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

That didn't last long..

The post mid term election rally - just fizzled out.  Where to now? Looks like we consolidated the initial move down with a 6-8 day rally (depending on the market you look at), and now markets are in the next leg down...

1. will this be a 3rd wave down?(longest and strongest)
2 is this still correcting the trend up since  2008

As seen from the chart above - monthly DOW - the rally from 2008 to 2018 was huge roughly 20,000 points.  It is not inconceivable to correct to FIB levels...we are close to 23.8  and on the chart the blue shaded area is the 38.2 % level...19200 (approx).

I like looking at the long term as it cuts out the daily "noise".

Talking heads (CNBC) still talking about how it's right to buy the market here..gut feeling is that they will be proved wrong... in the short to medium term..

Obviously it all depends on the time frame one is looking at.

DOW weekly shows the 2 week bear flag - measurement suggests minimum 23200 as a target as indicated on the chart.

Post mid-terms

Wow - so the result was more or less what was predicted in the polls, and the markets had a HUGE rally.

Since the low of 2 weeks ago the DJI is up 2000 points.

Are we on our way to new highs?

Looking at the charts.

DJI - Daily chart with possible Elliott Wave count (BULLISH MEDIUM TERM)

Notes : Elliott Waves (click here for more information https://bullwaves.org/elliott-wave-course-define-dominant-trend-using-elliott-wave)
Elliott noticed that markets move in impulses (5 waves) followed by corrective waves (3 waves)

There can always be different wave counts (alternatives) - but it CAN give a clue as to market direction

so if we are in a final V wave up for this bull market to NEW all time highs, and we have had wave i and ii, then we are in wave iii.  The recent 2000 point rally COULD be the start of wave i of iii of 5, may not be finished

when it does finish then we should get a wave ii down before the wave iii of V.

Wave 2's can be deep which may suck in bears thinking that this is the next leg down.
(THAT COULD BE AN ALTERNATE COUNT)

Looking at the DAX in Germany (and FTSE similar);  despite the HUGE rally in the US the market remains subdued.  This could change with a break above 11800 which would invalidate the Head and Shoulders formation (previous post)

This may tie in with a fall in US markets- whatever there is a disconnect at the moment..but a fall in US could continue the correction ...
Alt: US continues to rally and DAX breaks upwards

Big week ahead -

This week will be full of the mid term elections in the USA voting on Tuesday.

News can move markets short term - but generally speaking unless it's a bolt from the blue (KCTM, Lehman  etc) the charts can help to navigate the turbulent waters, keep an eye on resistance and support.

The chart below shows the DOW daily and a BULLISH set up from an Elliott Wave perspective.

I'm no expert but I know that an impulse is 6 waves which is then followed by a 3 wave corrective. This is the simple explanation as waves can sub-divide.

Bullish:  we have finished wave 3 and the recent fall has been a correction i.e. wave 4 and now we are in the final wave 5 up.  The rally from the lows may be a wave 1 and we are now in wave 2 down..wave 2 down can be quite deep - it will suck in the bears thinking this is the start fo a new bear market (if it break the recent low - it MAY BE).

If we hold then we should have a good rally which will eventually make a new all time high.

Be nimble this week, don't get married to a view or position.  It will be volatile - and could offer some good opportunities if we get large moves up or down

Week 3 ..CONSOLIDATION

January week 3.

Markets have consolidated the recent gains, most notably the DAX, which had a month of up days with little correction.  FTSE flirting with 6100/6070 as support.  EURO broke through 1.33 and looks to be back testing that level, holding above 1.325.  Cable notable under performer clinging to 1.60 level.

S&P very tight range 1465/1473

Oil, gold and silver have also held their rallies, as copper consolidates

OPEX week so not expecting major change this week. 

AAPL trading dominated by emotions.  $500 key PSYCHOLOGICAL level was broken mid week, and subsequently recovered.  The POSITIVE divergence on the DAILY chart continues and it is possible that the drop below $500 has now cleared out weak hands and "emotional " selling.  AAPL has also caused to NDX to under perform so a turnaround should be reflected many times in the NDX

CHARTS

FTSE Daily

May still be a move down but would not expect 6000 to be reached, more likely 6050 if anything

More likely scenario is a break higher once this consolidation is finished with.  Targeting 6400

DAX daily

DAX also consolidating (pink box) after the strong rally from November low.(light blue arrow)

Also looks like it will be on the way to new highs once this is over.

Possible for a scary move down MAX 7560 (in the scheme of things not that big a fall, but would shake out any weak hands).  More likely we have seen the extent of this consolidation, and a break above 7800 , targets 8000 and maybe higher. 

EURO daily

The EURUSD looks to be headed higher 1.35 first target.  Projected path pull back and then rally further towards 1.40 level, which SHOULD coincide with new highs in equities and a push higher in commodities.

