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Nic Lenoir's Charts To Keep In Mind Into Next Week
From Nic Lenoir of ICAP
Charts to keep in mind into next week
A brief word on stocks: Ever since the VIX posted a reversal outside the lower Bollinger band I am very cautious and bearish on stocks. We tested this morning the key upside level in S&P and so far rejected it. I have included the chart of the Nasdaq here to show that a weak trading session Monday would complete an evening star on important levels. The Shanghai composite is also sitting on a the 50- and 100- DMA ad a break would be very bearish. So I stick to my bearishness and will look for a break of 1,105 in S&P futures to confirm downside acceleration.
In Fixed Income Monday morning the 10Y US Treasury future bounced right on support at 123-00 and has moved to test the resistance of the downtrend channel. Recent weakness in 10s was a correction, the move is clearly not impulse, and a break above today's highs will trigger more upside in a hurry. This view is comforted ever since we saw my downside target in Bunds at 129-10 yesterday morning.
I will end with Gold. Disclaimer first since everybody out there I speak to is long and loves the trade: I love the fundamentals of Gold, I do think true value is around $5,000, and central bank policies around the world are doing nothing but make Gold as an asset more attractive. HOWEVER, technically the picture is horrible here. We tested a key resistance daily, divergence in terms of momentum is massive both daily and weekly. Hourly we have tested the channel resistance too. I expect we will pull-back and at least test 1,250. If this breaks key uptrend support is around 1,190 but given the magnitude of the bullish wave which appears to be ending here downside potential could well be greater. Don't hate the news and focus on finding a price at which to buy some on the pull back!
Good luck trading,
Nic
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Orly, you were a hero this week.
Wow! Right outta the box and I just knew that no one at all read the thread. Thanks, Newstreet. I do hope you made a ton of money. :D
I will say that the next few weeks are going to be tough trading, though. If you don't have the stomach for it, stay out. Or if you're not able to babysit your trades, there is a new trend-wave coming that is going to be much, much easier on the emotion and psyche. My best advice right now: clear all your positions and wait for it.
There is some severe stretching that is going on in the rubber-bands we call the Euro crosses vs. the SPX (read: risk-appetite...). The SPX seems almost desperate to rise, while the Euro seems desperate to drop through the floor.
My gut tells me that there will be a rare but distinct decoupling of the risk trade and typical 4X risk crosses, such as the EURJPY, which heretofore have been joined at the hip. After Friday, the 17th of September, the decoupling mechanism is fully locked and loaded (I'm fairly sure, anyway...), meaning that the SPX should still rise to my target of about 1155 (thanks to Charles Nenner for the confirmation...)- again on fumes. I expect the crosses to reluctantly listen to their muse (risk...) and be befuddled by their fundamentals (Portugal and Hungary/Bulgaria...). Therefore, there will be sideways trading at best; whipsaws at worst. Either play the weekly charts or the ten minute. Everything else, avoid like the plague.
The safest bet to play now is for a longer-term drop in the AUDUSD pair. It is still making highs, this time into limbo, as the 100 % Fibo-retrace has been breached and the "risk-on" trade drags the pair kicking and screaming higher than one would have thought possible. Accumulate short positions in the Ozzie/Dollar and just let them ride for maybe the next three to five years. Don't worry. Keep selling. It is going to be one slow drag, but fruitful nonetheless.
Thanks again for the mention. That was nice. :D
Olexsandra
I missed your thread Orly so am curious to read it. Thx.
Usually, you may look for really, really bad 4X trading advice on a Sunday night (which is early an Japanese morning...), preferably sponsored by an article from Bruce Krasting. He always has a fresh twist on things and truly thinks outside the box.
Loves it!
:D
The new trend line coming, could be stronger dollar and rising SPX?
That is not very likely.
Look at the weekly chart of the SPX and you will see that the Index is trading currently between the 50% and the 61.8% Fibonacci retracement levels. It looks like the highest it may go in this instance would be to about 1214. It just seems unlikely to go that high.
More likely, the SPX will rise to the 50% Fibo-retrace inside the longer-term Fibo markers of 50% and 61.8%. Halfway between those longer term levels takes the SPX to about 1154.66.
