Fake out to the downside Crude and Euro

Crude oil managed to spook yesterday with a nice fake out to the downside, and probably encouraged some short selling and/or triggered stop losses for longs...before reversing sharply higher...

30 min chart below..

So still in the potential BULL FLAG.. and now more likely to see a break above 101 (after a bit of time to digest yesterday's gains) 

The daily chart shows the FLAG

MACD looks to turn up

Upside target if it breaks North could be as high as 121

The €/$ also did a similar move, not quite as dramatic but tested the 1.3030 level, before reversing sharply higher and breaking resistance at 1.3225

Same as for oil, expect some back filling but should head to 1.35 minimum, and after hearing CNBC commentators yesteray advising selling into strength this may go as high as 1,40!! (good contrarian indicator)

Crude oil..still consolidating or forming a top?

Crude oil still in a channel...trending lower, BUT is it a bull flag or topping?

Daily chart

Personally it looks like after the bottom formed in Oct 11, which showed bullish divergence between Price and RSI, we had a STRONG LEG up  to the November high, and since then it looks like it is in consolidation for at LEAST one more leg higher.

A significant break of the December lows would change that

STRATEGY if bullish : buy on weakness, or wait for a break above 101

Weekly chart


RSI seems to have found support, only negative is MACD may be about to cross down, BUT lagging indicator and many time it approaches the signal and turns up.

EURUSD consolidating ready for break higher.

Or it could break lower..BUT EURO short position still large..
As seen in chart below .large speculators SHORT
Commercial ..LONG

usually commercials are right in medium term

European news is OLD HAT!!
Even Greece default will have short lived effect on the market, as it has been talked about for so long IMHO

Euro daily chart

Looking at the 4hr chart below: we can see the consolidation pattern clearer.  We may have a "fake out move" to the downside before the break out up. Maybe...

FTSE almost to 1st target

As pointed out in previous post chart here  the FTSE has almost made it the 1st objective at 5915, though we may get a little pop higher to 5960.

Looking at the chart below we can see previous resistance at the 5916-5960 level so expecting some sort of correction from there.

If we burst through that then 6100 level comes into play. The April 2011 highs..

Weekly chart shows resistance at 6100 level (rectangular area)

Equity markets in need of a rest?

Looking at the daily charts of many indices it looks like they need a pause at least before moving higher..

here's the DAX DAILY

Reasons for a correction

1.RSI in overbought levels

2. Maybe some late longs ie weak longs in near the highs

BUT the trend is UP, so unless very nimble best to wait for correction to get long again.

also looking at the WEEKLY chart

Can see that not overbought, and looking at past moves up they can get quite long in the tooth before a significant correction occurs.

NFP out in US tomorrow so could be some volatility ahead and after the numbers.

Stay nimble and look to buy pullbacks

Longs win again

DAX has broken through it's recent high

FTSE still needs to get there

Euro on it's way to 1.35 minimum

Oil  tried to break out of the bull flag yesterday and was pushed back..so probably quite a few longs were stopped out and maybe even more shorts stepped in..

Now need to see how it reacts .if it can hold these levels 98 -99 USD then I think we see another attempt at a breakout, measured move if a BULL FLAG 114

FTSE and DAX daily

Both markets pulled back yesterday, giving an opportunity to get LONG AGAIN!!
However, reading a lot of blogs, listening to CNBC (useful as a CONTRARIAN indicator) it seems still that the majority

"don't trust the rally"
"forming a top here"
"Euro is a sell"

So it seems that many will have sold into recent strength and any weakness they take as a sign that the market is now going down.  Feels like the markets will do the opposite and are winding up for a fast break North!

Crude oil also breaking out above 100.5  see previous post here

Not much has changed

Nothing really has changed for the medium term.
Markets pulled back yesterday and are quickly recovering
Expecting new highs soon..

quick look at EURUSD WEEKLY vs DOW INDUSTRIAL  to see long term perspective..

The outlined areas are where the EURO and the DOW have diverged...

€/$ WEEKLY 

A few scenarios possible  BUT
with record short position a move to at least 1.39/1.490 seems likely.

and above there maybe even as high as 1.44

A break above the large channel  would see new highs..BUT more likely form 1.44 it starts to head lower again

FTSE another chance to buy?

GDP figs disappoint in US
Markets needed a breather
BUT
getting close to buying levels again good support at 5708 and target for next 2-3 weeks min 6000

Copper nice move up, time for a rest?

Copper broke out of the triangle
and now looks a little over extended on the daily chart...HOWEVER the upside target from the triangle is still in the region of 439..

