have a good 2019 -

No trading until 2nd January -

charts still same

2019

I'm in to end homelessness because in a developed society and one of the world's top economies it is a disgrace that this occurs in our country - let alone in many other countries of the world. Resources are there; however governments use them in inappropriate ways (weapons is the prime one) - food is plentiful in so called first world countries, and we waste an enormous amount, inequality of wealth also contributes to the problem. I am not against people making money or bettering their lives but at some point there IS a level at which instead of accumulating more wealth or houses these people could divert that to the betterment of society. From small acorns large oaks grow, so the idea that one person's independent actions cannot help to solve the situation is an invalid argument. 
𝗟𝗲𝘁𝘀 𝗺𝗮𝗸𝗲 𝟮𝟬𝟭𝟵 𝘁𝗵𝗲 𝘆𝗲𝗮𝗿 𝗶𝘁 𝘀𝘁𝗮𝗿𝘁𝘀 𝘁𝗼 𝗰𝗵𝗮𝗻𝗴𝗲

I'm aiming to support this cause CRISIS - with a percentage of profits - let's hope it's a succesful year!!

Short term relief

End of year buying and oversold conditions contributing to a long awaited bounce - but where does it get to?

DOW daily chart

Pretty much self explanatory
But some key levels:

Bounce target = previous support 24236 - which coincidentally is the 61.8 % Fibonacci retrace of the downtrend from 3/12/18.

May slightly overshoot or undershoot
May take more time

Possible medium term scenario: (very rough !)

1 rally to around  24236
then next leg down to new low (20k)

that should complete 5 waves down for larger wave I

2 Then a rally correcting that 5 waves -
if the 5 waves down starts at 26200  and ends near 20k = 6200 points  then :
62 % retrace = 23844
78 % retrace = 24830 - if this is wave II up can often retrace a large percentage of wave I  - this is where Joe Public believes that the bull market has resumed

3 Then the next decline wave III - this will be the longest

Time frame?  after new low - rally into the spring - with the fall starting in summer

This will indicate if the correction is of 2016 bull trend, 2008 bull trend or even larger 1980 bull trend (worst case)

Other markets - DAX and FTSE still on target for 10k- 10220 and 6300 respectively

Does the 1000 point rally mean the bottom is in?

So a huge points rally on the first day of trading after Christmas day - is it significant?

1000 points IS a big move - BUT when looked at in PERCENTAGE terms - yesterday's move did NOT even make it in to the top 20 moves since 1900 !

For source click here : Percentage moves of Dow Jones Industrial

Now look at the daily chart:
1. after  a down trend of 16 days it is normal to have a reaction rally
2.  can be 4-7 days long
3. some upside targets 23231, 24284 ( Fibonacci levels)
4. Longer term down trend still intact until 26100 breached

So this kind of move will generate a lot of short covering - so volatility will still be a major feature of the markets.

Pick your moments to go long or re-short

What about other markets?
FTSE daily

No break of down trend

DAX daily
Again no break of down trend

Strategy:
Probably range bound until New Year -
Correction which will alleviate oversold conditions
Once this is done - one more move down the real panic wash out

DAX 10220
FTSE 6300 (BUT may be affected by currency moves)
DOW new target 20k

CAVEAT: Watch the down trend and especially the much higher levels for a change in trend

Merry Christmas

Almost there

OK so the down trend has been in force for almost 2 months now and are approaching targets

DOW LONG term chart (4th December)
Analysis of previous corrections - bear moves)
This shows the very long term and the up -trend

Look at the quarterly chart as of 21/1218

1.  this puts the recent fall into context i.e. could go much lower long term
2. other indicators such as RSI and MACD just turning down
3.  it has reached a very tentative support - have to zoom in for a closer look

DOW weekly from 16th November

and NOW:

1. It's reached the 32.8 % retrace (Fibonacci) of the 2016 rally (Trump)
2. could be near support

HOWEVER, it coincides with the Christmas holidays.

Bear moves tend to overshoot, with a panic blow off

61.8 % retrace (very common) would be around 20k (the blue dashed Fib level)

Zooming in to the daily charts

The daily is interesting

1. reached the 38.2 % retrace (black dashed line)
2. RSI starting to go oversold (not a sign to go long - can stay oversold in bear markets)
3. Volume picked up on the last move down (sign of capitulation)

Conclusion

Markets are reaching target levels (DOW 22300, DAX 10200) 

Some signs that the move down may be ending , volume, RSI and CNBC presenters starting to get nervous !

