Value of Perfect Information

Look at what news says and what chart says….. Now what does that mean. It means we got bottom this morning/today…….

This post is a follow up to the Euro Bounce I mentioned a week ago which has completed as it moved exactly to the area I had forecast.

The S&P has also moved into the area I had picked where I intended to be completely out of my longs.

Is it time to short stocks?  Perhaps with tight rules, but I was positioned long and for now feel comfortable taking profits here at the very least.  I have a bearish bias, but realize the market could make a push higher.

The dollar has pulled near its 50 day moving average which has served as support on numerous occasions.  These bounces have been accompanied by drops in the euro and an accompanying drop in stocks.  This relationship seems somewhat uncoupled as of late so caution is advised for any short taken here.

I am expecting at least a short term pull back from here.  At the moment, I am in cash.

Over the years we have seen the stock market make some pretty exciting moves for share holders. This year alone there have been some interesting events unfold causing wild market swings which most of us did not think could happen. Things like countries going bankrupt and the May flash crash. Also the BP Oil well leak which looks as though its about to kill not only businesses around the world but a large population of animals and fish which our planet will never be able to get back… It’s been a crazy year!

It sure would be nice if the financial situations between all he countries could be resolved, and if we could have some proper regulations on banks and the financial system to minimize fraud and manipulation. From the looks of everything we have a few years still before things get sorted out, fixed and some what stabilized.

Below are some charts showing where the Dow, Gold and Oil are currently trading and my thoughts on them.

DIA – Dow Jones Industrial Average ETF – Daily Chart

The past 12 years we have seen the DJIA go through some large bull and bear markets providing those with trading experience to generate large profits in both the bull and bear markets.

Recently we have seen the DJIA pullback and test the key pivot point and has started to bounce. Although this price action is positive I have my doubts about another bull market rally because of how the chart looks. I focus most of my analysis on chart patterns, volume and market internals. These allow me to monitor the overall heath of the market on a daily, week and monthly basis. Using these techniques I am able to pull money from the market consistently.

This year we saw some extremely heavy selling in May which could have been strong enough to shift the trend from an up trend to a down trend. I call these large volume candles Get Ready Spikes. If they are green then we are looking for higher prices but when they are red it means distribution is starting and lower prices could start to form in the coming months.

The DIA chart below looks to be forming a very large head and shoulders pattern which is currently trading near the top of the right shoulder. This pattern is very bearish and points to much lower prices in the next couple years if the major support level (neckline) is broken.

GLD – Gold Exchange Traded Fund – Daily Chart

The chart of gold shows the same cup and handle pattern which I have been talking about for a while now. Last week the price of gold made a new high breaking out of this pattern. We could see the price of gold start to work its way up to the $1400-1500 level over the next 3-6 months which calculates to $140-150 on the GLD etf.

USO – Crude Oil Fund – Daily Chart

USO oil fund has been trend down for a couple months and recently put in a nice bounce from the May low. I feel as though oil is forming a bear flag and could head lower in the coming weeks. Until it breaks the key resistance level traders must be cautious if they have any long trades right now.

Weekend Dow, Gold and Oil Trading Conclusion:

In short, I’m bullish on stocks for the short term and think we could retest the April high in the next month or two. But after that the market could roll over and from there we could see much lower prices. Or we could see the indexes breakout and start another leg higher… During volatile times like we are in now… we must trade with caution until the overall health of the market clearly indicates the direction of stocks. Until then focusing on low risk setups and taking profits quickly is the safest trading strategy.

Gold looks to be setup for a strong move higher. I am hoping for another dip to shake out some investors before it continues its march upwards. Oil on the other hand is trading near a key resistance level. Only time will tell if it can break through and start a rally. If not then we will see the market struggle.

If you would like to receive my ETF Trading Signals take a look at my website: www.TheGoldAndOilGuy.com

On the 4th of June we produced this chart below:

At the time the market was declining from nonfarm payroll numbers. The market was at 10000 and we said the market must decide if it can reverse within the next day or two or it will stage a decline with the 10000 mark being the pivot.

We didn’t reverse so we said the market would decline further!!

