AAPL parabolic

Apple - bellwether stock - widely owned by individuals and funds, huge index weighting - so all index-linked funds have to be heavily invested - everyone knows it's a "great" company ;)..so what next?
Below is the quarterly chart, with a parabolic rise laid over the top.  "Parabolic up moves are exciting to ride, but there is the almost certain danger that the rocket will run out of fuel, resulting in a rapid collapse of prices. Trying to pick the final top for this kind of move could be hazardous to one's health, but being aware of the potential danger can be useful in managing positions."

Below the AAPL chart is the weekly silver chart which shows a parabolic move in 2011 and the subsequent collapse.  I'm not saying that the top is in AAPL - but care is needed. 

2019 draws to an end - what's the state of play?

OK, 2019 draws to an end - and markets are still in bull mode - now the bull has been running for over 10 years - is it about to run out of energy?

The usual suspects are still pushing -
Low rates - forces investors to seek returns in riskier assets - (equities etc)
Election year in the USA (2020)
China trade - (a deal! - BIG deal?)
Brexit on way to completion? (positive? )
Here's a video of our current PM - showing how "eloquent" he is

Looking at the charts

Starting with a look at the Fear and Greed index overlaid on the Dow Jones Industrial average. (can be found HERE)

At the moment it looks like we are in Extreme greed mode - probably some caution warranted into the New Year -
Below is NDX 100 with same overlay but on the weekly chart

Ho hum - bull or bear - take your pick!

Nasdaq 100 -

2 scenarios - 1 Bullish - 2 Bearish
Which is more probable?  
probably scenario 1 - low rates here to stay, Fed, ECB and other central banks pumping liquidity into markets - which forces savers to look for returns in riskier assets (stocks, bonds etc)
BUT  there is always a probability for scenario 2 - maybe a, "wake up and smell the coffee moment" i.e.  the "people" finally realise that the Emperor really is wearing nothing!


1 Ascending triangle with a break out at week ending 01119

2 Rising wedge

  

Chop, Chop

The markets are playing with US!

Breakouts to the upside - no follow-through

Breakouts to the downside - no follow-through

WEARING market participants out

Basically, the bus is slowly being emptied -
BOTH buses!

BEAR BUS
if you can trade a bear move and get it RIGHT - it can be exhilarating  - Think rollercoaster ride

 BULL BUS
Bull moves - slow and steady (generally) not as much adrenalin rush

What does this look like on a chart?

Nasdaq weekly
clear rising wedge (usually a bearish formation, although to really clear the bus, typically it will rally above the line  (shorts will run for cover and bulls will load up), before a sharp reversal.

Conversely - if it breaks down, similarly it will fall sharply and then rally to re-test the break - catching many market participants out

With ALGO trading dominating the current market,  the moves will be exaggerated
Step back to see the TREES!

Still playing the markets

TRUMP changes mind

"Trump had said previously he would not be satisfied with a partial deal to resolve his effort to change China’s trade, intellectual property and industrial policy practices, which he argues cost millions of U.S. jobs. On Friday he said he had decided that a phased approach was appropriate."

So it looks like the back and forth of "deal or no deal" will be an ongoing theme for months and possibly years to come.

The markets were euphoric about the "latest deal" though the details were not released until after the market close on Friday - 

So some scepticism to come for next week?

Charts :
easy money and trade optimism are pushing indices to new highs, bell-weather stock  AAPL, also reached a new high on Friday.

DOW daily
Friday left what could be a shooting star (www.investopedia.com)
Warning that uptrend may fail..

The key to this will be the price action on Monday.

China v USA v Europe

Which one is which?

The world order is changing - and we are witnessing a LONG TERM shift in power from West to East which could last decades !

Dow Industrials

still in the throes of a trade war dominated environment - but longer-term NEWS doesn't matter?

Still looks like an ED; In August, it broke the lower uptrend line; and then consolidated for the month, then breaking higher - HOWEVER the rally failed at 27500 (possible DOUBLE TOP?)

Now threatening to test the lower trend line of the ED (wedge).

If the ED has completed - expect a breakdown of the lower trend line - followed by a more prolonged bear move - (correction of 2016 brally  or even the 2008 rally) 

If it HASN'T completed; expect a bounce and a rally to new highs (throw-over), and THEN a rapid retrace of the ED and breakdown as above.