Things to be wary of:

Down moves can accelerate even though it may be ending soon, a panic move could take DOW to 22k, and DAX to 10k

Holiday trading can be thin and moves exaggerated (up and down)

There will always be opportunities!

STRATEGY

reduced shorts Friday

look to start flattening out

Looking ahead:

Once this down move finishes , expect a retrace of the down move:

1. could be a partial retrace (FIB levels) before the next move down (BEAR scenario)

2.  Could be start of the next bull move up to new highs 

Addendum:

FTSE has been holding relatively well as is the cable rate (1.26/1,27) - this could be related to Brexit.

If Brexit deal gets no vote and cable plunges, effectively a devaluation then FTSE may get a boost (exporters) REMEMBER Mexico devaluation in 1994 - initial fall - Then a huge rally in local currency terms -

Euro bottoming vs the dollar?

Interesting in the FX market - dollar strength has dominated but is there a change afoot?

could target 1.18 of it breaks out to the upside

That was fun! Dow closing in on 22300 target (Dax 10200)

There are benefits of not having huge positions on a day like today;

less stress
more choice
small positions means more flexibility for volatility

Dow looks to be closing in on 22300 target
see what happens tomorrow

DAX  10200?  Head and shoulders target
still stepping down to that target

Saturday is a full moon - from experience could be a wild day and a possible low point for the market - especially with a short trading week next.
Moon cycles and Stocks - a lot of research out there
or here
Having studied Zoology (and in particular ethology) I am amazed that people doubt the influence of the moon (and sun) on behaviour - after all many animals have behaviours dictated by moon cycles and they are the obvious observable behaviours (mating etc) - but possibly many more as well.  Humans are ANIMALS!

Waiting for the Fed...long day ahead

While waiting for the decision ahead - LONG day - there has been a lot of coverage of the decline since October.  So where is the market?

Is it the start of a long term (Primary) bear market?

Is it a short term correction? (secondary movement - counter Primary trend)

Each Primary trend (up or down) has 3 stages

1. Accumulation (Bull)  Distribution (Bear)

2. Large move

3. Exuberance (Bull) or despair (Bear)

Just going to look at the change from Bull to Bear as the market has been rallying since 2008 

Looking at DOW (headline index) - up over 300% since 2008

The chart shows the (possible 3 stages)

So now it may be the start of the BEAR -

Probably seen or seeing stage 1

1 Distribution

• Smart money notices changes in business climate and start selling stocks
• Public still heavily involved and buying stocks (this is when the man on the street starts giving advice on buying stocks)
• However smart money tends to be larger and stocks start to fall
• Rallies will be strong and give confidence to bulls that the bull market is still strong
• however the rally should not exceed the previous high

Chart show monthly Dow Industrial

The high in February 2018 looks like the exuberance by the public

Reaction high in September looks like the resumption of the bull market ( all forecasts were for new highs and Dow targets of 30,000)

to be continued as the market plays out...

Crude oil

No bottom yet - despite quite oversold conditions
What do the charts say?

Weekly chart - what does it say?

Oversold - BUT price and RSI going to new lows - no divergence yet so selling pressure still evident
Next major support - shaded area, with possible overshoot
If that doesn't hold crude is headed lower

What about shorter time frames?

Crude oil daily

Getting close to oversold
POSSIBLE positive divergence setting up - as a new low with RSI looking like it will not form a new low

Crude 2 hour chart
Stepping down the stairs
Nice bear flags on the move down
Looks like at least one more setting up

Worth keeping eye on especially if it gets to the support highlighted (set alert for 42.9)
once the down move is finished - there should be a decent rally (corrective)

Market correction of Trump rally or 2008 rally?

The markets are obviously correcting and have been since October.

The US markets have outperformed the rest of the world.

European markets seem to be in bear moves since around May 2018.

So the BIG question is - referring to US markets and the DOW in particular;

What exactly are the markets correcting?

Since 2008 there has been a bull market

Within the bull market there has been a correction leading into 2016 , and a rally since then - the " Trump" rally.