HOWEVER whilst all the pundits were talking about a significant decline and a crash with it – we said we don’t expect a crash or market to have a significant decline and that was because our expanding triangle we had devised:

So then the market staged a decline and THEN we started talking about 10400!! Not many were giving it a mention, although a few selective pros were.

Of course today you can see what has just happened. The market is expected to back off from here or could we break the triangle higher?

This is A VERY SIGNIFICANT time for the U.S. Stock markets.

I am Ajit Singh, the writer of this article who started work with the financial markets from a very young age of 17 and this is our website: www.tradingmarketsignals.com – -TMS’.

If you like what you read and would like to gain insight on position trading style signals on five major markets. Or perhaps you want to add clarity to your short term trading with our signals which are fired via email and soon possibly by a live chat room platform then you should come on board at wwww.tradingmarketsignals.com and catch the unbiased action with us professionally.

http://tradingmarketsignals.com/#/subscribe/4539058094

For the Bottom

GS still rejected on its tl and SPX still rejected on resistance….. SPX/VIX last night was up against resistance and we saw VIX bounce off of channel showed last night… Nothing has changed and the pattern now showed bearish with way it was rejected off of high last night as shown in previous post. Identical top to the one shown at the current high made in April and then similar path and style. I think we now stand a possibility of getting that capitulation bottom.

VIX Juice pass the steroids

Past to Present- a pattern?

SPX/VIX

SPX

NDX

Stocks sit this weekend at the precipice. Conditions are ripe for a waterfall decline. This does not mean there will be a crash starting over the next few weeks, so please do not go out and short the farm. What we can tell you is the risk of one occurring is higher than normal, that conditions that preceded prior stock market crashes exist right here and now.

I believe that short-term we are now in a high probability zone for a stock market crash. Further, I believe this catastrophic Supercycle wave (C) down leg of the Grand Supercycle Degree Bear Market that started in 2007 will see a series of stock market crashes over the next 3 to 5 years. Further, I believe that when all is said and done, the Industrials, the S&P 500, and most major domestic and international stock indices will be near the value zero. This belief is based upon the technical analysis patterns and indicators that we follow, and is not some wild speculative opinion. This is dangerous ground we stand on this weekend.

We have been waiting and watching for a Hindenburg Omen to surface, that would warn of a possible stock market crash. We have not had a stock market crash over the past 25 years without an H.O. However, we noted several months back in these pages that it is going to be very hard to get a Hindenburg Omen until deep into 2010 because prices had risen so far, so fast above a year earlier’s lows that it would be nearly impossible to see the requisite number of New 52 Week Lows on the NYSE to appear at the same time we get the requisite number of New Highs. We posited that did not mean a stock market collapse could not occur without an H.O. this time, that this time could be the exception to what we have seen over the past 25 years.

But a fascinating development has arisen that identifies a similar condition in the market that the Hindenburg Omen does, which increases our belief that in fact we could see a stock market crash start and continue over the next several months. The whole point of the Hindenburg Omen, the essence of what it is about, is to identify an unhealthy market, on the brink. I will quote Peter Eliades of stockcylces.com in his assessment of why a Hindenburg Omen identifies dangerous stock market conditions: “The rationale behind the indicator is that, under normal conditions, either a substantial number of stocks establish new annual highs or a large number set new lows — but not both.” When both new highs and new lows are large, “it indicates the market is undergoing a period of extreme divergence — many stocks establishing new highs and many setting new lows as well. Such divergence is not usually conducive to future rising prices. A healthy market requires some semblance of internal uniformity, and it doesn’t matter what direction that uniformity takes. Many new highs and very few lows is obviously bullish, but so is a great many new lows accompanied by few or no new highs. This is the condition that leads to important market bottoms.”

Now pay careful attention to Peter’s thinking. He is absolutely right. An H.O. is not magic. It is a reasoned indicator that identifies a deeply unhealthy market that is not conducive to future rising prices.

Well, get this: There is another indicator we follow every day which has spelled out the precise market condition as a Hindenburg Omen identifies. That is the number of 90 percent up days and 90 percent down days we have seen over the past seven weeks. Are ready for these stats? Amazing. Since April 16th, 2010, there have been eight 90 percent down days and five 90 percent up days. 90 percent days are panic buying or panic selling days. This is highly unusual market action. And it indicates as Peter says about the H.O., “the market is undergoing a period of extreme divergence . . . And such divergence is not usually conducive to future rising prices. A healthy market requires some semblance of internal uniformity, and it doesn’t matter what direction that uniformity takes.”

