Thursday, 28 March 2013

DOW time

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The daily Dow chart shows an imperfect channel. I don't think it has enough gas to touch the upper band again.
On a micro level, I could pick up two channels one inside the other. No signal for the shorts yet.

Wednesday, 27 March 2013

AUD and GBP decided. FTSE in progress

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Next leg down C wave right ?

It was 4 years ago when I was introduced to Elliott Wave Theory and of course the 'magnificent' Bob Prechter. Imagine those times: S&P at 700, the world is collapsing, no jobs, no future, no nothing. Bob was telling everyone that he has seen this coming in his book from 2002! His prophecy was telling us that the markets will correct up to DOW 10000 and then the mighty C wave will come with total devastation. 

I was a beginner back then. A friend gave me his book which I read and got hooked up. It was so simple so beautiful. There was an order to mass psychology, to markets and the crystal ball was right there within this small book. I kept on following his daily and monthly publications for another year. Every time markets rallied, he and his team raced with each other to call the top. Oh yes there, oh no no it is now. It was insanity and I was very unlucky to have followed this path. After I gave up, I read another 50-60 books on trading methods and psychology from brilliant authors. I wish I had read those at the beginning instead of the voodoo. This is a business for Bob and he gets paid to be bearish and contrarian.  However, EW is something even the master cannot master. He still keeps calling the tops. One day he will be right and he will be on the TVs again. I'm sure he has lost 95% of his subscribers in the last 3 years, after making them lose tons of money. 

Here is my stand on EWT:
- It works only after several waves have developed. This is important. Counting 5 waves don't mean that ABC is coming. Those 5 waves can be from an A wave or a C wave. Only after several cycles, you can say "ahaaa now I see".
- It is very very very subjective. There are 13 different wave structures and every single person would count them differently.
- It is inherently bearish due to the count which makes you terribly prejudiced and opinionated. This haunts me today even after 3 years dropping the method.

I can count more but you get the idea. I don't do Elliott anymore. I trade what I see, period. I'm sure so many people would argue otherwise. They would tell you that there are people who can trade consistently with EW. Well, good for them.

Recently, EW published this graph which shows record low cash levels of mutual funds. He shows this graph at every top. The flaw with his claim is; cash levels were around 3.5% in the last 3 years. However, maybe he will be right this time and there will be a major top. The voodoo will work like a broken clock showing the right time twice a day.

Tuesday, 26 March 2013

Brent breaking up

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Brent broke up its descending triangle and the orange support.

Sugar update

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Since my sugar chart here, we are back on the recently broken red resistance line which can give a good stop loss level for the longs. I expect sugar will try the green support in the next leg. The prices look very depressed and selling power is diminishing looking at indicators at several timeframes.

Decision point for GBP

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GBP has to decide which channel it will break. Coming soon!

Sunday, 24 March 2013

Start your week with these

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The 5-year trend channel of WTI is unmissable. There has been too many touches on the lower band which makes the channel a bit shaky. Nevertheless, there is also a potential contracting sideways triangle which would be massively bullish. It needs a confirmation with a third touch&bounce on the upper resistance though.
I like the AUDUSD picture here. The 5 year trend channel is broken on the normal scale but the logarithmic scale chart still shows a potential channel with a target of 1.15. It is too far a stretch to call that right now though. It needs a touch first to confirm the blue channel and the orange triangle. 
Short term on the 4 hours chart, the red support will be hit for the 4th time soon where it will probably let go. That break would be a good spot to go short. Aussie's moves are synchronous with Gold and Copper charts here and here which have been in sideways action since 2011.
EUR and GBP hit their supports at the same time where I expect a bounce downwards. If there are good news - as if there can be any - from Cyprus during the weekend, the EUR channel may break up at the open. Also note the negative divergence on GBP.