Cable daily chart

1.60 looked to be key level..but like AAPL probably more psychological with a lot of stops just below. More important should be 1,5970

tentative EW labeling ! Maybe we are poised for wave iii up. Target 1.63 and beyond

A drop below 1.5830 changes things

AAPL daily

NDX daily chart

The GAP up has not been filled (BULLISH)

looks to be forming BULL flag between 2710 and 2750

A sustained break above 2750 could target 2890 (measured move)

NDX weekly chart

Chart is pretty self explanatory

a sustained break above the rectangle  and we could see similar move to August 2012

FTSE (and DAX)

So with recent market action, especially in the FTSE, my previous post  "FTSE vs DAX conundrum" seems to have answered itself.

As wave 4's cannot enter wave 1 price action, then it looks like 5 waves completed up on 14th March and we are now in
Either
an A-B-C correction (currently in C down)

OR (more bearish)
a new move down and we are in a wave 3

IF ABC then once complete the BULL run should resume and we see new highs...
IF new move down, once 3 completes we should see a corrective move up then NEW LOWS.

FTSE DAILY CHART

DAX DAILY

FTSE vs DAX connundrum

FTSE and DAX look similar but with important differences in terms of Elliott Wave labeling.

FTSE daily

Recent down move LOOKS like a wave 4, BUT according to EW rules wave 4's CANNOT violate Wave 1's price.  So an alternative may be that the move up concluded at 5990 mid March , and now we are either in a Wave 1  down, wave 2 in progress (bull move complete), Wave A down and wave B in progress; which means a wave 3 down (strong) or a Wave C down (also strong).

The DAX is similar BUT the recent downward move has not violated Wave 1 so current move up could be start of Wave 5 up; Is the move up convincing enough? 


So there are 3 scenarios.


1. Bull move from December complete, and now in down trend.
2. Bull move from December complete and now in correction ABC with C down wave to come
3. Correction from highs complete and NOW in a move to NEW HIGHS

Dax daily

Well if the count is correct looks like we are close to finishing, but I would expect some sort of panic move down and recovery to signal the downside has ended.

The bullish scenario:
The 200 dma is at 6190
Or a sharp 100 point drop and recovery..the UP UP and AWAY

The bearish scenario..
The DAX has already topped @7180 in March and we are now in a wave 1 and a wave 2 (abc correction) will occur when this down move is finished.

EITHER way it looks like the next decent move will be up...

The only CAVEAT is that the DOW looks like it should have quite a bit more downside left..

FTSE

So as expected the FTSE daily looks similar to the DAX, with one clear difference if we are looking at the Elliott wave labeling; Wave 4 on the FTSE seems to have broken into Wave 1 top.  Reading EW theory it seems that wave 4 should not retrace to wave 1 (somebody please enlighten me!!)  Link to Elliott Wave rules 

So this means either
A. something else is going on (market may have completed the bull run and now on an extended down move)
or (more likely!!)
B. wave count is wrong!! (It does look good though!)

DAX (Germany)

The DAX daily chart updated below, shows the market could still be in a WAVE 4, with the final wave 5 up to come.  Where is it likely that wave 4 will end?

Well price action is nearing trendline support at 6490 (ish) which is also near top of wave 1 at 6430.

DAX 30 minutes

shows we could be finishing a wave 3 down with a 4 up and final 5 down to complete wave 4.  This pattern could also tie in with a false break down in the EURO and Copper

US markets also seem to need a little more downside corrective action..

DAX filling GAP @ 6709/6680

Just for "laughs" here is a possible BEARISH count for the price action on the 3hr chart...

DAX 3hr 

Sti

DAX hovering above short term support

Dax 3hr chart shows about to test 6840 level and a break  through there targets 6709 (Gap Area).  In the bigger picture this could still be a 4th wave with a 5th wave yet to come to test the highs or more likely NEW highs.

Wave 4 could go as low as 6475 level... (top of wave1)

Where are we part 2

Continuing from the previous post, "Where are we?" the markets have rallied after falling last week.

So is this the push to new highs?   Or a small push higher, and then a bigger fall? (In Elliott wave terms , the fall last week could be an "a", the rally today the start of a "b" wave and  if we get a new decline a "c" wave, which would form a larger 4th wave..
look at the 1 hour DAX chart

and the Daily chart shows the BIGGER picture

ONLY time will tell!!

Where are we?

Well "where are we?"  Well markets are near a TOP (IMHO) but today the equity markets are correcting, as is the fall in the YEN vs various currencies.  To get an idea where we could be, I look at the DAX, and even though ELLIOTT WAVE theory is not a good PREDICTIVE tool, looking back at where we have been can give us clues to WHERE we MAY be going !

so a look at the DAX daily chart


The preferred count is in RED (looks cleaner) which means we are now in a wave 4, and once this is complete we will head up in the last wave 5 to new highs (or equal if a truncated 5th)


If the count in BLACK is correct we should now start a LARGER correction or a change in trend to DOWN.  


looking at AAPL and equity markets it "feels" like we have just finished wave 3's (Wave 3: Wave three is usually the largest and most powerful wave in a trend  The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to "get in on a pullback" will likely miss the boat. As wave three starts, the news is probably still bearish, and most market players remain negative; but by wave three's midpoint, "the crowd" will often join the new bullish trend. )

AAPL


This is classic wave 3 sentiment, prices rising rapidly, those wanting to get in on a pullback miss the boat and have to pay higher prices, analysts all getting bullish...crowd joining in big time!!