Do you see? The high number of 90 percent up days interspersed over the past seven weeks is botching up the uniformity we would see in a normal corrective downtrend — which would be a good thing for the market because it means a base building bottom is approaching. But there is not any uniformity to the decline from April 16th. Panic selling followed by panic buying followed by panic selling, etc… In other words, we now have the precise condition necessary for a stock market crash to occur over the next few months. This market has flies on it.

The most the Central Planners can hope for is an orderly decline over a period of weeks or months instead of a couple days of flash crashing. But a couple days of flash crashing where prices drop 2000 points over a few days cannot be ruled out. We believe that by the end of 2010, we would have seen stock prices fall at least 20 percent below where they are this weekend. There will be bounces along the way, but we have entered a period of time where lower lows and lower highs will occur, and that period of time could last several more years, into the 2012 to 2014 time period.

You can read an article on the theory and history of the Hindenburg Omen in our Guest Article section at www.technicalindicatorindex.com

There are several other troubling developments at this time: Head & Shoulders tops that started back in November 2009 in the major U.S. market averages are nearing completion with downside targets that require a crash to get there. This weekend, we show in our newsletter to subscribers at www.technicalindicatorindex.com something else that is interesting, a possible fractal pattern of the decline from October 2007 through 2009 may be occurring from mid-April, that is a declining wedge with a waterfall conclusion.

Check out our June Specials, good through Sunday, June 6th, 2010, including a fabulous 13 month offering, only $259, a little under $20 a month, or 2 years for only $459 at www.technicalindicatorindex.com. We added a 3 months for $89 budget friendly deal this week.

If you would like to follow us as we analyze precious metals, mining stocks, and major stock market indices around the globe, you can get a Free 30 day trial subscription by going to www.technicalindicatorindex.com and clicking on the Free Trial button at the upper right of the home page. We prepare daily and expanded weekend reports, and also offer mid-day market updates 3 to 4 times a week for our subscribers.

“Jesus said to them, “I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day.”

John 6: 35, 38, 40

Note the three 5 to 6 day rallies that end in “pennant ” formations. The latter the most extreme.  This is NOT the sign of healthy accumulation. 

 The unexpected Wave II counter trend rally that began mid-week last.  Is proving extremely ephemeral and tenuous to say the least.  The Moody’s downgrade of Greece’s debt did not help market mood, although averages have rebounded for the moment. I had wanted to advise  taking profit of 1-3% on our recommendations: FCX, XLE, RTP,  by Wed. Before  the options expiration this Fri. Now however, the prudent man move is to exit this low volume rally and await re-entry of short positions for the trip to Dow 9600 and beyond!

A short while ago our systems have just entered short term sell signals on the Dow Jones 10320, GBP/USD 14785 and Euro 12297.

Members have received emails and updates on all the action so far. At the open of activities on Sunday Globex action members were informed how prices could continue moving higher in this way in which we stated that TMS would stand aside during the Asian and European session. The U.S. session has begun and the prices have aligned nicely with our sell areas for the short term system sell signal triggers.

We would now expect a pullback to materialise soon but we would allow for price action to unfold for the next few days, as prices can reach higher elevated overextended levels in which case the TMS system may trigger another sell signal should prices move higher and if the criterion is met.

Currently the markets have halted at near entry levels in which recognition of overextended prices on LIGHT VOLUME is taking place. Either markets will simply correct from here or they will grind higher to produce more euphoria about a breakout of short term activities in which talks of back to the highs will start to surface. We don’t expect markets to breakout before a pullback is achieved.

Of course our members are kept posted with any technical developments on price action, as it occurs.

The above signals don’t need to pull through as this is the work for Monday in which the whole week is left to play, although we would expect them to!! Last week however we made over 600 points on short term signals and these signals were only triggered from last Wednesday onwards!

I am Ajit Singh, the writer of this article who started work with the financial markets from a very young age of 17 and this is our website: www.tradingmarketsignals.com – ‘TMS’.