A correction in early 2018 and a rally to new highs

DOW monthly chart below

The box outlines the Trump rally
Show a double top
The rally has retraced to the 23.8 % Fibonacci level, this is usually the minmum retrace
Odd are that it will test the 38.2 % level , 22300 approx.
Why?  Too many investors are still in the BUY the Dip mentality
The market has changed since the first correction on 2018
There are genuine concerns about a slowing economy in 2019 which doesn't support valuations seen earlier in 2018 - whether recent falls have made these fairer is still open to debate - so UNCERTAINTY - never good for markets
Trade wars - more UNCERTAINTY

What if the correction is actually of the whole rally from 2008 ?

The market has rallied over 300 % since then
A correction of that would be more severe (and still be in a SECULAR BULL market)
DOW chart below showing Fibonacci retracement levels
Coincidence - 23.8 % retrace is almost same as the 38.2 % retrace shown in first chart (22300)
If the correction is for the whole 2008 rally, there could be a lot of pain ahead. 
In Elliott Wave terms the whole rally from 2008 could be a wave 3 (typically the largest and longest), with the fall in February as a smaller wave 4 and then rally to new highs for smaller 5 , which completes wave 3.

All that aside , favour a fall to 22300 unless the markets turn around PRONTO!

Talking heads (CNBC) keep talking about how the market is good value - good contra-indicator.

CAVEAT:  Medium term bearish scenario may change if there is some deal with China, the FED LOWERS rates instead of raising.

Sentiment

Again this week CNBC watched by many (including the POTUS) are constantly talking about "finding bottoms"

Too many "bottom pickers" and "buy the dip"

Major US indices look like testing the pierced bottoms last week, and ,more than likely hitting new lows for this move.
The rally from the circled area looks corrective and losing steam i.e. not heading to the top of that range looks very bearish.

I would not be surprised to see a wash out next week ahead of Christmas, and THEN maybe we find a tradeable low.

Cable - broke support

So the cable set up seems to be playing out.

short with stop above 1.2720
it broke support and then tested that support which now look like resistance. Target medium term 1.1875 (triangle measurement)
lower  stop after today's trading

Updated chart below

Cable 2 hours

Previous post below:
Cable  looks to have broken an important support at 1.2670 (ish).
Wait for either a retest in case it's a false break or selling momentum increases to sell


Obviously a lot of Brexit news (not for the faint-hearted) but measured price target if the selling continues will be around 1.1870

Cable daily chart

FTSE triangle

Has the FTSE broken out of the triangle to the upside?

Triangles CAN be reversal patterns as well as continuation patterns, however continuation patterns are much more common.

4 hour chart

Shows the longer term support which was broken.
The triangle with potential break (or false break to the upside)

If it's a break to the upside the triangle will be a reversal pattern (rare)
If it's a false break - should reverse fairly soon and retrace the whole move up

Interestingly normally a break below long term support - usually sees a re-test of that support - so this move up may be doing that..

Key is getting back above that support.

Anything less increases the chances that the down move has not finished.

FTSE triangle update

Looks like there was a false break out to the upside of the triangle  FTSE traded as high as 6858

That probably stopped out a lot of shorts and sucked in longs playing the break out..

That's what bear market rallies do

All reverse in the afternoon with the DOW giving back all the morning's rally ( again a Trump hot air tweet helping to push it higher)  and more..

Interesting to see the close

FTSE - short term - watch the triangle

The FTSE is an interesting market to watch in terms of technical analysis, especially with the BREXIT "news"

Lots of news  - BUT "news doesn't matter"
 One of the principles of technical analysis whether its normal bar charts or candlesticks is:
"The “what” (price action) is more important than the “why” (news, earnings, and so on)."

Short term the FTSE is forming a symmetrical triangle
This is usually a CONTINUATION pattern i.e. when it completes the preceding trend will re-assert itself  - in this case DOWN
A break above the top boundary will signal that the trend may be changing 

 Caveat:  beware of false break outs both sides; they should happen on increasing volume and usually better to wait for a confirmation with the next bar/candlestick of price action to avoid whip-saw.

Turnaround Monday?

Big turnaround on Monday 

Is that it for the downside?

signs of a rally - the market found support at the bottom of it's trading range.  And a 

Caveat: it did pierce support  so might be a warning sign.