Waiting...

Still waiting for the markets to move one way or other..
FTSE still stuck in 100 point range, DAX near resistance at 7000, DOW near 13,000, NASDAQ Comp near 3000...

FTSE 

DAX


The large black arrow shows the RESISTANCE it has to go through for additional gains.
Methinks not this time..

BUT................

some warning signs in other asset classes like currencies and commodities. OIL is weaker and  COPPER also seems to want a bigger retrace before any greater rally.

AUDUSD is struggling after an attempt at breaking out of a BULL FLAG ..CONSOLIDATION last week at 1.08.  If it doesn't do it soon, a failed break out is a good signal for a decent move the oppsoite way..ir DOWN vs USD.

On the MONTHLY chart some Elliott Wave numbering for fun..
Could it be we are seeing a truncated 5th wave?Truncation A truncated fifth wave does not move beyond the end of the third. It can usually be verified by noting that the presumed fifth wave contains the necessary five subwaves, as illustrated in Figures 6 and 7. Truncation gives warning of underlying weakness or strength in the market. In application, a truncated fifth wave will often cut short an expected target. This annoyance is counterbalanced by its clear implications for persistence in the new direction of trend.

Here is a graphical representation of a truncated 5th wave

 

and here is the AUDUSD monthly chart

DAX nearing resistance band

DAX WEEKLY

Dangerous using Elliott waves , but looks good!

So IMO nearing some hefty resistance, question is "is there one more push up left?" before the correction?
DAX is up 30 % from the November 2011 lows..with barely a pause..

Maybe a push up to above 7000 to suck in late longs and stop out shorts before markets turn.
5-10 % correction would be healthy..

Ideally a small drop and new highs first before larger correction, but larger correction could start here.

Looking at AUDUSD (risk on risk off leading indicator) it has broken out of bull flag, so new highs SEEM likely..
BUT BE NIMBLE!!

DAILY CHART

On the daily the major resistance is the shaded light blue area (6990-7100).  Feeling is market will try and pierce this, before deeper correction.

Cable consolidation over? or topping?

Cable (GBPUSD) seems to have consolidated it's move up from the lows at  1.53

Now at resistance near the 200 day ma, and horizontal resistance.  A significant break above clears way to 1.6140 and beyond as per previous post  here

Looking at the daily chart

This shows the horizontal resistance levels clearly

Also the recent corrective action could be an Elliott wave ABC correction.

Move from Jan low (1.5256) to Feb high (1.5898) = 642 pips

 if next move is equal to this 1.5936 + 642 = 1.6578 (ie close to 1.66)

4 hour chart

Pull back possible before heading higher..

Can be short at 1.5930 with a tight stop

Or wait for pullback and stop below 1.58

If break out higher 1.62 target off the 4 hour chart ( close to 1.6140 target off daily chart above)

DAX Elliott waves for FUN

Not an expert so more a bit of mental masturbation and a bit of fun whilst waiting for the NEWS !! So it seems everybody is bearish again; VIX at high levels, "shoot sell first , ask questions later" mentality prevailing, well to some the recent fall in the markets may just be a correction of the big run up from 25 Nov lows. Of course the DAX has been sold more than others (Germany at core of Europe, plus inherently more volatile), so here's a look at a POSSIBLE wave count (Elliott Wave, IMHO usually not good at forecasts BUT quite good to look at in retrospect)..

Obviously this is the BULL scenario at least in the Mid term...once wave 2 completes...then the BIG wave 3 down occurs!

Any "experts" on EW more than welcome to comment.

CABLE...

Looks like cable is nearing significant resistance zone...

 

Could be one more move up to 1.65 if the USD carries on being sold..

Longer term view..MONTHLY Chart

has worked off the oversold condition at point 3 

RSI is now back to neutral level

IF wave count is correct longer term should revisit lows ie 1.30 level and possibly more

EURUSD...3rd wave?

The EURUSD move down has certainly been relentless and now looks like we have 2 legs down.  The 2nd leg is just a little longer than the 1st leg so likely that it is a 3rd wave down BUT has it finished?  A break above that descending trend line may be first warning that choppy trading lies ahead if we go into a wave 4.

BUT also wave 3 may extend down a 1.618 x wave 1 would bring us to 13074 approx.  Could be, especially if sentiment at the moment is looking for a bottom in the EURO and ALSO equity mkts.  A continued fall would tie in with some more equity weakness before a more pronounced bounce.

EURO 4 hr chart

Look at yesterday's post for cable chart , if it breaks down likelihood is that Euro will also go down