Expect a blow-off top to go parabolic over the next several weeks. It will be interesting to see what the reaction is from risk trades, such as the EURJPY. I think the AUDUSD follows the SPX in lock-step...but I am not sure. Frankly, I don't know what to expect...but momma needs a new pair of shoes. Know what I mean?
:D
Gold could tank to the lower trendline and still be in an overall channel upward. Not a big deal. Unlike equities, which are gasping like a fish thrown on to the pier. Monday should be fun :)
I thought opex today was supposed to be fun. Looks like nothing but computers trading.
Thanks Nic. Do you have the point spread on the Super Bowl yet?
NFC favored by 3.
i will be watching 2560 on shanghai (http://www.google.com/finance?q=SHA:000001), stronger yuan is bad for chinese stocks.
Wouldn't surprise me to see a brief shank back down to the 50-day and 200-day.
That will send everyone fleeing back into Treasuries and put buying will go wild.
But it seems like the market is getting stronger, not weaker.
Nasdaq is still leading, and the Summation Index is still in an uptrend.
http://stockcharts.com/charts/indices/McSumNASD.html
Seems like every pro trader is bearish, and they are already loaded up 100% short to profit from the oft-predicted Sept. - Oct. decline.
The dumb money is position long LARGE
"the American Association of Individual Investors that the percentage of bullish investors had suddenly soared to 51%. That’s usually a big warning signal."
http://www.zerohedge.com/article/morning-commentary-art-cashin
This has always be the way of the land.
Just like the market was strong going into Aug/Sept 07, with the real economy crumbling underneath. Just as today, but this time interest rates are zero, the Fed balance sheet is triple the size, most americans are poorer, golding hitting all time highs, Japan intervening in markets, half of Europe on the verge of defalut.
We have no volume, retail pulling out in droves(they finally realize the ponzi it is), plus the demographics working agianst them.
Housing still in the dumps, we have mortgage rates at all time lows and still no one is buying, that alone speaks volumes.
We have credit contracting in a economy built on credit expansion.
The S&P earnings next year are still near all time highs at $87 with no revenue expansion to speak off. The yoy benchmark going forward is damn tough, we still have roughly 3.5% GDP growth penciled in next year. How much cutting can companies do?
This is a bear market rally, we are still in a bear market. YOU DO NOT RALLY LIKE THIS IN A BULL MARKET. You should know better RoboTrader.
Ya sure seems to me the market is getting stronger with a 8-10% rally in 10 days. I think we can go up another 20% by end of Septmember. LOL
Stick to posting pictures Robotrader.
TELL IT!
Yeah, I agree. NYSI says another week or so up at least. Economy is crap, but the market follows its own rythms. I remember reading posts in April from long-time bears who finally threw in the towel and went long. Looking for that signal again to buy any serious short-side exposure.
Where are the boobies?
Not counting the stock traders...
TBT gaps at 30.5 (bond bullish) and VXX gaps at 28 and 80. Something's gonna give...
True. But the tech bubble taught us, that half the world could be long (at a rare inflection point ) and half could be short. And when the Exuberance/Manipulation eases, it all ends the same. In this case, Down.
The main difference at that time? Credit was expanding vs contracting as in now. And people weren't underwater on their largest "asset" (not sure it should be called that when people don't actually acquire any equity). I think that does portend a very different timeframe for results. But I agree when it's over it's over this time...the relief rally of "change" will officially be dead. I wish the market had a reason to turn around as I wish we were actually creating jobs and dealing with the housing crisis, but as was apparent 3 years ago if you don't actually deal with the problem it just continues to fester and the next time it shows up it might just kill you.
Chart: SPX
It may be time to put a fork in it; it's done.
http://www.screencast.com/t/MDI1NGE5ZG
I don't know technical from shit but I still think you are an absolute bone head.
If the definition of bone head is a person who posts charts that only show upward movement then, yup, he's a bone head.
@RockyRacoon
perfect..
thank u :)
Sorry, Nic. I appreciate your analysis but you are dead wrong on gold. The monthly chart is great and today's close made the weekly chart fantastic.