BUT there should be a pullback soon which would be a good long entry.  Maybe even if nimble some small shorts to play the correction could be had...risky against the trend..

Aussie dollar vs USD ..

Might be time to take some profits if long AUDUSD and wait for pullback for re-entry...
Or if really nimble SHORT..but it would be against the trend and for very short term..

Would probably tie in with a pullback in equity markets see previous post here

Longer term if triangle break out is not a false one..at a minimum should see this test the highs vs USD at 1.1

History repeats or rhymes..fractal?

Looking at the DOW daily chart

The action so in the red boxes looks pretty similar.  Plus we have total disbelief in the rally so far, so expect a dramatic push up for a short term top as happened in the 1st circled area of the 1st red box.

Then a similar fall to encourage longs to sell and short sellers, before the market rallies again.

So on a big push up would probably be right to sell/short the market..BUT be prepared for a bear trap!!

FTSE perfect retest ..so far!

Perfect retest of the consolidation area in the FTSE at 5720...(so far)...as per yesterday's post click here

Today's 4 hr chart so far...


Now it needs some follow through to the upside, a break above 5782 brings the next area of resistance into play  around the 5810 level.("STICKY AREA").  It's also good to look at other markets eg DAX, COPPER for clues as to possible path for the next few days.

The DAX is similar in a need to break above last high at 6470, BUT then there is little resistance up to 7000.
Look at the DAILY chart

Dr Copper is also rallying last at 380 and looks to be on way to the 430 level 

Last but not least..despite markets having rallied for the last few weeks..this has been in the face of skepticism and disbelief from many quarters and a lot of blog forums show "people" looking for tops...so it seems that the rally may continue for longer than expected..buy on weakness..

Weakness expected..when to buy again?

Dax down 1 %, FTSE down 0.8 % Euro consolidating recent gains..
so when to BUY again?

DAX 15 mins chart showing support levels
aggressive buy here at 6360

more conservative wait for a confirmed short term bottom and then buy, could even go as low as the GAP

DAX 3 hrs

DAX daily

Also a bit overbought but RSI now out of overbought zone

Finally a look at the FTSE 4 hour chart

we can see the area marked consolidation and we had a push out of that to 5780 level..now we may get a retest of the 5720 level (marked by red arrows) which acted as resistance, and should now be support.  If markets are as strong as they seem possibly we don't even get to 5720.  Otherwise a test of 5729 would be good long entry again.

Targets for DAX medium term are here

Crude thoughts

Looking at the daily chart of Crude (WTI)  does it look BULLISH or BEARISH?

Interesting things to note..when trend is down and RSI gets to 50 or just above ..it seems right to sell, and conversely when trend is up and RSI drops to 44 it seems right to buy.




So where are we now?


Trended down from May 2011 to October 2011, possible double bottom at 76 level..


Rallied to 106, and now seems to be consolidating (or TOPPING).  Support seems to be at 93.

So what if we take a BIGGER view i.e. step back and look at the longer term?

Look at the weekly chart.

After the rally to all time highs ($190) in 2008 Crude collapsed and traded down to 62.  

Now it has traded in a range with slight upward bias, retracing just over 38.2 % of the big fall from 190.

so basing or another leg down?

Resistance at 106 a break above that and we may see a new leg up (possibly coinciding with equity markets rally)

A break below 90 and we may retest the recent lows (70 $)

Looking at the general trends in the developing world it would seem that demand for oil will only go up in the future, especially looking at Africa, S America and Asia.  Plus tensions in Iran, Nigeria etc may also support higher oil prices.

FTSE stepping back to see the full picture

FTSE monthly chart

LONG term view...
just for perspective..
If bulls start running could be at minimum challenge of 6100 level, and if that breaks then test of all time highs...SCARY!

RSI is neutral, MACD could be in process of turning up

EURO DAILY, breaking out of falling wedge?

A look at the EURUSD DAILY chart

Price action is poking above that descending trend line (upper boundary of the falling wedge).  If we get a sustained push expect SHORT covering to come in, and a sharp rally.  Sentiment is still BEARISH on the EURUSD and there is still a record SHORT position.. conditions RIPE for a BIG squeeze!!

DAX a look at 4 time frames nearing resistance at 6400

The DAX has broken through the 6170 resistance and headed to near 6400 quite quickly.  This level is the last Major resistance as can be seen in the Weekly chart below.

