Calm before the storm? Or blue skies ahead?

After a strong rally from December lows markets are in a "wait and see mode " - STILL !
Waiting for : trade deal with China (probably priced in - bar the pop on the new)
Waiting for Trump to reach deal with Dems on Border Security (i.e. THE WALL)

Quick look at DAX :

Daily chart from the 7th
Looks like a breakdown from a bear flag
Relative weakness vs other major markets
Look left  - 11550 level if breached might signal change in short term trend - until then medium term downtrend still in force.

DAX 2 hour from today

This shows the break of the recent uptrend
And a rally from oversold levels
could be a test of the broken trend line and then resumption of downtrend  OR
that fall was a fake out and now rallying to test 11550 level

Finally look at weekly DAX
testing the 200 week MA
rally has relieved oversold

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

have a good 2019 -

No trading until 2nd January -

charts still same

2019

I'm in to end homelessness because in a developed society and one of the world's top economies it is a disgrace that this occurs in our country - let alone in many other countries of the world. Resources are there; however governments use them in inappropriate ways (weapons is the prime one) - food is plentiful in so called first world countries, and we waste an enormous amount, inequality of wealth also contributes to the problem. I am not against people making money or bettering their lives but at some point there IS a level at which instead of accumulating more wealth or houses these people could divert that to the betterment of society. From small acorns large oaks grow, so the idea that one person's independent actions cannot help to solve the situation is an invalid argument. 
𝗟𝗲𝘁𝘀 𝗺𝗮𝗸𝗲 𝟮𝟬𝟭𝟵 𝘁𝗵𝗲 𝘆𝗲𝗮𝗿 𝗶𝘁 𝘀𝘁𝗮𝗿𝘁𝘀 𝘁𝗼 𝗰𝗵𝗮𝗻𝗴𝗲

I'm aiming to support this cause CRISIS - with a percentage of profits - let's hope it's a succesful year!!

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

Merry Christmas

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 -

Euro bottoming vs the dollar?

Interesting in the FX market - dollar strength has dominated but is there a change afoot?

could target 1.18 of it breaks out to the upside

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...

Crude oil

No bottom yet - despite quite oversold conditions
What do the charts say?

Weekly chart - what does it say?

Oversold - BUT price and RSI going to new lows - no divergence yet so selling pressure still evident
Next major support - shaded area, with possible overshoot
If that doesn't hold crude is headed lower

What about shorter time frames?

Crude oil daily

Getting close to oversold
POSSIBLE positive divergence setting up - as a new low with RSI looking like it will not form a new low

Crude 2 hour chart
Stepping down the stairs
Nice bear flags on the move down
Looks like at least one more setting up

Worth keeping eye on especially if it gets to the support highlighted (set alert for 42.9)
once the down move is finished - there should be a decent rally (corrective)

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.

Sentiment

Again this week CNBC watched by many (including the POTUS) are constantly talking about "finding bottoms"

Too many "bottom pickers" and "buy the dip"

Major US indices look like testing the pierced bottoms last week, and ,more than likely hitting new lows for this move.
The rally from the circled area looks corrective and losing steam i.e. not heading to the top of that range looks very bearish.

I would not be surprised to see a wash out next week ahead of Christmas, and THEN maybe we find a tradeable low.

Cable - broke support

So the cable set up seems to be playing out.

short with stop above 1.2720
it broke support and then tested that support which now look like resistance. Target medium term 1.1875 (triangle measurement)
lower  stop after today's trading

Updated chart below

Cable 2 hours

Previous post below:
Cable  looks to have broken an important support at 1.2670 (ish).
Wait for either a retest in case it's a false break or selling momentum increases to sell


Obviously a lot of Brexit news (not for the faint-hearted) but measured price target if the selling continues will be around 1.1870

Cable daily chart