Gold closed the week above the previous weekly intra-day high of 1267 from the week of 6/21. This is extraordinarily bullish.
Regardless of all this TA BS, the fundamentals of gold will rule the day. The Comex is broken. They are clearly out of silver and the world is recognizing that they are likely out of gold, too. In a situation like this, throw the TA out the window. The gold market is taking on a life of its own. Gold will soon trade to $1350. It will then trade to $1500 before 12/10/10.
I pretty much agree but would love to see a quick sharp pullback (as in the 08 margin call) to load up with more. Nice hat...
Nic is right, I am afraid. Follow the currency pair most easily associated with gold (the base and other precious metals, too...) and that is the Australian Dollar. Look at it versus the USD and you will see that a strikingly similar pattern that developed in January of 2008 has developed now from the middle of August of 2010. The results are not at all pretty.
Gold will follow the AUDUSD cross as the Australians finally come to grips with their own bubbles into the Spring of 2011. The Ozzies will find themselves in the same predicament the other "Western" economies have encountered, namely that their economy has been built upon wild excesses in real estate speculation and relatively easy money. While the bond market expects that the AUD will have to raise interest rates (as do Goldman-Sachs economists...), the government will find this impossible to do facing a sluggish economy that is going to get worse before it gets any better. (Same for the Canooks, btw...) "No rate rise for you, Mister!" That means any appreciation in the currency is null and void from that point on.
Gold may very well trade at $1500/T.oz in December but that may well be it. Watch the Ozzie crossed Dollar: when that one begins to really move to the downside- i.e., it breaks the long channel- it is look out below. Sell all your gold when you see the channel fail. (I am very popular on ZeroHedge with that comment, I'm sure...)
:D
So, are you telling me to sell my gold and buy paper at 1500? If you're wrong, will you help pay my retirement?? Of course you will, we're all here to take care of the poor...
Dude, get a grip. I don't owe you shit.
Get over yourself.
I see you speak French..nice. Guess I hit a nerve.
I bought most of my Gold and Silver the last time the Ozzie was .93
If the Aussie market crashes and the AUD again goes to something like .70 I will hope Gold (if it falls) is at a much slower rate, I will still win. I'm pretty safe with this either way.
I think you're correct in that way, Kina.
The drop-off is not going to be nearly as severe and will take much patience to play the trade to its maturity.
Yep, gold juniors are screaming 'buy the dips' now. And as someone who remembers the gold-bull of '96 (remember Bre-X?) I can only say - don't miss out on a really good gold-stock mania - they're as good or better than dot-com.
hello zero hedge it's my first post, you can relax i am not a robot. weel I ask you a question : Imagine that you discover a trading methodology who give you 30-40% each year since 100 years and will absolutly repeat the same while the grid govern the humanity what you do zerohedge ?
a) you put 10 box because you 're young and wait 50 years to build
b) you take 1 M$ because you're not young enought and explose the financial system with 10 years?
c) you did nothing because you dont want to burn into the hell
d) you continue to serach because you want to begin the game only from a 100% return strategy
oh oh oh
Dude, the translator app your using sucks.
yes and i'm worse from english to french imagine the fight
e) Keep taking the tablets.
Bonjour, mon ami de Vietnam!
It is nice to have you aboard and, I feel I can say for most everyone here, welcome to ZeroHedge. There are no robots here. They would look far sillier than you do, I am afraid. /:
Your question pre-supposes the impossible. There is no such system. There are no guarantees that your system will work 70% of the time, much less 100% of the time. It is just not going to happen.
So, if you came here to sell such a system to us, then you are a fool. No one here buys the others' words, much less their robots.
Here's the key:
Flip a coin. You win about 50% of the time. You lose about 50% of the time.
If you can make the winners take twice as big as the loser's take then guess what? You make twice as much money. Simple.
You will win. You will lose. Learn how to thrive in that environment.
:D
If I understand you correctly, you have a profitable 'edge' that returns consistently. With money management, why not - you could extract a good revenue stream from it. I'd consider relocating to a capital-gains free territory (yes, they still exist - better hurry!), and rock that system while taking ALL your cash home.