DAX WEEKLY

The RSI is not at overbought levels.  If we look at the Daily chart below, we can see we are nearing short term overbought, so some rest is needed.  HOWEVER looking at FTSE which is close to breaking out at 5720 level, it seems that consolidation will be flat or maybe a drop to the 6200 area (fill the gap as seen on 15 min chart)

DAX DAILY

Interesting is the measured move from the BULL FLAG is around 7230, which is also the underside of that trend line (purple dashed).  

On the 3 hour chart we can see the push above the 6170 level and now hitting the 6400 level, and the RSI is near overbought, again suggesting some sideways/down movement to 6200

DAX 3 HOUR

On the very short term 15 min chart it shows the gap between 6230 and 6280.  The DAX has a propensity to fill gaps fairly quickly.

DAX 15 MINS

FTSE ..consolidating rally from 5330 to 5700

Looking at the 4 hr chart we can see the rally from 20/12/2011 to 04/01/2012 a total of 382 points


Since then the market is rangebound with attempts at breaking out over 5720 repelled and selling off to as low as 5580 so far...

so it looks like CONSOLIDATION of the move up..which means we should see a break above 5720 resistance in near future..

The DAX seems to have broken resistance at 6170 and now looks to be heading to next at 6400
The DOW is similar to the FTSE, finding resistance at 12500

DAX update...breaking out

Well the DAX has continued its move upward interspersed with a few scary down moves...(all to shake out weak longs), now we are entering  an area where we could see a quick move to 6400... and if we bust through there DON'T BE SHORT!!

Awaiting ECB, BOE looking at EURUSD and GBPUSD

Looking at the EURUSD chart and awaiting ECB decision... 2 things
1. Markets are always pricing in future developments as perceived by investors
2. Market knows and has known since teh surprise rate cut by the ECB that interest rates will not be going UP in the Eurozone..

SO ...EURO shorts still at record highs...if we get a move down on the ECB news BEWARE if it is short lived..a move down and rally could be the start of a bigger short squeeze.. see chart here

Looking at cable...slightly different scenario...looks like sentiment has turned very negative and many are highlighting the break to new lows and support at 1.53.  Also many pointing out the BEARISH HEAD and SHOULDERS formation.

However, a move to 1.52 would bring in trendline support, and if EURO rallies against dollar the it is hard to see cable falling dramatically.  So a quick shake out and a rally may be on the cards...

Remember H&S patterns have a high probability of failure.   That said if the selling does accelerate, then one would have to go with it.

Some contrarian news

USUALLY when these BIG announcements are made, they tend to be near or at the bottom of the cycle. Managements like to EXTRAPOLATE.( Extend the application of (a method or conclusion, esp. one based on statistics) to an unknown situation by assuming that existing trends will continue or similar methods will be applicable)

 From experience I remember a lot of lay offs towards the end of 2002...maybe a sign that a rally is imminent.

EURO weakness coming to an end ...(medium term)

There are record numbers of EURO shorts and looking at the DAILY chart of EURUSD we can see some positive divergences building ..POSITIVE DIVERGENCE between PRICE and RSI.  


This is when the PRICE reaches a NEW LOW, but the RSI doesn't


This is highlighted on the chart (first circled area) and the current situation in the 2nd circled area.

On the EURJPY the divergence is clear on the WEEKLY chart each time generating a short squeeze rally.

Yesterday and TODAY

Well yesterday's late fall in the markets with the DAX trading for a brief moment below 6000, and the FTSE approached 5600, may have been the shake out of WEAK hands, referred to in yesterday's post .

Today markets have opened with gaps up of 1 %, may be a bit of back filling before a push higher.

KEY levels  DAX 6170  FTSE 5712


30 minute charts shown below

Looking to buy on weakness especially DAX

FTSE still on track for higher levels..

FTSE has been working off overbought conditions..now looking like either one more small drop to 5560 or we are on our way higher..

FTSE 3 hour chart

The DAX also looking similar..

DAX daily chart

DAX 3 hour chart

Obviously if we get any bad "NEWS" out of the MERKOZY affair the short term may be a bit more volatile..
BUT longer term  once the "sell the news" crowd have finished higher levels ahead...

New YEAR !! 2012 rally...!

Will it be the "end of the world as we know it?" ..

Probably not !

DAX and FTSE are breaking our of downtrends /triangle formations..Copper close to breaking out of a triangle as well..

DAX has some tough resistance between 6170 and 6400 above 6400 and clear skies above...target 7200

Also Euro pairs look like finding support and with HUGE short positions a rally above key levels may initiate some short covering.  EURJPY looks like a FALLING WEDGE...

So if we get follow through the rally may be LARGE