reflective time...

An aside from the markets..

Now we are coming up to summer ..(at least in S Spain) and the clouds are clearing ..thank God !!...we are finally getting to the task of clearing the land..and need to get the vegetables in the ground..

With the weird weather across Europe and especially down here..it seems that we are in store for higher food prices..some early vegetables have been wiped out by waterlogged conditions and only now is it possible to plant.  the problem being that the plantlets will not have the "good" i.e. not too hot temperatures for very long so roots will be less developed.  The "heat" will arrive soon, which means a lot of plants  will not have developed bug enough root systems to carry them through the summer, and once it heats up here the top 3 inches or so turn to rock!!



If you are interested in a Southern Spanish holiday home click here .

Euro daily basing or consolidating?

Couple of possible scenarios.  For now looks like we will get a choppy rally up in  wave iv  before a wave v down..

IF the move down has finished we should see some good mini rallies to signal a change in trend

DAX daily

Whilst bullish sentiment is still rising..with the markets..the DAX seems to be lagging..

 We COULD be in the final move of an abc correction which when finished will herald a large move down..
The DAX has lagged other major indices, when usually it is LEADING the indices higher...

OF course all can change, but MAY be a WARNING against the decidedly bullish sentiment prevailing.

DAX..

4 hr chart of DAX

Why figures are meaningless!

 

Jobs figures are meaningless! As is most data from the govt or associated "independent" bodies. 

The figures today came out "better than expected"...BUT the fine print tells us that last month the data was WORSE than originally reported!

"There are three kinds of lies: lies, damned lies, and statistics." ..M Twain

DOW bull back..or pull back?

Looking at the rally from March 09 we can see 3 drives up.. a break of the up trend and now in a rally question is "Is this part of the correction of March 09 rally?"  OR  "is this the start of another leg up?"

BEAR CASE..
 

1.  We have 3 drives up, so would expect a "correction" at least
2. Current correction has not even retraced 23.6 % of the rally..normally would expect to at elast 38.2 % or 50 %.
3. Could be we have made an A  down, B up (currently), and next will be C down similar scenario to post here Dow Transport..clues


BULL CASE

1. retrace has been small so far..indicates "lack of selling"
2.  Close to making new highs for the current rally
3. Could be we have ALREADY made A B C correction...

EITHER way we should see resolution soon..maybe Friday NFP day (non farm payrolls)..

Dax  is still lagging FTSE and DOW

EURGBP

Well this went further than I thought..BUT like the AUDUSD chart from 23/02/10 AUDUSD  the negative divergence set up is looking better with a new high and RSI flat.  And the STOP for a short is close by so RISK/REWARD  looks good as well.

GBPUSD looks like it is close to target so with Greece and other countries weighing on the €, maybe £ will start to outperform again vs Euro.

Dow Transport

Looking at this chart, it looks like the next big move should be down in equity indices, regardless of whether one is a BULL or a BEAR.

The weekly chart shows 5 clear thrusts up, a break of the uptrend. Then 1 move down, and at the moment in a rally.  If this is a correction of the March 09 rally, it seems too shallow, a 38,2 % or even a 50 % retrace would "look" better.  Then if it's a bull, a rally to new highs, if it's a bear we head  much lower..

AUDUSD

Trade on track..looks like the rally off the  7th Feb low has finished, tagged a 61.8% Fib level retrace at 9040, now at support 8879.  Looking for a re test of  broken trend line at 8960 ish for re short...

refer to previous posts correction ended or beginning and divergences continued..

if thi i next leg down...we could have a long way to go

AUDUSD

Stopped on initial position but re entered at higher level..the negative divergence looks better today ..a new recent high with RSI now turning down...plus on the 8hr chart below looks like we have a bearish reversal signal

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?