Just an idea. Most locales that fit the requirement also have an 70 - 80F average climate in the winter, too :)
I ain't sayin'...I'm just saying.
Unfortunately, I still live in that hellhole called "Texas."
Ha!
:D
Nicest home and hunting Iv'e ever owned was in the big thicket or piney woods of east texas. Never should have sold that place.
A few thoughts to throw into the debate over where risk is skewed;
The primary risk to the short side (imho) is the FED........through its extensive interventions which have distorted natural price discovery.
PDs, through the FED's printing and swaps for toxic assets have signifcant cash on deposit with the FED..... there is nothing stopping the banks from deploying that cash into a broader array of assets including equities............$2T can be levered a long way, justified or not.
The BOE has already hinted today through Posen that 'heavy credit' purchases are a possibility as a way to stimulate. Guess where Posen was educated? Although a memeber of the BOE, it happens Posen is an American. Posen seems to be signaling there are at least 2 central banks on the same side. I am guessing there are more than 2.
The FED, as do other central banks and sovereigns have a lot at stake and I doubt are about to rollover for the sake of fundamentals, let alone let something as trivial as fundamentals get in the way of agendas, especially with the US elections looming.
An argument can also be made for the possibility of an inverse HS pattern for the S&P.......some have made it already.
My guess is central bankers are very aware of the technical patterns hinting at the possibility and consequences of selloffs, all of the negative fundamentals aside.
Most people (forgive me) have not a fucking clue, which is also in the FED's favor as long as the FED can 'sell' it, which I am guessing is a plan already worked out.
Maybe I am wrong about the risks here, but I do not think the situation is so simple and trading is about being on the right side of price and part of that is assessing where the risks are skewed.
Your idea is that the Swiss and the Japanese central banks agree.
Your other two are the Bank of England and the Regional Bank of Australia?
Where am I wrong?
Orly, I was implying the FED and BOE to start, but I think all central banks have a vested interest in NOT having an unwinding, let alone a disorderly unwinding in the form of a runaway selloff.
I think central banks will collectively defend against it........the selloff may happen and if it does then I will be short, just like I was short up until 4PM of Tuesday August 31 when there 300,000 EMini S&Ps futures contracts bought bewtween 3.59 and 4:15PM.
Ask Nic about that if you don't beleive me.......or RobotTrader.
Back to the central banks; just look at the recent Basel accord........
With $500 Billion (at least...) in FX swaps already on the books at the BoE, it can be argued that the Fed and the BoE are one and the same. It is hard to imagine that the Central Bank Club would deliberately exclude the Bank of Japan and the Swiss National Bank from their machinations.
Yet, listening to the rantings of Kan and Hildebrandt, it is as though the Fed took their ball and went home. Why are the CHieF and the Yen at extremes while the DXY (US Dollar Index...) is still trading in its range? Are they just being nice to the British or is there an undercurrent and agenda that we don't readily understand?
The Euro is ready to drop through the floor, which would skew the DXY (thus skew the price of oil and gold...). Therefore, there must be a re-balancing act about to take place, either with the Yen or the Swissie, or both. I suppose that if you can guess which way they are going to play it, you could do very well trading 4X over the next several months. Or, you can get creamed.
It is hard to know...
What do you think this means for the DOW, NYSE, SPX?
Ramp to ~1155. Please see above...
Hey, wait a minute, youse guys. I may have just discovered a tell:
The GBPUSD H8 (thanks to Netdania...) has developed into a classic "cup with handle" formation.
My personal bias in looking at cup with handle chart patterns is that there is usually a "dent" in the cup. The dent will appear either in front of the cup or in the back, toward the handle. The size of the dent can give you a clue as to the size of the impending move subsequent to the completion of the formation.
Also, the placement of the dent is quite significant. If the dent is in the front of the cup, then the pattern almost always fails to the downside. If the dent is toward the handle, the pattern has a much better chance to react toward the upside after completion.