If this is just a consolidation, a sustained break above the top of the wedge (ED) and then more prolonged bull move (pushed by lower rates, China trade deal)

NASDAQ daily

So longer-term the charts look like a topping pattern is in progress -click here for NDX LONG term - previous post

Looking at the daily chart - looks like what could be called and ENDING DIAGONAL in progress.

More information here: https://elliottwave-forecast.com/elliottwave/elliott-wave-theory-ending-diagonal/

IDEALLY - a new high (overthrow of upper trend line) and then a sharp fall

DAILY closer up

can see the bounces off the lower rising trend line 

clear wedge forming

1 If it breaks down from here - there could be a sharp move down 

2 if it rallies - could test the upper trend line and break temporarily higher..

On the 2 hour chart - we can see we the level closer;  a break down below the trend line and likely quick fall and possibly a larger fall to finally correct the rally from 2008

DOW - the LONG view

like the other indices you can see the effect of easy money on asset prices - investors looking for a return when money in the bank pays nowt

Negative divergences are building - long term - 

Nasdaq LONG term chart

NDX 100 cash 2-week chart

The negative divergence between price and RSI is obvious(Higher prices but RSI seems to be trending down)
Rally has accelerated away from the longer-term trend line  (SOLID RED)

Even a correction to the steeper trendline (DASHED RED) would be a 14% decline
A fall to the LONGER term uptrend would be a 30% fall

LONG TERM CHARTS

With all the "China Trade War tweeting" being done by TRUMP (makes you wonder if he is gaining financially from this ;) ?)

There will never be a deal that satisfies both sides.

However, with the markets dominated by Autobot trading - it has made for difficult trading conditions especially if you look at longer-term trends.

So LOOKING at very long term charts can help with the BIGGER picture

DAX  weekly
A bit speculative but price action so far is playing along.

Even LONGER term below

Next posts DOW, NDX and FTSE

FTSE 100

Big fall from 7700 - (looks like many shorts stopped out, and bull trap ) with the subsequent collapse.  Now a corrective rally up to the shaded red area and now turning down.

Likely - new lows coming - but watch RSI - could be setting up for positive divergence and a short to medium-term rally before the next leg down.

ALT:  market keeps going lower and medium-term correction underway.

DOW - ending diagonal?

Dow daily chart

The trading recently (a year) has been very volatile - one moment looks like sustained rally, the next looks like a sustained fall.  So looked through books and online charts.
could be we are forming an ending diagonal

So, the fall in December 2018 could have been the end of the larger 4th wave, and now we are in some "ending diagonal" full of 3 wave moves.  This doesn't look complete - which allows for a new high - which also ties in with the lower rates scenario and this in turn, will mean a shift in assets to "risk" - for the wrong reasons - so the latecomers to the 10 years plus bull market.

Dax weekly and daily

This was the weekly chart posted previously

here is the weekly to date

Sows the break of the uptrend since December 2018
Found support at the 200-week moving average

rally to test the trend line - a break above and the bull move higher probability
a failed rally to the trend line - a test of the lows  and possible bear move
a failure short of the trend line, the higher probability that the bear move is stronger

DAILY

arrows show various scenarios

keep an eye on levels 

Bounce back - what next

The bounce-back - now what?
Technically: markets were oversold, the fall overnight, when the Dow futures were down by 600 points, was low participation and by the time Europe opened the relief rally was underway.
2000 points loss on the dow in less than a week.

some charts and possible paths for the rally
WATCH THE VOLUME ON THE BOUNCE - LOW VOLUME WILL BE A WARNING THAT ALL IS NOT RIGHT!!

DOW daily
The fall overnight pierced the 200 DMA - for some that is a KEY LEVEL, so it looks like the PPT may have stepped in to prevent a crash on Tuesday morning
so a stick save - but where to now?
The "managed" fall tagged the lower upper trend line - so if the bull trend is in force then the rally should head to the upper trend line if this rally is only a correction of this fall likely target is 62 % retrace (marked in red)

Nasdaq daily

Looks like the fall also tagged the rising trend line so BULL market still intact

However, the fall was characterised by a few gaps down so it is possible that an attempt to fill the gaps will happen.

marked on chart at 7640

Another LONG term chart - headline index the Dow Jones Industrial index

The DJIA is a narrow index but it is the headline index - for the major news outlets.
The monthly chart shows negative divergence between Price and RSI
Since Jan 2018  the market has tried 3 times to break to new highs -
so this can be a consolidation (as in minor bear move, followed by new highs) or a topping formation (as in major bear market)

Who knows which it will be?
keep eye on levels 27650 and 24500 - short term.
breaking 24500 targets the December 2018 lows
breaking the highs could see a fast move higher

as always there are various scenarios - depends on your time frames, and style of trading

Jack be nimble....