Friday, 22 March 2013

Brent trend

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The 4 year trend in Brent oil is making its 3rd hit on the trendline. It may bounce here for a target of 125s initially and potentially higher later on.
Short term it looks oversold and potentially making a descending triangle which is an ending pattern. RSI has made several positive divergences. It is ripe for a bounce which is in parallel with the weekly chart above. Hope it helps.

Thursday, 21 March 2013

Breaking down

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All indices are alarming today. FTSE and DOW broke down their upward channels.
My long term chart on FTSE shows a nice reversal at the top of the blue resistance. Now it has also broken down the orange channel.
The downward channel EURUSD is still showing weakness. The red channel on EUR may get a 3rd touch on its upper wall today or tomorrow. After that, further weakness awaits.
Same is valid for GBPUSD but I think is one looks weaker in the medium term. The green channel may get a third touch before resuming downfall. I would sell the pound here with a target of 1.45-1.46.

Wednesday, 20 March 2013

More channels more fun

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Just when I thought my EURUSD declining channel broke upwards, Cyprus massacre changed everything. There is now a much stronger blue channel. It is severely oversold and there is a massive gap which occurred during the "weekend" trades. It will definitely be filled but when will it occur is anybody's guess. If they stop the wealth confiscation on the island before the banks open on Thursday, Euro may jump and fill the gap. Otherwise, the bottom of the channel is real deep.
GBP is doing well in the correction. We will see if the blue channel will confirm which will accelerate GBP annihilation. If not, we should hit the upper wall of the green channel soon.
Natgas smashed through the blue support and now is following the well established red channel towards 4.8-5$ area.
What surprised me is how much selling power was left in the coffee trade. It bounced off the declining support and made a lower low which doesn't look good for the coffee bulls at the moment. It is right at the brink of breaking the support coming from 2003 which I showed earlier here. It may be in the  making of a descending triangle which is an trend ending pattern. It is oversold but I don't think it would be wise to buy this before it breaks the downward channel.
Last but not least is the Nasdaq composite. I think the chart talks for itself. It looks very squeezed and stressed. It tried to break up the red resistance countless times after breaking it down in November 2012. There is a blue resistance which it has already hit and bounced down and then there is the green support which it will hit for the fourth time soon. We will see when it gives in and corrects a while.

Monday, 18 March 2013

GBP update

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The middle resistance of the green channel was broken up after the 5th hit. It is a very strong one. I have another channel candidate inside the green channel, which I showed with blue. It has to confirm with a hit&bounce downwards. The red upwards channel is not a very strong one and I think it won't last very long. If it does, it may take us to the upper wall of the green channel which we will hit around 1.5250. If the blue is confirmed and it resumes the downwards move, the first target is around 1.45 which is extreme but who knows. Pound is getting real smashed nowadays.

Monday, 11 March 2013

Channels for the eyes


The EURUSD chart I posted here is still valid. The downward channel has four touches on the support band which is alarming for shorts. It would pay to be cautious with shorts here also considering the oversold RSI. If it hits and bounces on the red "still-hypothetical channel" support, I expect a very strong rally.

As the UK finance based "paper" economy is crumbling, it shows on the GBPUSD. The 5 years support was broken 4 weeks ago and I showed what happened after that here. I was too optimistic to think that the green support would give in for a bounce to touch the upper wall. Instead, it continued its free fall to confirm a very solid double-decker channel. It looks very oversold and may bounce here. It would be a fantastic short when/if it touches the upper band.
Since my last post here, SUGAR has broken its first descending triangle and rallied quite nicely from 18 to 18.8. It may correct to touch or get close to the red support it just broke which would make a perfect entry point for a long. If futures or CFDs aren't for you, you can use ETFs with positions tailored for your account size and stress tolerance. Ultimately, I still expect it to break the green and orange supports. It may even disregard them because they are not confirmed supports without the third touch&bounces. The target is in the 22 area to break free. After that, I would just ride the wave until it gives me some clear signals of turning back down. This chart is one of my favorites in terms of depressed and squeezed price ranges. 
COFFEE, since this post, hit the  green channel and bounced back without making a new lower low. It is right back at the channel resistance which means it is quite eager to break it. The other option is to break the red support which would ruin this nice picture.
NATGAS long looks good since my last post here. It doesn't show any indication of a correction back to the red uptrend support. This is very encouraging to think that it may break the blue support at the 4th touch which would take the prices to around $5.00. I have been reading that many exploration companies are going bust at these prices. On the other hand, power and transportation industries in the US are switching to natural gas at a rapid rate. Soon, perhaps already happening, the supply-demand pendulum will swing to the short supply side which supports the long trade. Some call it the trade of the century. I wouldn't go that far but it certainly is promising. Hope it helps.

