Mercury

The market has reached the Daily channel tram-line breakout point. We might get some hesitation around here but a push on through would be indicative of a strong rally wave A for this market. I then anticipate a reaction in wave B before a final push to complete the retrace, with 2 possible final turning points obvious at present. Note this A-B-C is similar to the DX set up, even though AUD is not part of the DX basket. This A-B-C set up is another reason why I prefer GBP or EUR to this pair right now as I expect a cleaner wave C rally (notwithstanding the clear possibility of a complex retrace form as mentioned in my DX post). Still this breakout potential is worth watching as confirmation of an overall rally phase or to swing trade if you one has a mind to.

It's always like this on a trend reversal, you have to have the retrace to "prime the pump" for the main move. As mentioned earlier, I think a retrace back to retest key support/breakout area is what we will see before either a break back through support or a strong rally away.

Retest of breakout looks on.

I have 2 possible turning points at previous Triangle breakout (7150) and at Wave 4 termination (7050). I kinda favour the latter but who knows. The move down looks like a 1-5, which is in the direction of the potential new trend. This would mean any rally would be a relief retrace to a suitable Fib level after a breakout of the tram-lines. PMD is building on the Daily too, support a turn back up. There is always a chance of a new higher high for the whole move up to coincide with the Monthly Fib 50% and the upper weekly tram-line but we would have to reassess when we see rally price action. For now my assessment is a continuation of this bearish move to somewhere between 7,000-7,200 before a rally that breaks the 1 hour chart channel tram-lines.

That's WTI right @PandaFace cos we've already had 85 on Brent... I love they way these guys talk about where the year will end up, like somehow the markets operate to the Gregorian calendar and reset every Jan 1... Can't believe people lap this stuff up...

Still waiting for a break of my upper Tram-line for any long (watch out for a fake one Oil can be bit spiky). Odds are still on for further drops until stronger support reached.

Last month it was high too @Caseynotes but NFP was much lower so who knows but a least it seems to be providing air cover for the Bulls...

Looking good @Caseynotes, Nasdaq has broken out of its Triangle on opening with strong price action, which means all the majors are now broken out of consolidation.

Agree @elle the Fib 50% is a first target, which alas conforms to both a standard retrace and turn back down scenario and a halfway point to fresh all time highs. Let's wait and see how the price action shapes up. For my money if we get a strong fast move up to the Fib 50% (circa 7,400-7,500 area) and consolidation then it is shaping up more as a motive rally up to new all time highs. If we get an A-B-C form to the move it would be more like a retrace and turn. I favour the fresh all time highs before a big drop for the following reasons (this is the same for all major indices I think): We have not yet seen NMD on Weekly/Daily charts at a major top The form of the run down of late fits more with an A-B-C retrace, although you can make a case for a motive 1-5 too so not conclusive this one The bounce away from the 6,800 (and respective zones for other indices, was very strong with good PMD, suggesting good momentum behind this move, I might expect a retrace to be a bit more circumspect before it got going... On the US indices, and perhaps the Nikkei, I have a nice set of tram-lines that suggests another leg up is on the cards. But as you say, first things first, we need to see a rally from here and trade what we see not what we'd like to see! Let's see...

FTSE100 looking to make fresh highs on the 1 hour for this small consolidation area. The market is in "clear air" from a support/resistance perspective. A strong move through should take this market up to 7,200 area initially. Overall, if this is to be a rally up to the 8,000 zone, I'd expect to see a consolidation Flag formation around about 7,400-7,500. ST outlook could be curtailed by ADP payroll data and US open jitters and a retrace back to breakout zones cannot be ruled out but the prognosis seems good for a continuation of this rally on consolidation breakout. I'll be looking for the US markets to push through and away from breakout zones and for Nasdaq to breakout to align the whole piece. Anyone seeing something different?

I don't see a Gap on the SP500 on my charts @elle can you show it?

I'd really like to see USDJPY get going again with a resistance break through to be confident of a stocks breakout. This pair especially holds the Nikkei back, which is my preferred stock vehicle at present. So long as USDJPY doesn't breakout into its rally, and retraces, the chances or stocks breakout area retests are higher. On the positive side this pair now look to be firmly in a rally phase within the up-slopping channel, which supports a stocks rally scenario .

Agree @Caseynotes, I have a breakout of FTSE100 channel, other indices are flirting with their our breakouts but Nasdaq is a bit behind still. Need to guard against a possible retest, which if it comes offers a good low risk entry point. Such a move and strong bounce away from the retest would be very bullish and confirm the breakout. We might get a bit of consolidation until ADP or US open, which could produce the retest. Early days in the European morning session but the FTSE is quite bullish at present...

Yes compelling bounce off key support levels with a pin bar and PMD across the board. Alas not get got a breakout of Triangle formation and therefore could get either a full retrace to the lower line or a simple 1-2 retrace before a push up and through. If and when that breakout happens then we can anticipate a descent rally. Both US large Caps are once again in lock step, showing a wide channel perfectly containing overlapping 1-2,3-4 waves, an ending of motive and change of direction formation. This suggests to me a final leg up to cap the Bull off once and for all. If this happens it is likely to be swift and overzealous.

