Divergence continued..

Looking at AUDUSD again.. click for previous divergences post

AND NOW:

 

We can see RSI starting to turn down whilst price has more or less matched the previous high, setting up a NEGATIVE DIVERGENCE.  Short with a stop just above the recent high 9045, and look to cover half at the up trend line...a break of that and may see much lower levels.

Still looking at...EURGBP

EURGBP... with this rally looking to get short eurgbp chart Thursday Feb 11th

EURGBP as of today..

X ABCD on the chart is a possible BEARISH GARTLEY PATTERN

CABLE 8hr flag broken?

Looks like cable has made up it's mind which way to break (after a nice head fake yesterday when it traded up to 1.5830),  the RSI has also broken the trend up, and MACD is starting to turn down.. NEXT level to break if we are to get a sustained move is 1.5500.

medium term targets?  There are 2 possibles depending where the "flag pole" started.
How to measure a flag formation click  here.

1
taking high on 19/1/10       16458
taking the low on 8/2/10    15534   subtracting gives us 924 pips

break today at 15687 - 924 = 14763

2 taking the high on 3/2/10 16069
     taking the low on 8/2/10 15534 subtracting gives us 535 pips

break today at 15687 - 535 = 15152

Here's a look at the 4 hr chart from the other day..cable 4 hr range (bear flag)

looking at the DAILY chart with those targets added on

Obviously if we break back into the flag significantly something else is happening...use stops!

Divergences

When looking at charts one of the indicators I like to look at is RSI.  On it's own it can be difficult to read, a high reading can stay high in an "overbought" situation, especially in a strongly trending up market, and vice versa in a down trend.  However if looking at the evolution of PRICE with RSI, many times (NOT ALWAYS) it can be an early warning sign of a top  or bottom.

Looking at the AUDUSD 8hr chart below :

basically in an up trending market the price makes a swing high, retraces, the rallies again to a new high, BUT the RSI fails to make a new high, NEGATIVE DIVERGENCE.  That is the warning signal, and when price turns down a short trade is possible with a stop above the high.

In a down trend the reverse happens, price makes a new low but RSI fails to make a lower low, POSITIVE DIVERGENCE.

This is just another tool to be used in trying to identify good entry points.   I have hand drawn what the next move MAY be in AUDUSD, if it transpires will be initiating a short.

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

AUDUSD has the correction ended? or just starting

The Aussie dollar (v USD) has broken the up trend since  DEC 08, and has been one of the main beneficiaries of the carry trade (sell USD and buy AUD).  It seems that these trades are unwinding, so I would expect a bigger correction than we have had already, AUDUSD has only retraced to 23.6 Fibonacci retrace.  The recent fall looks impulsive, and the rally since has relieved OVERSOLD conditions.

2 options:

Either we HAVE completed an A-B-C correction and now we head to new highs, but it looks too shallow to me (subjective!).  Also we see general dollar strength vs other majors such as £ and €.

OR we are just in first leg of a bigger correction (my preferred scenario).

Look at the daily chart:

I think that we will see minimum retrace to 38.2 % Fib level at around .81 and am positioned accordingly with stops.  I have room to sell more on strength, but a move above 9060 would make me cautious. A nice break of the 3rd fan line would also be good for adding shorts on a momentum move down.

(NOT!) Trading ranges and the waiting game..

With a holiday in the US today (Presidents Day) it seems that trading will be subdued, so taking a look at the very short term can see some ranges in many indices and currencies.  Concentrating on DAX and Cable (GBPUSD).  Unless you are nimble ranges are frustrating, waiting for that move one way or another. PATIENCE is KEY (repeat again and again!)

Look at the DAX 10 min chart:

 If we break to upside looks like potential target initially (and probably quite quickly is 5684)
, while a break to the down side targets 5324, which fits in with previous posts targets for DAX (prior post link).


Now looking at cable we can also see a range in the 4 hr chart., and this  SHOULD eventually break to the downside roughly calculated minimum target 153.42, maybe more.  IF it breaks HIGHER then it is likely the DOWN move has finished...

 

You can see some spikes up and down through the range, this is when traders are "anticipating" the break out, only to cover when it fails, and heads back into the range. Which is why RANGE trading is difficult and frustrating.

Dow weekly

Having a look at the DOW weekly and playing with some moving avgs (ma's)

200 week ma, 55 week ma and 34 week ma (the last 2 are Fibonacci numbers) Fibonacci numbers explained

On the bullish side it looks like we have had 3 waves up (Elliott Wave theory) and maybe one more up to complete a 5, maybe testing the 200 week ma?

On the bearish side we have 3 waves up (EW corrective wave of the fall from 2007, MACD has just turned lower.  Key levels may be the 9760 and 9000 area for a bounce in both bullish and bearish cases.