If you like what you read and would like to gain insight on position trading style signals on five major markets. Or perhaps you want to add clarity to your short term trading with our signals which are fired via email and soon possibly by a live chat room platform, then this would be the best time to join us with our annual membership offer that unfortunately expires on TODAY 14th June 2010, in line with the U.S. stock market close on Monday.

http://tradingmarketsignals.com/#/flash-crash-price/4540799314

Until next time, remember:

Trading Market Signals
…the hub of unbiased technical analysis!

When you’re trading short term timeframes it’s important to have a check of what the long term timeframes are doing as somewhere along the line they interlink with one another providing critical levels and trading triggers.

We’ve been catching the short term moves with ease last week using our short term timeframes and with our TMS Strategy which has been catching some nice position signal moves using longer term timeframes.

Today we’ll look at the markets using daily/weekly charts to see what unbiased messages they are signalling. We start with the Dow Jones:

Dow Jones Industrial Average

Firstly we look at a Four Hour chart below just to signify the range that we’ve been in for nearly a month:

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As you can see the market has been ranging whilst producing some volatile moves but no clear cut direction on the long term context of things has been decided by the Dow Jones.

Below you can see a daily chart:

Larger Image

The red intersecting channel shows where this range is actually coming from. The SIGNIFICANT thing to note is that the market is showing problems at the same area on both timeframes. Whilst the short term timeframe shows problems at current prices and upwards to 10330 the daily also shows problems in the same area with the red intersecting channel.

However the major recognition that needs to be absorbed is the 10400ish mark. The short term timeframe shows the area will produce problems as the channel widens. Look at the daily chart ‘dark maroon line’ which ALSO shows problems at the same area.

Both charts show differing timeframes, both have different unbiased technical analysis painted over them and uniquely both flag up the same area of concern using varying analysis.

So for the week ahead the 10400 mark may be too tall for the market to reach and if we do get to it then THIS is the mark that the market must KILL in order to see higher prices. If the market moves higher then this mark, then you have to admit the case for back to the highs or new highs for 2010 would come alive, just as we’ve been saying.

When the market hit 11200 we stuck our neck out at the time and labelled it as THE high in which we stated prices should start to decline from here. BUT many pundits, analysts, commentators and traders simply forget some basic elements. When tops and bottoms are formed prices RARELY, in fact hardly ever react straight from there to produce ultimate tops and bottoms. The tops and bottoms are formed; markets produce them as a ‘formation’. When these formations take place for tops and bottoms markets can go back to the highs/lows or reach near to the highs/lows or simply take them but only as part of the formation. So whilst the prices of 11200 is a high for 2010 you cannot say it is the HIGH as at this moment in time it is fair to say the price action is in a formation phase of this long term top in the making which means back to the highs or near the highs or new marginal highs cannot be ruled out.

In conclusion though the market may face a tough time even reaching 10400ish let alone taking it out and in which case the range may last longer before we have a chance to spurt higher. All eyes on this area as failure leads to more range bound activity whilst conquering it could take us back to the highs.

Crude Oil

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The chart above is a weekly chart, so it’s a longer term chart and it gives some real clarity! Oil must hold at or near its recent lows in order to avoid a deeper decline to $60 or $55 something which will only happen if the decline in stock markets deepens! Holding at these levels or even if a quick v-shape move occurs to $60 we feel that in 2010 for the price of Oil you simply cannot avoid talking about $90-$100! Sounds like lofty prices but it is easily achievable this year! However it’s not plain sailing at present as the lower blue line must be taken out in which TMS feels the price of Crude would head back to the 2010 highs and even higher.

Euro

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Again for the Euro we’ve used a weekly chart as the short term direction has been clear recently. However the green line shows how we could be in a bottom making phase, in which a lower low could occur but the formation of bottom making, could still stick. It’s important for the market to regain 126 as that would make the Euro overall bullish in which a sharp oversold move would take us back to the 135 level! The blue line has been hit frequently over the past three years and TMS feels we haven’t seen the last of it yet.

Of course the green support line must hold otherwise vacuum opens up, in which we would travel straight to 113 and if that folds then for sure you’ll see 1:1 to the dollar.

