Friday, 27 April 2012

Gold....Has this market turned? EP M12...Objective reached

Recent price action in Gold suggests we may have seen the short term lows and we are heading back towards 1670-1680$. This is based upon repeated sharp tests to the downside and firm support seen at 1620 plus a higher low at 1624 on 25th April. We are clearly going to break out of the current green d/sloping fork( black in the MT4 chart) after repeated tests on the upper MLP (MLH) and a pair of down sloping reaction lines that have channelled price lower after/since the first attempt to break up through the line yesterday..

Finally the S&P has reached it's objective in what must be one of the most unusual patterns within a fork body i have seen for some time. See the black up sloping fork where price is currently at the centre line and see the journey it has taken over the last few weeks. A brief pause perhaps & although i am still not 100% sure of the downside risk i think this market is going higher and fast. Spend 20 mins on a daily and wekly chart and you can see  there are no downsloping forks that can be drawn off the big pivots from the last few years. My guesstimate is that we will attempt to take out 1418 within days/weeks.....and all this from an eternal Bear

Thursday, 26 April 2012

EP #M12 & YM M12 The end of the correction- perhaps today?

Today and tomorrow are the days that will determine if we are in a continuation pattern for the stock indices S&P and Dow or are still flirting with the downside. It's not only my reaction line/ ML technical approach that tells me this but also many other folk watching potential bearish patterns plus other commentators who tend to more or less agree that a close this week above 1390 ( June 12 EP ) or 13100 (YM M12) will see a continuation of the long term trend up and signify the end of the recent correction with 1352.50 as the low.
 In many respects for me it is not so much PRICE that is important but TIME. What i mean by this is that for a continuation up we need to see not only new highs but pass through several reaction bar count zones which are located over the coming days. I am still uncertain and as such am not looking for a position. Price (today) i believe want's to go higher, this i observe from the manner in which it finds support when it retraces, moves up through reaction line resistance etc but I am still wary of the downside but this is slowly diminishing after recent price action.
I believe the  next few days will reveal the direction for the coming weeks perhaps months and today and tomorrows sessions will volatile and sideways.
Here is a simplified chart of the ES M12:

 and the detail showing just that one reaction line.

CAC40 & EP M12

Wednesday, 25 April 2012

Nagging doubts continued

From the last for a retest onn the black horizontal line at 1384 and then a fail and perhaps a short entry setup on the back opf that scenario... The fork is now drawn form the correct pivots 1-2-3.....and of course the blue fork is the mod Schiff relative of the grey fork.

Tuesday, 24 April 2012

EP M12 & YM M12...Nagging doubts about the downside potential

I have before on several occasions alluded to the fundamental difference between the mindset of  both pro and retail traders trading equity markets versus other commodity or currency markets. This is both a professional and personal observation (because i have a close relative who has worked in equity sales for 25 + years) and my past experience was in futures/forex markets. The difference is the mentality of equity markets are essentially 'long' orientated. Yes of course i understand there are many methods a manager or John Doe stock picker may go short either a stock or index, ETF or asset class but a cursory glance at any of the US monthly/weekly equity charts will show that these markets spend a much longer proportion of time going up than going down in trends that almost defy all the rules. They are for me different to many commodity futures markets and yes, oil,gold, copper, grains and many other have seen dramatic rises in recent years but if you look at long term CRB charts going back to the early 70's and before these markets all display different behaviour that is only apparent in a much higher time frame..... take Soybean Meal which has seen major rallies followed by major declines every few years. Cocoa, sugar, Coffee have never surpassed highs seen over 20 years ago and many others: meats /livestock, Lumber etc despite recent trends are cyclical.
Now we turn to the Indices and look at long terms charts (and we could include Gold in this as well ) and we see extended trends lasting decades. So my point that I am making is never underestimate the power of a equity market trend and those long term trends are still firmly up. I wrote a brief article last autumn on this blog just after the so called crash and subsequent hysteria in the press entitled "Crisis? What crisis?" and posted several charts showing Andrews forks with centre lines untouched by price and the somewhat insignificant retracement made by North American Indices at that time. In addition I had thought what on earth would happen to all the cash sitting on fund managers/banks/institutions books? I know enough about the industry to know that portfolio diversification into fixed income, Sovereign bonds ,Gold, commodities and other asset classes would be limited and that the vast majority of funds were just waiting to flood back their cash into the equity markets. This is a simple fact of life and remains so.
What i am saying is what i have learnt ( with my own account equity over the years)...Never underestimate the power of the equity indices to keep on trending upwards (& screw a short).
Of course the above is over simplified but i am concerned that with all my recent bearish sentiment -(based on sound technical analysis and recently traded successfully on the back of the triple tops we saw in the Dow and the fork shown in chart 1 above at the top of the page).... that i may not remember my own hard learned lessons.
 I am now starting to see the same type of stubborn support underlying the equity markets that we saw last Autumn. Here below is a chart showing last Summer/Autumn price action in relation to Andrew fork A-B-C and it's Schiff variant in blue. Remember pivot B was out high at the time ...Then note the inability of price to make a touch on the blue Schiff CL and the resulting low pivot was D.
This chart shares striking similarities with Gold at that time.... but thats another story.
The current dashed red almost horizontal down-sloping reaction line is from fork C-A-D as is the previous reaction line. The sharp angled uplsoping RL is responsible for the recent sharp up trend is from the un-Schiffed normal Andrews Fork A-B-C but it's influence is now over.