Agree with everything you said there @TrendFollower. The only thing I would suggest you consider is that over the past, well since Bretton Woods really, we have been in a monumental bull market driven by debt related money creation as a result of disconnecting the USD from the gold standard. Governments could now create money from nothing to fund their policies and private enterprise could fund projects with debt "to infinity, and beyond!" So the investing strategy you outlined made perfect sense and has become the defacto way to do things in the professional finance community because that is all that they know. But what would happen to that strategy if a long term bear market (or depression phase) takes hold. The mantra of buy low and sell high is well known but so many people never sell high on the premise that they are holding for the long term. That is my main issue with investing these days. If ever there was a time to sell high it is now, surely?

AUDUSD breaches ST resistance. Is it a sign for USD to drop or another false dawn..?

Nice retrace and touch on the lower Triangle line for the Dow and then pin bar rally away to new ST highs. Similar on Nasdaq (and SP500) , Not quite yet made new highs. All going according to road map just now.

Yeah that's my point, trend line is not valid because it broke back above to fresh highs. The second one is not confirmed with sufficient touches and rejections (rallies in this case).

Your blue support looks like it roughly equates to my Brent 7,000 support @elle but I don't really see the same channel. If your channel is correct then this market has probably topped and any retrace off support would retest and fail at the channel line (accepting a hard test through) rather than a stronger retrace. At present I judge that to be unlikely on Brent so I agree the support but not the channel or else I would be looking to short the market.

As a case in point re trends short and long term, my weekly/Daily chart (see above) shows medium/long term trend up but this could be a retrace and hence the true LT trend is still down. The short term trend (for me 4 or 1 hour charts - I don't look lower than this except to zoom in on Elliot Wave counts for small retrace moves) is clearly down and the channel lines on the 1 hour chart are holding nicely. This is still pointing to a test of the 7,000 support zone (albeit with a fer stops along the way). Breakout of the upper trend line required for a Long, which may go for a new high at the Weekly Fib 50% or could just retrace the whole recent move down to turn back into a bear market. To many could be and if for me right now but maybe a good turn at 7,000 ish could work...

Trading is trading in whatever time frame for me @TrendFollower. Long term swing traders look for fewer bigger better (i.e. more points) trades where as short term or day traders look for quick hits between levels and are typically higher freq traders. This is why we might disagree and yet still both be right. It is important to know what method and trading style a trader has if you want to have a conversation with them and I am always keen to hear what short term traders have to say as my entries are always on the short term time-frames (usually 1 hour charts) but backed by longer terms set ups. For me the key differences between trading and investing are: Investing is very much buy only, not short - one way traffic and obviously useless in a Bear market (despite professionals selling Bear friendly funds etc...). Also the notion of averaging out (drip feeding funds) is bogus. The only maxim that works for investing is buy low, sell high. Investing is about buy and hold plus add to gains with things line divis etc. Quality of what you buy counts, penny shares are highly speculative and amount to trading in my view. Retail trading is often, but not exclusively, on margin and really is betting on market direction. Investing is too in reality but with the basis of only risking what you have put in and owning shares in a decent company will still pay divis even if under water. Funny enough I use the same analytical techniques for investing as I do for trading, which has worked well for me. In terms of trend @247trader I agree and disagree but again it depends on what you are seeking to achieve. When I talk about trends I am only talking about long term established trends and retraces against these trends, which would reverse or change the trend. My view is that it is far better, safer, more profitable to trade with the long term trend, even for short term trading. On Oil I cannot tell which way the long term trend is heading at present, hence the 2 major scenarios. Until I can tell I will not trade this market. The whole point of technical analysis for me is to change the odds of any trade from a 50/50 coin toss to something more in my favour. A huge part of that for me is being confident of the long term trend. Alas at present many, if not all, markets are in pivotal moments where the LT trend may be changing and has been for some time on some of them. This is very hard trading conditions. Oft times it is better to do nothing. Long term successful retail traders have mastered this, I wish I could say I have...

OK now with some charts. Looking back I didn't have PMD on the 4 hourly chart at the Fib 78% and on the 1 hour it was not strong. I now have a Triangle formation with good PMD building on 4 hourly and Weekly and a last ditch support zone around the Fib 88% (which was a level reached by EURUSD recently). Failure here brings up the spectre of a double bottom, hard to trade as it looks like a break lower is on the cards. A Long trade on any bounce rally off this zone would need close stops and GBP is spiky. Safer bet is a break of the upper Triangle line. Ironically, given the surge down, my set up is stronger than before. I guess that is all about buy weakness, sell strength...

Shoulda known better! Markets make fools of everyone... This break down on GBP brings up a test of the Fib 88%. EUR is holding up better so far and AUD looks to have already turned, unless... Catching a retrace rally is hard work, which is why it is always better to wait for confirmation. I thought I had it on EUR, maybe still do but this morning will tell the tale I think. Given GBP volatility I am waiting to see a confirmed turn at Fib 88% and breakout of upper resistance before trading but EUR is more stable.

agree @elle that is my assessment also. Should see some positive movement this morning, maybe led by EUR, which is data release heavy this morning.

Looks like AUDUSD has turned finally, with a subsequent retrace to the Fib 62% and rally away again. Need to see a confirmed break of overhead resistance to be sure but signs are good and could be indicative of the breakout on EUR and GBP I have been tracking.