshoot (Fakeout). Mild NMD but it is there. This could turn out to be a better trading vehicle than the primary pairs at present, also if this turn out to be the beginning of a long drop Shorts would be in the direction of the long term trend. Needs a breakout of the Weekly chart Triangle still...

Moment of "Truth" for EURGBP (or week of truth at least...). Will GBP get a shot in the arm or will it keep on falling?

Wondering what could possible act as a catalyst for a GBP rally? Today there is a strong rumour that the UK PM will pull the Brexit deal vote, which she knows she will lose. Simultaneously there is an ECJ ruling that the UK can reverse the Brexit decision. Coincidence? I doubt it. Smells much more like the so-called elites cooking up a recipe for contravening the will of the UK people, which if true will have noting whatsoever to do with democracy but that's a topic for another time. I wonder what the markets would make of the rumour that such a reversal might be in the offing and that a delay to Brexit is on the cards...

Brent Crude made 3 attempts to breakout through the upper channel line into a rally (third time's a charm!). After 2 fakeouts we look to have had a proper, if not altogether convincing, breakout. The set up is in the form of a 1-2 (brown labels) within a 1-2 (Green) with that second wave 2 currently in play. I am anticipating a completion around about the channel line retest, which is coincident with an area of support that also runs through the top of the recent significant gap, now closed (Gaps are important for support/resistance zones). The Wave 1 (brown) top was a higher high. Having now had a higher low (2 Green) and a higher high (1 Brown) if we get another higher low at 2 Brown and strong rally away that should be a wave 3 of 3 of a wave A (Daily chart). Once we get a break of overhead resistance above wave 1 Brown) then I will be looking for the Wave A completion to bring up a drop in Wave B before a final Wave C to complete the counter trend rally and after than a long drop. For me it is less important to find a trade on this move (counter trends are challenging to trade because of volatile whip-lashing) but to see if it sketches out according to my road map because if it does this will prove to me that a big drop is on the cards and that is the better trade opportunity, especially while there is so much potential in Stocks Shorts at present.

Silver is showing an interesting set up just now, having been contained within near term resistance but potentially poised to rally sharply through it after the short term retrace drop. There are 3 overhead resistance zones for Silver to get through but the nature of this market is one of fast breaking moves so this is eminently possible and would signal a strong wave 3 move consistent with my projections and support the target area of 1750 as an initial "let's see what happens there" focus of interest. Currently I am expecting a strong retrace from this area but a fast breakout would be a credible alternative scenario. With Gold having already broken through near term resistance on a similar set up the odds are favouring a strong rally from here. Add to this USD gearing up for a bearish phase (still unconfirmed but the case is improving) and Stocks on a down trend. IF Stocks have made that final high and are in a long term decline in an initial wave 1 down (we can expect a counter trend relief rally at some point and a similar counter trend bearish move in precious metals) then now could be a great time to go Long precious metals (another strategy could be to wait for the retrace move and get Long at that point).

Silver still has a bit to go to make the breakout but the EWT count is set fair for a strong rally (a wave 3 or 3). A higher high over the recent high at circa 1465 should seal this move and a break of Daily chart resistance (circa 1500) confirms it. If this all emerges then I expect a strong rally to the 1750 level before any major retrace. The only thing that could appear is a consolidation phase, roughly half way up to the 1750 level. In terms of Gold the picture is even more bullish (interesting as this would mean Silver is a bit behind, possible being restrained by the more industrial nature vs Gold and if economic slow down is coming then industrial commodities will take a hit, at least until they get ridiculously cheap). Gold has made a higher high and is breaking through Daily chart resistance with a strong single daily bar move on Friday. A continuation move (opposite to stocks drop) o Monday would be very bullish indeed. The only fly in the ointment is a last minute USD rally on Friday night but either this will reverse (likely in my view) or precious metals detach from USD correlation as stocks drop through key resistance. Note also that as with Silver, the EWT count shows 2 retrace moves within consolidation after a major turning point (pink 2 on Gold, Purple on Silver), which is why my assessment is for a wave 3 of 3 (a very strong move - rally in this case). If this holds then there will be no further retraces until perhaps a consolidation flag. This will be important as it will give clues as to the length of this rally phase before the next counter trend retrace, which could be quite significant and would set up the market for a much, much bigger rally to come, but let's worry about that as and when...

Correction, 1500 is the Silver equivalent to 1245 on Gold. 1465 is an near term resistance level only.

Silver did indeed close the gap and has bounced off the Fib 50% just below the gap, as projected, and is now rallying away. A break of the overhead resistance is the next target (circa 1465) and then there isn't much standing between this and 1750. Gold was a bit me bullish and has now put in a higher high, fast coming up on the magic 1245 level (similar to Silver's 1465). Again nothing standing between this and the potential neckline (circa 1360). While stocks remain weak and USD stays in a retrace bearish move the outlook is set fair for a strong rally in precious metals.

Looks like I called the A-B completion too early (the hazards of trading...). This pair appear to have had another leg up in them to complete the wave A and are now retracing in a wave B (unless or until a new lower low vs 26 Oct is made). Lead turning point (especially given USD - DX seems intent on turning south, or at least is not rallying away at present) is the retest of the initial channel breakout zone (Fib 76.78%). Given recent markets volatility it would not surprise me to see a test of the Fib 88% though. Any turn would bring up a fast and strong wave C to at least the previous breakout and retest of the Weekly chart Triangle consolidation (Fib 62%) and quite possible an actual retest of the actual Triangle line (Fib 76/78%). This now represent perhaps a better trading opportunity than EUR or GBP given the political uncertainty surrounding those two pairs, although a related breakout of current consolidation on these 2 pairs is likely to also be fast and strong... For full disclosure, I would only be thinking of trading this pair on positive signals if I think the current stocks bear move will go into a period of consolidation (possible around 23,500 to 24,000 on the Dow) or to provide some diversification vs my US large cap shorts campaign. Otherwise I am focused on the US large cap bear market.

Looking at the short term movements, pending longer term breakouts, I find Silver may offer more insights than Gold just now. On the hourly chart there is an unclosed gap, which I think must be closed before the next rally phase in Silver (and Gold) gets going. I think a retrace to around about the Fib 50% is likely, which is just below that gap. After that we would need to see a bounce off this zone. There is a similar set up on Gold, albeit the unclosed gap is arguable. Or could precious metals just respond to USD? Worth watching whether and when DX & EURUSD turn.

Looks like we might get a fakeout on Brent but looks (at this point) like a retrace off a 1-5 wave up to maybe close that gap after all. I would be more comfortable with the gap closed... Due to the uncertainty I decided to cash and wait, shifting margin usage to stock indices as a better bet.