Friday, 8 March 2013

S&P almost there !

1 comment :
S&P was the first chart I posted. The market decided to hit the highest point of the channel and we are right there at the moment. I believe a correction is coming with a major high perhaps.

Wednesday, 6 March 2013

Selling EUR? Not so fast..

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There is a potential red channel for EURUSD coming up soon. It needs a "touch and go" to confirm. Considering that the currency is quite oversold, the chances that the market will regard this as a legitimate channel is high. If not, well there is not a bottom to this hole really.

On the dollar index, a channel doesn't get any better than this. Please note that this is on logarithmic scale. The middle band plays as support and resistance on several occasions and it may do the same again which is in parallel with EUR upward move. We will see. Hope it helps..

When will GOLD shine again?

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Probably you have seen thousands of gold charts by now. Mine is not distinctly different but it makes a point which may profit you handsomely very soon. The main channel in red, one support line in green and another support level in blue. All these point out to the possible inflection region which is marked with purple
Gold cannot be left alone without its currency AUD. In fact copper shows the same symptoms of a sideways correction. All three have been just standing there doing almost nothing since 2011. AUDUSD has a potential contracting triangle in the making and also a massive upwards channel but it needs a touch first. I admit this is a very long shot but I just keep this chart in mind for the next months.
In the short term AUDUSD has some upwards potential if it can break this up.

GBP mayhem

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It is astonishing how fast currencies can move without a warning. At 1.63, 2 months ago, everything looked just fine for the sterling. It went into mayhem mode after breaking down the blue 4 years support line also breaking the yellow support level. The momentum was overwhelming despite several positive divergences. This shows how useless the indicators can be on a real momentum move. I have been watching the blue support line for a very long time but I was expecting an upwards move to complete the triangle by touching the red upper resistance for the third time before coming down. It didn't. I think the ultimate target of this move is 1.35ish but that won't happen before this down wave takes a breath.
On the short term, the first green channel has been broken even further down with strong momentum. It has been trying to break through it since then for the third time. It is close. However, the blue channel can be the potential for the major downward wave but it needs a hit to confirm. Hope it helps...

Tuesday, 5 March 2013

NATGAS love..

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I have been interested in NATGAS since 1 year. I do not believe in the shale gas revolution which is claimed to keep the prices below $4 for the next 10 years. I'm extremely bullish on this commodity and it might be ready for the next leg up.

The blue resistance line will be touched for the 4th time very soon and most of them are broken on the 4th to my experience. The upward channel looks beautiful too. Please note that I use log scale in my channels on commodities.

Monday, 4 March 2013

Coffee time !

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I have been watching Coffee for the last 2-3 months. The downtrend looks very tired in the daily chart. I think it is a very good long potential from here. To my experience, the channels are broken 80-90% of the time at the 4th hit. And here we are on the 4th! It is safer though to wait until it breaks the channel. Also note the positive divergence shown by the blue arrows.

Supporting this long idea, the potential for higher prices is enormous looking at the weekly chart supported by the massive positive divergence on MACD. This 10 years support line is very strong and I would be surprised if it is broken considering the falling daily chart channel looking exhausted here.

All in all, both coffee and sugar from my previous post confirms higher prices which supports the secular bull market in commodities. 