Dow 2 hour chart

No break of down trend (yet)

Some positive divergence

Looks like 24750 could be touched and still be in down trend

A break above 24750 may be sign of bigger and longer rally - countertrend or nw bullish move

DOW daily chart

Clear hammer candlestick on the daily, which is a bullish reversal.  Clearly shows the previous support (look left) being pierced.

Hammer candlestick can be bullish but:

"𝙒𝙝𝙞𝙡𝙚 𝙩𝙝𝙞𝙨 𝙢𝙖𝙮 𝙨𝙚𝙚𝙢 𝙚𝙣𝙤𝙪𝙜𝙝 𝙩𝙤 𝙖𝙘𝙩 𝙤𝙣, 𝙝𝙖𝙢𝙢𝙚𝙧𝙨 𝙧𝙚𝙦𝙪𝙞𝙧𝙚 𝙛𝙪𝙧𝙩𝙝𝙚𝙧 𝙗𝙪𝙡𝙡𝙞𝙨𝙝 𝙘𝙤𝙣𝙛𝙞𝙧𝙢𝙖𝙩𝙞𝙤𝙣. 𝙏𝙝𝙚 𝙡𝙤𝙬 𝙤𝙛 𝙩𝙝𝙚 𝙝𝙖𝙢𝙢𝙚𝙧 𝙨𝙝𝙤𝙬𝙨 𝙩𝙝𝙖𝙩 𝙥𝙡𝙚𝙣𝙩𝙮 𝙤𝙛 𝙨𝙚𝙡𝙡𝙚𝙧𝙨 𝙧𝙚𝙢𝙖𝙞𝙣. 𝙁𝙪𝙧𝙩𝙝𝙚𝙧 𝙗𝙪𝙮𝙞𝙣𝙜 𝙥𝙧𝙚𝙨𝙨𝙪𝙧𝙚, 𝙖𝙣𝙙 𝙥𝙧𝙚𝙛𝙚𝙧𝙖𝙗𝙡𝙮 𝙤𝙣 𝙚𝙭𝙥𝙖𝙣𝙙𝙞𝙣𝙜 𝙫𝙤𝙡𝙪𝙢𝙚, 𝙞𝙨 𝙣𝙚𝙚𝙙𝙚𝙙 𝙗𝙚𝙛𝙤𝙧𝙚 𝙖𝙘𝙩𝙞𝙣𝙜. 𝙎𝙪𝙘𝙝 𝙘𝙤𝙣𝙛𝙞𝙧𝙢𝙖𝙩𝙞𝙤𝙣 𝙘𝙤𝙪𝙡𝙙 𝙘𝙤𝙢𝙚 𝙛𝙧𝙤𝙢 𝙖 𝙜𝙖𝙥 𝙪𝙥 𝙤𝙧 𝙡𝙤𝙣𝙜 𝙬𝙝𝙞𝙩𝙚 𝙘𝙖𝙣𝙙𝙡𝙚𝙨𝙩𝙞𝙘𝙠"

So tomorrow should see follow through to the upside to confirm and volume should increase.

If this fails to happen, likelihood increases of sharp move down to previously mentioned levels 22k Dow.

Monday mini-musings

DOW daily

just supports and resistance
Triangle still in play - near the bottom of this - so if nimble can buy with a stop


Caution : if it breaks support  - could be fast move down
Also this is the third test of support - more inclined to sell short  on a rally -

If it stays in the triangle , may head to upper boundary
Bias: still down

Father Christmas MIA?

So far the "seasonal" Christmas rally hasn't materialised, and Father Christmas seems to have gone MIA as far as stock markets are concerned.

However there is still time for bears and bulls to be happy with their Christmas presents!

Looking at the charts:

DJI  daily 

The action is still in the large triangle (with a sloping upper boundary - leaning towards bearish)

Great for traders playing the range

Bear market rallies are vicious "in the bear market that began in 2007, stocks staged 12 rallies of 5% or more, with four of the 12 logging gains of more than 10%." - Kiplinger (for more statistics look at this page)

So as usual CNBC are still looking like headless chickens when the market heads south and when the rallies happen they are jubilant and bull happy.

What does it mean?

EVEN if the market is a long term BULL, there always is a correction - this is a normal process - and healthy for up trending markets.  However a 5-10 % correction after a 360 % rise since 2008 is probably not enough of a correction.