Sterling

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Once again we’ve used another weekly chart for the Sterling to view the situation at play. The Sterling has been trying to make some progress over the last few weeks as it tries to edge somewhat higher from around 14250 but ironically on the weekly chart it appears as nothing more than a dot as the Sterling clearly trades in range bound movements.

The United Kingdom is in a dire state and the nation holds uncertainty over its actual size of the deficit and the measures that will be used to tackle it not to forget its effectiveness or lack of it. On top of that inflation figures are flawed as governments have been known to gloss them up to paint a differing picture from the actual high inflation that the public suffers from. On top of that, we have a housing market, which is currently witnessing a ‘dead cat bounce’ in which the projected collapse of it, has simply not taken motion YET! This would start to batter the Sterling even more in which 1:1 will likely be seen at some stage over the next few years.

Fundamentals however can get one more emotional then technical’s and that is why we prefer to react to price. In which case the recent lows are holding and until they hold, 135 won’t come into play. Folding them would take us to the level directly! Holding that, doesn’t necessarily mean, that the Sterling is safe as the orange lines are giving two problems on the weekly chart. A declining orange line that must be overcome AND a range bound orange line that must be overcome! Until both cannot be conquered the longer term scenario will remain range bound to lower price action over the coming years.

Short term it’s a different ball game all together, the dynamics are different, the targets are different, the expectations are different, as you’re not bothered about long term price objectives in day to day trading although overall any trader should respect long term price action, and it’s always good to recap long term action regularly as some critical levels interrelate within timeframes.

GOLD

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Whilst analysts, traders and commentators across the globe are looking at long term projections for gold we thought we’d look at the short term scenario at play and for this insight we’ve used the four hour chart which is supreme at depicting short term movements in Gold.

First of all you don’t have to be a rocket scientist to understand that Gold has a short term issue with 1250! For us at TMS it is plain and simple, if we get a four hour close above this mark then we would be very surprised, if momentum, doesn’t carry the price to 1300 – direct move!

However it is also not hard to see why the recent attempt on 1250 failed as the purple line shows it’s alignment with this level. The blue line provided very short term support but the green line is the short term four hour trend holder. If this line is taken out with a four hour close then we would feel gold would travel straight to 1200 and lower for a corrective phase OR a deepened pullback in which the euphoria would start to be questioned by the media but the contrarian would be ready to BUY BUY and BUY some more for the longer term activities.

I am Ajit Singh, the writer of this article who started work with the financial markets from a very young age of 17, even though it wasn’t legal and WE are www.tradingmarketsignals.com – ‘TMS’.

If you like what you read and would like to gain insight on position trading style signals on five major markets. Or perhaps you want to add clarity to your short term trading with our signals which are fired via email and soon possibly by a live chat room platform, then this would be the best time to join us with our annual membership offer that unfortunately expires on 14th June 2010, in line with the U.S. stock market close on Monday.

http://tradingmarketsignals.com/#/flash-crash-price/4540799314

Until next time, remember:

Trading Market Signals
…the hub of unbiased technical analysis!

This first Chart is my EOD analysis that was posted on 8 June 2010. My primary scenario was the Bullish path depicted by the blue arrows. These arrows were drawn to indicate typical market direction and action for the next day. The first arrow up indicated that I thought the market would make a little headway before correcting into a buy-the-dip setup. Then I expected a significant rally into the EOD.

The chart below is the market’s action the next day with the arrows superimposed. Not perfect, but I’ll take that call all day long!

We don’t provide a day trading system. I am a probability trader that has modified a system that gives you an opportunity to learn to fish. The value we provide is in understanding setups and managing risks. However, there are times when I will give you a fish and other traders here will do the same. Also, please remember that this is about probabilities, not certainties.

My goal would be an “Elliott Wave for Dummies” curriculum. I love all the “for Dummies” books because they strive to simplify and clarify. They are profoundly simple. The mark of a good teacher IMO is someone who can get the hay down from the loft so the horses can eat it. Many teachers like to complicate their subject matter so they can appear “smart”. I have no use for insecurity in teachers. The old saying that “it’s better to teach someone to fish than give them a fish” is never more true than in teaching.

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