In the current pattern of the GBPUSD, there is a rather sizable dent in front of the cup, meaning that downside pressure from these levels is almost assured and that move could be pretty big. The chart is making the handle now.
If the Cable breaks the 1.57 level, get long Pound Sterling hand over fist. The upside target would be 1.63- but that doesn't look like that will happen. Instead, expect the pair to retest recent lows at 1.5319 on its way to 1.49.
If the formation develops long, then that would be "good" for the SPX. If it fails, then that would mean US equities would tank. We'll know in a couple of days.
:D
Thanks for the further explanation.
Nice posts, Orly. I'm trying to understand your post 589584. The "Cable" I assume means the GBPUSD. That being the case, I see a cup and handle where the cup has a dent in it on the weekly chart going back to Jan 2010, so that the handle is forming from the beginning of August. By "breaks the 1.57 level" do you mean that the low for the day or week must be above 1.57? Because it has already pierced that level yesterday. Pardon my ignorance but your posts are so worthwhile that I want to make sure I understand. Perhaps you could attach an annotated chart when explaining chart-related issues? In any case thanks for your posts.
Thanks for the kind words, Escapeclaws. I have no privileges to post here but anyone can pull up a chart.
Yes, the Cable is the GBP, or Great British Pound Sterling. Looking at the weekly chart of the GBPUSD pair, you are right in that there was a cup with handle formation from about December 2009 to about August of 2010.
Notice, when the long-range Fibonacci retracement level (as measured from the top at 1.7036 made around August of 2009 and the low of 1.4225 about May 24th of 2010...) hit the 50% retracement mark (the Brits seem to like 50% retraces a lot...) at 1.5631, the move stalled and fell back below that critical level. That killed the formation.
The chart then bounced off of the 38.2% retracement level to challenge the 50% Fibo level again. With the pair currently trading at 1.5621, it is only ten pips below the critical 50% retracement level- but moving lower.
The candlestick pattern here, though, has kindly given us another clue in the form of a "Pinocchio candle" (a pinbar...) that was formed on September 17th, which pierced the Fibo retrace and rose to 1.5726. They are called pinbars because they lie to you.
That is why I would say that a sustained move (in other words, not another pinbar...) above this level would confirm a move higher off of the handle of the formation. An up candle close above the pinbar would do nicely.
Thanks for the clarification, Orly. I'm learning a lot from your posts.
Thanks...
Chart: GBP/USD
Doesn't appear that the Handle will have a chance to complete the pattern; there's a channel down.
http://www.screencast.com/t/YjQ2NTI5ZmEt
Chart: 6B
Also, Cable futures appear to be backtesting the rising channel from which it fell.
http://www.screencast.com/t/MGIyNjViNDYt
Interesting charts. Thanks for that.
My idea is that the back of the cup has already formed at the 50% Fibonacci retracement level at 1.5631, whereas you have the front of the cup about 1.5961, some 300 pips higher. It was a small cup- from August 16th 2010 or so.
Having bounced off the 38.2% retracement level, it has rounded into a cup back to the 50% trracement level. The pair was unable to hold the level before and it looks to be failing now.
:D
Chart: SI
This weekly chart, showing multiple Cup with Handles, makes me rather bullish longer-term.
http://www.screencast.com/t/ZTlmMzBmN2Qt
Uncle Ben fries rice and Traders.
Be careful when you look at the Shanghai Composite from a technical perspecitve. The current theme in the Chinese stock market is playing with the small-caps while ignoring the large caps. Just look at Dalian Yi Qiao Marine Seed (002447:CH) and you will know how crazy it is. The Shanghai Composite has been trading between 2500-2700 for more than a month but many small-caps have doubled or even tripled.
Shouldn't that be potentially even more concerning?
what a asshole ,,,#technically the picture is horrible here.
well Sir,, gold outperform each and every asset classalst 10 yy..
I guess each and every time there was picture ' technically horrible'
so what who cares ???? WHAT IS HORRIBLE IS runnign 1.5$ trrln per annum..
that's horrible..
thats why i hate tech.. they dont have a clue..
alx
I found lots of interesting information here. I love zerohedge.
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