Wow - some overnight moves - sometimes it pays to stay up a little longer when markets are like this.

So overnight it looks like there was a mini capitulation of sellers (see chart) - and a subsequent short-covering rally.

So now where?
The drop tagged the 78.6 % Fibonacci retracement level, and rallied 600  points - these markets are NOT for the faint-hearted- hence the title of the post -
1. this fall may mean more to come medium-term
2. snapback rallies can go further than one might think.

Strategy
keep an eye on key levels for buy/sell opportunities
if trading intraday - be vigilant - and manage risk
best strategy is to wait for key levels

How CNBC are permanent bulls

watching CNBC for a laugh - as when markets fall they are like headless chickens.
I'm sure that he says "Nasdaq is up 3.5%" 

Longer term view Nasdaq

So although the sell-off at the end of the last week will be blamed on Trump tweets, in reality, news usually doesn't matter in the medium term.  so where next for the markets?

We can't predict this, but we can look at various scenarios, and assign a probability to them.

Nasdaq weekly chart

Technically - the negative divergence between price and RSI (price making new highs - RSI not) - usually a negative sign for the market
The bull market has lasted over 10 years to date

What are the scenarios?

1.  This fall is the start of a correction of the December 208 rally to new highs.  looking at Fib retracements 62 % is quite common but the correction could stop earlier than that.
This is the most BULLISH scenario - supported by uptrend still intact, interest rate outlook conducive to more risk.
2  The recent fall is the start of the Trump rally correction - this would be a deeper fall and targeting the lows in December

3 The bull market is ended and the correction/bear market will correct the rally from 2008

Scenario 1 is more likely at present; low-interest rates, an election year in USA 2020,; however if the falls become more pronounced or a rally fails to exceed the recent ATH - then should be on the look out for deeper corrections.

A quick look at the daily charts also shows the negative divergence.

DAX - long term view

So the markets have had some wild gyrations in recent weeks - seems to be a TWEET based market

so sometimes it is beneficial to take a step back to a LONGER time frame - in this case, the weekly DAX chart, shown below

 Can't See the Forest for the Trees!

This is  a LONG term chart

Head and shoulders formations don't always complete

However, today's move looks like the start of the right shoulder shaded blue area

MACD crossover imminent 

The target, if it breaks the neckline,  COINCIDES with te LONG term uptrend

Remember markets have been pumped by easy money, investors looking for return when rates are at all-time lows in most developed economies.  Central bankers and governments trying to keep the illusion of growth going.  The emperor's new clothes  - 21st Century style!

LONG TERM CHARTS 2 -

DAX - monthly

Again, as with the Nasdaq 100 the Dax long term chart is also showing NEGATIVE DIVERGENCE - as it's a LONG TERM chart - it's a warning signal not a call to action - but worth bearing in mind.

Where are we?  over 10 years of a bull market  -

LONG TERM CHARTS 1

Nasdaq 100

DANGER - Will Robinson!!

Long term chart, but seems to suggest weakening market
New highs, but RSI is trending lower, negative divergence
Worth keeping an eye on it

short term - battle grounds galore

2 hour charts for DAX, FTSE and NDX 100

Battle in all markets between sellers and buyers
(S&P 2830, 2785 - key levels)

waiting for breaks of up or down for next direction
Or trade the range - but getting smaller so should resolve soon

Long 3 months...

The move off the lows in December caught a lot off guard by the strength and relentlessness of the rally, me included. 
So pretty much watching this the last couple of months.

Some interesting things to watch and to note now the rally seems to be lng in the tooth (FLW)  - with the Nasdaq 29 % up from the lows in December.

Reasons:  Fed has reversed course - after jaw-boning about raising rates this year - it looks like they have succumbed to the Trump "pressure".

The trade deal with China (though the reality is that it will only be a band aid on a BIGGER problem)

European Central bank also looks to be on course to keeping the easy money flowing.

BUT will it help?  - Think Japan..

Interesting Europe has underperformed the US, Germany up only about 12 %

Nasdaq daily chart

Looks like a rising wedge , and a classic throwover
overbought (but can remain like that)

After such an extended move - the probabilities increase that the next multi-day (multi-week) move will be down.

BIG question : will it just correct this move up, and then rally to new highs?
OR will it be the start of the next down leg and break to new lows?

watch this space..