Here is the current picture below ( viz a viz pitchforks) and yet again we have the same non touch on the blue Schiff fork from pivots P0-P1-P2 shown with a green arrow...Looks familair? However if we use the lower high P3 we have a touch on the schiff CL (P0-P3-P2).

Now lets keep it simple ( for the time being) and draw the obvious fork on a daily chart below and you realise that the objective is a long way down towards 1100...a long term move and perhaps too much to ask of the market? (I should mention that regardless of if the fork is 'in play' with price, the reaction lines and ML's will still influence future path of price if they converge or meet.
Now lets drop down to the 240min and we add the RL's plus a fork off the pivots 1-2-3 and its Schiff variant in thick blue...

THIS TIME the fork and its RL's work a treat, capturing the frequency of the entire recent weeks of price action. However the higher -high pivot is not used and of course you may think its a 'fudge' because we have not used the correct pivot ( see comment**) .This forks ML's and RL's work of course because all any three pivots do is express the interrelationship between themselves and price so this is what i call a slightly "unorthodox Fork" but it would not be the first or last time they show their value....
(Postscript.**  upon reflection it's not really a fudge because if i use the correct P3  the non Schiff Andrews ML /CL bisects both this high and the previous penultimate higher high  ie the prior high to the highest high shown at 1419.50.. Try them both for yourself.)
 Here's more current detail in the 60 min below:

Here's even more detail below with some local time frame forks added which show both the up and down sloping objectives...the latter having been reached (but not exceeded yesterday). If we reach the upper blue Schiff MLH again ( as its already done its work once at pivot Z) i think we may go higher and break through to test the horizontal resistance zone (ML) at about 1383.

Here below is a current lower time frame chart of another set of forks seen above in the 3rd chart down from the top.. it shows possible down sloping MLs where we may see resistance but often in  sideways patterns they are not fully reliable... but at least we can see possible UMLP's and they are all current and in play and should be viewed in a lower time frame to do these forks justice but their reaction lines are perfect and reveal last night & todays supporting reaction line.
NB: All RL's & ML's are drawn automatically by a custom indicator so cannot be moved unless the fork pivots are changed.

If ever there was a day for a punch though & down  the 1350-1355 area yesterday was it. We now have a bullish double bottom having failed to make a lower low. Depending on how you count the topping sideways formation we are currently seeing (on the emini S& P June 12 contract) our 3rd, 4th or even 5th peak since the 1352.50 low on 10th April and i repeat failed to make a LL yesterday. Price is showing a reluctance to go lower and this can be seen as a "tell" . Yesterday all the 'boxes were ticked' in respect of all 'local' down sloping forks seen in the 60 min chart and they all had the CL objectives met (and no light touches or 'kiss and reverse' behaviour) so the short scenario is still in play but price must make a LL soon in my opinion or head back up towards 1380 for an eventual  retest of 1400 where it failed to forfill its obligation to touch the the thick black up sloping fork CL (see above chart 3rd form top).
I am still just bearish perhaps also impatient but a break of 1350 will confirm (for me) the possibility of a new phase of a medium term trend down to 1280-1300 but I am not yet 100% convinced that this will happen and am extremely wary of being caught short in this market. In the daily chart this is still an insignificant matter and only if we break 1338 will this correction be certified and have some teeth to it. In the meantime i have a feeling that bargin hunters are out there in the equity markets picking up stock and it would not surprise me in the next few weeks if I then realise that we have already seen the bottom- conversely a news driven headline or story ( & there are plenty out there) or crappy data could provide the impetus to go lower through crucial support but the appetite is not apparent today.... SO at the moment I am prepared for both eventualities.