Monday will be interesting:

Gap down and target 23k or rally and stay in the triangle - time will tell.

DAX seems to be heading to the head n shoulders target (10200)

FTSE seems to be holding relatively well - this may be Brexit related with a crucial vote coming on Tuesday

So world markets seem to support more downside for the moment.

So bulls and bears can win.. a fall next week followed by a rally.

Longer term the markets may be signalling the end of the 2008 bull run.

SPREAD charts:

Sometimes good to look at spreads between different indices.

This is  DAX- NASDAQ 100  spread..

so at the extremes a play is Sell DAX and BUY NDX or vice-versa  looking for the spread to normalise.

At present it looks like Buying DAX and Selling NDX should be a profitable trade over the medium term, expecting the spread to expand again.

Let's talk about bottoms

Here are a few sayings about bottoms

"Only monkeys pick bottoms"

" picking bottoms will give you smelly fingers"

Why ?  The usual CNBC talking heads are still spouting the bullish side...

 

" In the case of the Double Bottom Reversal, a significant downtrend of several months should be in place."

"Prior Trend: With any reversal pattern, there should be an existing trend to reverse. In the case of the Triple Bottom Reversal, a clear downtrend should precede the formation." 

Stockcharts school

DOW daily

Watch out below if that support breaks 

Triangle measured target is around 22100

Which sort of ties with the first target

DOW WEEKLY

Could be short term support around this "triple bottom" - just because everyone is looking at it - the buyers will not be strong hands

Next support is probably around 23050 (look left) 

Then 22000/21300

Markets take a turn for worse (if you're long)

So the "XiTrump" rally lasted all of one day.  See previous post here

What is the roadmap now?

What is the psychology of the market(s) ?

In words:
The Fed rally was explosive - however this was probably short covering and machine driven trading - this means NOT much SUPPORT for the market. 
The "XiTrump" rally was also a NEWS  driven rally - again these rallies don't give a lot of support to the market as they are too quick/

Explosive rallies like these tend to be characteristic of BEAR moves  so for the moment the DOWN trend since October remains in force.

So where to?  Short term I expect markets ti accelerate the move to the downside (today US markets closed) so maybe Thursday.  Reason being that they have spent a couple of weeks consolidating - corrective - so next leg down soon.

Targets remain the same from previous posts DOW 23200 DAX 10200 FTSE 6400 (? complicated with BREXIT )

If markets don't reach these then likelihood is selling is abating.

If markets reach these targets then what happens next will give clues to the next move.. RALLY or further DOWNSIDE.

Charts below of the DJI

Charts of DAX showing head and shoulders targets (notice coincides with long term up trend)

Looking forward to THURSDAY!

G(20) - whizz - friends again?

Some of the statements made by Trump after the G20

"If it happens it goes down as one of the largest deals ever made"  

“was an amazing and productive meeting with unlimited possibilities for both the United States and China”.

"amazing and productive." 

"a not yet agreed upon, but very substantial"

This is to be expected based on past form, and yesterday it continued regarding car tariffs.

So what have we had?

A rally based on Fed chairman Powell - back tracking - 

A rally based on a "truce" between China and USa in their trade war.

Turning on the TV to listen to CNBC the media machine is in full force pushing the bullish side.

Comments like " the Santa rally is here", " we've had the correction and now it's time to buy", "the worries about interest rates and trade wars have receded" - to me it seems everyone is bullish.

Look at the charts (a picture of the behaviour of all active participants in that instrument).

DOW JONES (headline index)

Monthly chart

Not much changed on the longer term - still showing negative divergence between price and RSI

Target price still there 23150 (approx) trendline support and horizontal support (look left)

Closer look

DOW weekly 

RSI not oversold
At a minimum expect it to test 23150 ish
behaviour then will give clues to next pathway
1.  a fall through there and this may be a full blown bear market
2 a hold there and rally may be sign that this is a correction and now on way to new highs

As always makrets are dynamic keep eye on levels and probabilities

Even closer look

DJI daily
So could be forming a triangle  - watch the boundaries
at present we are near the top so short - obviously a sustained break above would increase chances that this correction is over
A break below the lower boundary - and target comes onto play and maybe more

   Other thoughts

Everyone is expecting a santa rally into year end
Bull market is 10 years old
Earnings outlook for 2019 may be getting cloudy