What about behaviour?
Well this rally has definitely got everyone talking about new highs and that the bull market is back.  TV pundits declared that the bear market has finished.

So this is the longest bull market in history (2008) - is a three month bear market really it?
Are companies forecasts at the end of 2018  of slowing sales and difficult conditions , already improved?  (FED EX)
If not then valuations especially in the US market look rich.
The market has been led higher by increasingly smaller group of stocks FAANG and Boeing, while banks are struggling

So the BEAR market scenario

In a bear market the classic scenario is a wave 2 rally that sucks in the crowd amid declarations that the initial fall is over and good times are back - CHECK

Bear market rallies are violent and sharp - CHECK

What about the alternative scenario? BULLISH

The rally from December is a Wave 1
A wave 2 down will do the opposite of the bearish scenario i.e. suck in the bears and may look like the start of a new leg down..
BUT if bullish and wave count correct, the next move up would be a WAVE 3
which SHOULD take the market to new HIGHS.

other markets in the next post

Nasdaq monthly chart  - similarities with 1999/2000
March 2000 -May 2000 37 % fall
May to Sept 36 % rally

2018 -2019   fall of 25 % , followed by rally of 29%

Markets don't necessarily repeat themselves over time but they do rhyme
Human behaviour doesn't change - emotions are still the same

Calm before the storm? Or blue skies ahead?

After a strong rally from December lows markets are in a "wait and see mode " - STILL !
Waiting for : trade deal with China (probably priced in - bar the pop on the new)
Waiting for Trump to reach deal with Dems on Border Security (i.e. THE WALL)

Quick look at DAX :

Daily chart from the 7th
Looks like a breakdown from a bear flag
Relative weakness vs other major markets
Look left  - 11550 level if breached might signal change in short term trend - until then medium term downtrend still in force.

DAX 2 hour from today

This shows the break of the recent uptrend
And a rally from oversold levels
could be a test of the broken trend line and then resumption of downtrend  OR
that fall was a fake out and now rallying to test 11550 level

Finally look at weekly DAX
testing the 200 week MA
rally has relieved oversold

January almost finished - no real change

So the market maintains its rally since New Year, and now in wait mode;

1. Fed
2. China - Trade

Market sentiment (use CNBC!)
Kramer declared bear market over
Bulls are back, supported by view that Fed will not raise or only raise once

but...  even cyclical bear markets last 12-18 months - so far 3 months

Obviously markets don't go straight down, and classic bear market rallies suck in shorts and bulls to believe that the BULL is back..

Charts don't lie
A lot of damage done technically in the autumn fall..

Look at the DOW charts for various time frames


Dow monthly

No real change but updated view with recent price action
still see that the rally has not recovered the broken trend line (rally from 2016)
coincidence? 
the 61.8 % retrace of the 2016 rally coincides with the 38.2 % retrace of the 2008 rally , which coincides with the up trend line from 2008
TOO many coincidences?
IF the market trades towards these "coincidences" looking at DOW around 19k -20k

The weekly and daily are self explanatory.
Bumping against the down trend.
Weekly RSI show clearly the "wait mode"

DOW weekly 

DOW daily

CNBC says it's "SAFE" to buy the market

Jim Cramer declared that the bear market finished on Christmas Eve - criterion?  That the market was down about 20 %.

Yesterday they said that it was now safe to "BUY" the market after this 12 % rally from the recent lows;

However if this was just the beginning of a bear market (which tend to last anywhere between 12-24 months) - we have only seen it for 3 months (so far) - what does it say about the rally - strong as it seems - is this a sign the BULL is back?

Well the last significant bear move was 2008.

Dow chart from 2008

1. can see the initial fall from the topping pattern was about 18% (2018 - 20%)

2. Rally from that first low was 12% (2019 -12%)

3.  Market then fell 18% and made a lower low - 

4 Market rallied 9 % (weaker)

5 Finally 27 % fall 

6 small rally 

7 final fall and capitulation

Target areas reached - what next?

So the DOW has reached the target area posted on 28/12/2018 .  The chart of the DOW on that date is shown below:

DOW today :

So  reached and surpassed the target 24280 (ish) -
Wedges typically have a throw over so could trade up to around 24600
Options expiration may be affecting this move up

So what next?
a few scenarios
1 a pullback from here and rally resumes
2 rally carries on to 24600 to form a throw over and then a sharp drop.

Remember in bear markets -  rallies like this will give investors reason to believe the bull market is back;
Bear markets on average last 10-15 months