Oh sweet sugar

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One of the most promising longs I have been following lately is sugar. The timing looks right this week or next. The blue line plays as support although I know it doesn't look perfect. I don't like to draw my lines with chalk. I rather prefer pencil and the blue line drawn with pencil has been slightly violated in the last 2 weeks. However, the positive divergences in daily and weekly charts still tell me that this can be a good long. I think the strength of sellers is diminishing and if the prices can break the red resistance, there is a long way to go up, first to the green and then to the orange resistance lines.

The weekly chart also indicates a massive support line all the way from 2003. I had to ignore the weird action in 2003 when the prices went to almost zero in one day. This support is extremely important this week and the next. Hope it doesn't break. Anything below 17.50 would make me think that this beautiful long picture is fading.

Sunday, 3 March 2013

Copper indicating something ?

1 comment :
To most macro traders and investors, copper is one of the indicators of economic growth. It has topped at the beginning of 2011 and has been in sideways move since then. Although it looks corrective, last week's move broke the 4 years uptrend shown in red on the logarithmic scale. I use logarithmic scale when the prices move 3-4 times in a trend. The green small sideways triangle broke down although in uptrends, sideways triangles are seen as bullish setups. I thought it would break up but it didn't have the power and it broke down this week while breaking down the uptrend as well. It is a major move. However, this could lead to a larger triangle in blue. I expect it will touch the bottom line of the triangle before jumping to touch the upper line together with the support line of the red channel. If it disregards the blue triangle then there is a whole lot of space for the prices to go down further. 

Below, I will also show how the normal scale prices formed a major uptrend which broke down in Q3 2011. There is major difference between normal scale trends and logarithmic scale ones. I always check both of them especially in commodities.

Saturday, 2 March 2013

First things first... S&P500

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Ok I couldn't wait till tomorrow so here is my first chart for all of my fellow traders and trader wannabees. The unprecedented rally on S&P in the last 4 years formed an immaculate channel which I showed with red. The way I trade channels is by anticipating them before they occur. Surely this is a risky way but once you get an eye to capture the channels, you start seeing everything with channels. The last major leg of this 4 years rally started at the beginning of the 4th quarter of 2011 from 1075. Precisely September 1, 2011. We are now at 1517. If you could draw the red channel with the upper boundaries just touching the prices there as I plotted in the picture, you could have made a very sharp shoot right at 1075. I will demonstrate these sorts of "channel potentials" in my future posts.

Very steep channels such as the red channel usually induces some inner channels. In this particular example, I can see the blue channel as one of those. You can immediately notice that I also use some inner support and resistance lines inside each channel. Hence, a channel is not plotted by only upper and lower bands but also with its inner dynamics. Sometimes the middle line of a channel plays an important role and sometimes the rims come forward as in the blue channel. 

Usually and magically, the channels behave like magnets. The markets are so determined as if they "see" the bands of the channels. They have to go and touch the bands before reversing. I have seen it so many thousands of times on every time frame, I don't question this phenomenon anymore. If one day someone proves why and how the channels form so perfectly, that person will make more money than god.  

So here comes my prediction. I think in the short term S&P is topping. 
Considering DOW really wants to make an all time high before reversing, maybe one last push will come to touch the very upper boundary of the blue channel which is around 1545 at the moment. I do not expect an all time high from S&P. Even if it reaches there, it will be a perfect triple top and shorting from there is worth a fortune. When it reverses either now or after reaching 1570s, I expect it to come down real hard and follow what I showed with the green arrows. 

I will keep posting my picks on commodities, gold and FX. Wow I really thought it would be easy but it is not. It takes a lot of time but it's fun. That's all for today.

Hello world !

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This is the first heart beats of my trading blog. I don't really know what I'm expecting from this. I just felt the need to share my thoughts and be a bit more interactive. I welcome any comments. Hope it helps traders and trader wannabees.