EurUsd- corner trade or breakout continuation?...continued

The jury is still out on this but it looks like we have failed to make a LL..perhaps now a test on te Blue UMLP?

EurUsd......Corner trade or breakout-continuation

Its got to be a corner trade off the d/sloping reaction line and blue UMLP or a break up and through. The RL comes form the peculiar thin green up sloping fork. entry will be on the break of the thin green ML ( previously mentioned) and the taking out of the previous low 1.3150..beware we may see a further attempt at the RL so a safer entry would be to wait and watch the Ensign Bline 2X template for an entry.

Monday, 23 April 2012

EURUSD & EP M12... The weakness shows

Following France's 1st round of the Presidential election we are faced with Mn Hollande in the lead- he has already said he wants to upset the apple cart viz-a viz Europe and the EZ and spend spend spend, tax tax tax. As someone who lives in France there is no other Western European country where the politics of envy are more apparent. France is truely a socialist state and my local town has not only communist candidates but a charming Trotskyist local candidate in the annual local elections ( not this Presidential election). Wealth and wealth creation are frowned upon in the same way as they were in the UK in the 1970's. Sarkosy was meant to change all that with wealth creation and reclain that famous French word Entrepreneur for the French. Sadly his politics have been devisive. It was only yesterday when i relooked at the CAC40 chart i saw with horror what a lacklustre performance it's put in over the last few months compared to the S&P or the DAX.

There is suppport for the failed black upsloping black fork at 1359.00 ( June12) but I suspect we are going to make a LL this week and have another go at 1350.00
Re the June 2012 Mini Dow we are heading back towards 12765 where again we should find support but remember myu current interest in these Stock Indices markets kicked off a few weeks ago with the triple tops formation in the Dow. I still am uncertain about the long term direction and if we are now in a new bear phase. It seems unreasonable to expect markets not to correct but at the same time the USA fundamentals are positive.In my opinion we will find the answer to this question in the coming 2-4 weeks.but my money is on seeing a LL and taking out  12668 (M12).

Sunday, 22 April 2012

North Africa 1942... and now for something completely different..

Here's another piece of my late fathers collection of memorabilia from his time in North Africa in 1940-43  in the British 8th Army
 This time not one of his photos but a printed propaganda sheet that were dropped over German positions in the hundreds of thousands. This is a safe-conduct pass for any German soldier.
Later today i will post my take on the S&P and the recent triple tops in the Dow and how this pattern is playing out and also a one -off appraisal on the CAC40 and whats going on with France, its current elections and the danger the markets perceive of  F.Hollande  re market confidence/ fiscal prudence.

Friday, 20 April 2012

EurGbp& EurUsd..Germany delivers good data..The rest are a shambles

Theres a potential reversal on EurGbp in the offing but not yet confirmed; Following on from posts a few days ago:
German IFO is better than expected but questions for me over France/Hollande and then theres the periphary ..? Eur Usd could go either way and until i see the writing on the wall i am not going to try to second guess short term direction.... but as per last nights post i still favour the downside and if i were a betting man ( which i am not) i would say that we are at the highs above 1.3170 for the day.

Thursday, 19 April 2012

EurUsd...getting ready for a big move?

Todays 80 + basis pt move up seems all in vain......Its still a 'fail' using my system of forks. This is not Andrews/Schiff/Mod Schiff seen in thes two Ensign screen shots but still .. not only does it work every bit as well as them as an indicator of price strength/weaknes etc but the reaction lines ( seen here) are always superb. This fork was developed as an idea for reaction line efficiancy. Use the usual P0 or any significant low then the first HH before any retracement ie the top of wave 1 and then the usual P2.. It's called a G-Fork ( and not because it hits the G spot...which it does in a manner of speaking viz a viz reaction lines).
Anyway. It looks like we are getting ready for a big move-either way. I have seen similar behaviour and the support at 1.3070-1.3080 looks like it's going to be taken out in the coming days and its a reaction line from a monthly fork and can be seen here in the right hand chart form this earlier post. You can bounce a pin off this reaction line and price has been bouncing off this line for weeks... however if you look at recent price action we have been making these big moves up only to fail ( viz a viz andrews)...and down we come..then up again and its a bit like being stuck in an elevator...always back to the same line at 1.3070 ( since Dec 2011). Today we have ( so far) failed to make a HH and what with the vibe this market gives off my opinion is that we will go lower sharply and this view respect the current funamentals BUT its not over till the fat lady sings and at this moment i only have an opinion ( not a position!) which may change. Either way i think we may see a big move tomorrow.
Lastly....Is GBPUSD building a top at 1.6065? It looks posisble.

