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

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.

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)

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 - 

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

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

Still waiting for resolution

Bulls are cheering and the talking heads have declared the bear market has ended.  read Jim Cramer article here.

Has it?

Well admittedly the rally has lasted about 12 days...

does that mean a BULL market has started?

look at some charts

DOW daily

So far down trend is still intact
clear classic rising wedge  (usually bearish) shows - more often than not there is a throw over (a rally above the upper boundary) which is quickly retraced

Nasdaq daily

bearish wedge
short term trend is up
but down trend still intact
could target 6750-6800

would need a break above 6880-6900 and follow through to start trend change

DAX and FTSE similar

DAX key upside level 11520
FTSE 7131  - Brexit vote  may have an effect

No change - except Euro break out

No real change
Market rally has continued now 4 days long
still no break of the  downtrend (October - December)

if this is correction of that down trend and the trend is STILL down - could be close to finishing this move up - and next leg down

Small short probes on strength

No news on Trump trade deal - well actual definitive news - however the "positive" spin has contributed to the rally  - and markets are discounting mechanisms so a "Trade deal " news would more than likely boost prices but likelihood is a "pop n drop"  - keep cool!

Euro breaking out targeting 1.18 - 1.20
this is saucer formation
already broken out

DOW 4  hour chart

Looks like CLASSIC bearish wedge
Resistance at 24300
Could overshoot on a "trade deal"
A break down of the wedge - new lows ahead - 20k? possible 18500

Finally - a rally - but is it a trend change?

Finally Friday's action looks like seller stepped back and markets had a decent rally.  Is this a change of trend?  Or just a correction?

Last post looked at the monthly charts, now zooming in to look at the weekly charts.

First the headline index  Dow Jones Industrial
Remember the downtrend on the monthly shows it in perspective - the odds favour a deeper correction.

1.  Bear market rallies are usually very strong rallies
2. The chart shows the down trend within a channel - prices reached the lower boundary - so the market was ripe for a reversal
3.  The action (so far) is still contained within that channel
5. There is still room to the upside to reach the top of the channel.
6 if this is just a short term bear market rally then I would expect prices to turn down again NEAR the top channel
7 A significant break above that channel and we may visit 24236 (see previous post)

May have been premature in discarding the 24236 target
Stopped out of all short positions on Friday - for profits
flat and watching 
expect rally to continue to at least top of channel and possible larger correction in which case 24236 on the cards

What about the other markets? 
DAX weekly

Similar channel
DAX has been showing relative strength vs US markets - has come close to the 10220 target (10275 low)
shaded areas show potential Fibonacci targets for a correction of down trend
Elliott wave - could be starting a wave 4 (up/sideways )  4's can be very difficult to trade - lots of whipsaw

FTSE weekly

Also in a channel
last post highlighted that it was reaching obvious trend line support

Nasdaq 100 weekly

Also in a down trend - but nearer to breaking out
if it does targets next trend line 6750 ish
a turn back down here likely sees new lows

CONCLUSIONS

Markets still in down trends but all rallied near bottom of the channels
May be a sign of short term trend change  to up (6-7 days)
Anything larger may mean bigger upward move
Be nimble and don't get married to short side
Volatility will still be present

2019 !

So a new year begins

looking at 2 long term charts - the DOW (headline index ) and the DAX (Germany - Europe's largest economy)

DOW JONES INDUSTRIAL monthly

!. This shows the decline at the end of 2018 and puts it into perspective related to the 2 rallies; from 2016 (Trump rally) and the 2008 rally.
2.  The rally on 2/1/19 failed to reach the 24200 target
3.  at the moment it looks like it can test the long term up trend (blue line) and there is horizontal support (look left)

will look at shorter time frames over the next dew days
Market view can change - but it seems that unless we get a trade deal out of Trump and China (and this may end up being a few days of euphoria before reality sets in ) then likelihood is DOW can head to 20k and possibly 18500




DAX monthly

Break of the up trend since 2011
Up trend from 2009  - trend line support 9100 and rising
LONG term trend line support 5900 and rising
horizontal support 10050 and 8066
Head and shoulders target minimum 10220

So 2 major markets seem to be in sync
 A trade deal with Trump (USA) and China would more than likely have a sharp rally so be wary - if short -
HOWEVER - in TA NEWS doesn't matter and if the primary trend is now down - this will re-assert itself

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

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 -

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...

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.