If bull then we get a new high, and then a wave 2 down, which may also be close to testing the lows in March 09

if bear then the next move up will not make a new high, and will be a wave 2 up...before a catastrophic wave 3 DOWN...

As can be seen in both bearish and bullish cases the moves are similar, that explains why trading can be so difficult, especially if you start off with pre-conceived ideas!! 

Here's another look at some monthly charts S&P monthly and DAX monthly both from JULY 09...

Here are the S&P and DAX monthly as of this week.

FTSE weekly and daily..quick look at DOW

Recent action in the equity markets LOOKS corrective..ie  we have had some sharp falls and now consolidating for another leg down..BUT...as with all trading there are ALWAYS 2 possibilities (at least!).


Looking at the FTSE chart

weekly

 We had a break of the uptrend since March 09.   So at minimum we are in a corretcion of that, or now we are in a down trend.  If a correction how far can we go?  Look at the daily chart..


FTSE daily

BEAR view.  Broken up trend, Head n shoulder formation targets 4600 area.  4520 is 50 % retrace of the move up since March.

The bear view gets seriously damaged if we close above 5300.

Looking at the DOW..very near term also painting a BEAR flag, but action since 10740 has been contained in a well defined channel (BULL FLAG?)and a break above 10300 will get the bulls going again..

 200 dma is at 9510 which would be a good target for this move down 6 % lower., MACD looks like it wants to turn up...but best wait for a bullish crossover.

Euro v pound sterling

With a Greece bail out looming and the "burden" on the bigger EU countries, plus the prospect of further help for others like Spain, Portugal and Ireland MAYBE the pound is set for relative strength against the €..

look at the chart

Look at daily...

AND the weekly ..

THEN probably coinciding with new weakness in the USD expect cable to go to new lows vs Euro possibly attempt at parity?

Euro getting near short level?

Euro looks to be nearing a SHORT level...each corrective move up in this down trend has reached the previous reaction low (horizontal lines/arrows)..looks like 1.3850 is a good level..
barring any more "GREEK" news...if it breaks above this looking at 1.3925 as next short level.

Some targets...

Some targets looking to cover shorts and maybe go long...depends on market action !  (If not going long will wait for a bounce to re/short)

DAX: looking for 5350 as a target chart here DAX chart

FTSE 4950, initial target...BUT a break below here will see 4650

 

Silver  looks to have broken the up trend line, and maybe the head and shoulders target at 14 is the one to look for. 
 

EURO   starting to look like nearing the end of a 1st wave down...looking for some capitulation 

DAX count still alive..

The 30 mins DAX still looks on track ie we are in a wave 5 down to finish the larger wave I.  Dax Friday 29th Jan

dax today.. still looking for this to bottom in or around 5350 to 5400

Currencies crucial levels..

Cable

Aussie dollar

Euro chart from October 09  click to see where we were..

and where we are now.  Euro looks like headed to 1.3760 support...but the major trend is now down after the break from the wedge.  If Cable breaks down through 1.57, it may be worth buying euro vs cable..

DAX,,where we may be?

Is the recent fall a correction or start of something bigger..ie the end of the rally?

Looking for current move to bottom around 5400...

Then a rally...new highs or failure?  who knows!!

Silver....

Silver chart above..looks like a short term topping formation with a test of the up trend line on the cards..target around 15.5...should coincide with:  A stronger dollar and B weakening commodities in general..possibly also another LEG down in equity markets...

Gold correction where to?

Looks like gold is enetring a correctove phase after the big run up, plus recent dollar strength also affecting negatively.  A mild correction would be to 1060 level, maybe even 1030 (horizontal support)...anything larger and may target the break out level between 990 and 976..

Possible bullish catalyst for year end rally?

Looking at JPM and GS ...

if they can break higher would give impetus to a new move higher...IF they break down, may stop the rally in it's tracks... 

Long with tight stop... possible reverse on a break down.

Xmas charts..

FTSE

Looks like one more push up to 5670 level possible, especially with the predicted "father christmas" rally. If break the mini channel a move to the lower side of the channel, IF that breaks then rally is over for a while.

DAX

 

 

DAX is forming a clear triangle, a clean break above 5800/5840 targets 6200/6350 (61.8% retrace of fall from highs)  On the downside it looks like 5580/5530 is key, followed by 5250 (50 % retracement level, and resistance/support)

DOW

weekly

 

Weekly chart show we are still near some strong resistance 10500 level, a clean break above this can target 11200, possibly ending this rally.

daily

Daily chart shows a bit more detail..range bound for last few 10200 key on downside, 10500 key on upside.

where is gold going?