Wednesday, 18 April 2012


EURGBP has reached an area of interest for me as per yesterdays post but frankly I can't see the long trade here at the moment what with Cable just having taken out 1.60 on the upside with gusto and continued strain ahead for the EuroZone despite EurUsd's nice rally today ( see below Ensign). The problem for me is that this still looks like a sell if we go through the level plus the market is so over sold currently but who wants to try to catch a falling knife?

Tuesday, 17 April 2012

EURUSD..There's a new fork in town..

What we could do in early NY session with EurUsd looks very likely now...a break of 1.31 the figure will see the previous low at 1.3090 threatened and if we make a LL then this fork is in play and we are looking at 1.30. If we hold here above 1.3100 then we may test the same UMLP of this fork and try for a HH above 1.3170
We have seen an almost 100% retracement of the 50 basis pt sharp move earlier on and now all eyes are on the support at 1.3115-1.3118

Gold continued +EURGBP+ EurUsd

Two views of Gold showing current weakness. It's hanging by a thread ( yellow LMLP) as far as
I am concerned and bumping along the bottom of this LMLP from the dominant yellow fork. Perhaps a H&S formation in the making?It is important NOT to ever think in terms of one fork when you look at this ( or any other) chart. At any one time there are endless forks 'in play' but if you can identify the most important pivots you can draw multiple forks ( & RL's) and see the dynamics of price working plus see the potential critical support/resistance areas.
EURGBP is at a important Schiff CL and the big figure .8200 is the area to watch. We have already seen one bounce off this blue CL in June 2010 and this is one possible area of support. There is no trade yet....but i will watch for a reversal setup entry..perhaps a over and under divergence or a 2B reversal or even a pattern to trade off etc etc. Remember we are talking daily or weekly TF's here so great care should be taken especially as my personal view is that the process of price penetrating a line like (& in any time frame) this involves the expenditure of energy received from that line on the first and subsequent touches - hence we often see diminishing tops LH's in a sideways pattern and sometimes eventually a break below. Here's the current information as it is below on a series of chart shots just showing this fork and it's Schiff relation in blue:

Friday, 13 April 2012

Gold...youve got to love this!!!...(From "The man Who")....

From "The man who" post last month..
...Following on from this mornings post i have been preoccupied with EurUsd and EP m12 but this is sweet..look at the RL's and note the support at 1645 and 1637...but remember that the 30$ rally yesterday was all in vain as the big picture is yet another grand show of weakness...a bit like little Kim Jim Uns North Korean rocket! ( please excuse my unusual departure from never mentioning politics,religion etc on this blog ..but if the suit fits i occasionally can't resist....)

EURUSD..Spanish worries

Spain today has a stagnant economy: 24% unemployment, 53% youth unemployment, an economy shrinking at an annualized rate of at least –1.75%, a banking sector with a collective insolvency that runs some €78 billion, a government that needs €190 billion this year alone to fund itself (on a total GDP of barely €1 trillion). Read this article if you have time:

I think there is an extremely high probability that the EurUsd is going back to 1.3050. There was painfully slow progress upto the blue CL which is was a miss/failure whith price being
stopped by the grey thick historic ML. Price action looks like this could go all the way through current support at 1.3108 a crossroads & ES M12

Our old friend Gold is at an important level and the direction we see in the next few sessions will give us an indication of the near and medium term direction. Late yesterday i drew attention to the fork (P0 19th March 1669.70, P1 1696.85 on 27 Mch & P2 1627.95 on 22 March) and seen drawn in blue in last nights post. Overnight and today we have seen a first and second attempt to break up through this line. Recent price action is bullish with a near 40$ rally from the low 1650's upto the recent high around 1680 and just piercing the UMLP line. Today we have made a second LH at 1677.85 and are currently 1671 with a London session low of 1669.55...this is a LL. There is no trade yet but a break of this line would strengthen my view that we are set to make a higher pivot on the daily chart and take out 1696 and thus a retest of 1700. However today we may see price come back to the low 1660's. In my view this market is set to go higher and touch the yellow CL at 1692-1696 area. This does not affect my long term bearish view however.

JUNE S&P is heading to its CL destination of 1395 off the fork (P0 23 mch 1380.50, P1 1419.50 on 27th Mch and P2 1352.50 on 10 April). This is the dominant fork in all time frames and as such is an ideal yardstick to guage price direction and strength. This fork can be seen in the simplified chart below.

Below there can be clearly be seen structure at 1385 plus the down sloping RL's at 1382-1383 and these are the levels I will watch this afternoon when the US opens.