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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex

DISCLAIMER: All the information contained within my posts are my opinions only and none of it may be construed as financial or trading advice...
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Monday, June 27, 2016

How Q2 Closes Is Important For SPX

Each candle on the SPX chart below represents 1/4 of one year.

  • Q1 2015 is a spinning top candle (indecision)
  • Q2 2015 is a shooting star (bearish warning)
  • Q3 2015 is a bearish engulfing (bearish but needs a confirmation lower close)
  • Q4 2015 is a bullish piercing pattern reversal candle, but such a candle is more effective after a decent drop, rather than stuck in a consolidation pattern at all-time highs
  • Q1 2016 is a bearish hanging man (bearish but also needs a confirmation lower close on the next candle)
  • Q2 2016 is an important candle, which will close this Thursday, June 30th, as it could be the bearish reversal confirmation candle that's needed for the Q1 candle -- a lower close is required

Saturday, June 25, 2016

Currency Canaries

If currency markets continue to experience high volatility with a strengthening US dollar, I think equity markets, including North American markets, will follow suit.

So, I'll keep a close eye on those as potential canaries in the coal mine; e.g., to see whether the spread continues to widen (downward) between the SPX and the Pound:USD Forex pair, as shown on the Year-to-Date comparison chart below (the Pound lost 8.75% last Thursday and Friday).

Also, note the great disconnect, starting in mid-2014, on the 3-Year comparison chart below. I think currency markets were beginning to price in and forecast major world equity market volatility (that will, ultimately, be larger and last longer than most people currently anticipate).

Further to my last post on the World Market Index, price did, indeed, rally above major resistance of 1600 and appears to be forming an inverse Head & Shoulders pattern on the Weekly chart, below. However, a potential neckline is downward-sloping and price has fallen below 1600, once again, to the 60% Fibonacci retracement level. As well, new "SELL" signals are triggering (or are about to trigger) on all three indicators on this timeframe.

If price fails at current levels, I'd be wary of North American equities succeeding with any kind of sustainable rally, as it could very well be a short-term dead cat bounce. The currency canaries may provide confirmation of this potential event...worth monitoring.

Once again, price has plunged into the "Fragile Zone" (below 80) on the SPX:VIX Monthly ratio chart below.

As I mentioned here, a drop and hold below the 100 Bull/Bear Line-in-the-Sand level would signal that a downdraft is in store for equities. We saw the beginnings of that scenario play out on Friday, as the SPX lost 3.59%, following results of the UK Brexit vote.

We'll continue to see high levels of equity volatility as long as price on this chart remains below 100, and, to a lesser degree, below 150 (the next Bull/Bear Line-in-the-Sand level).

In conclusion, I'd re-iterate what I said in my March 3rd UPDATE to my post of February 17th...

     "We'll see if the newly penetrated 100 level holds as support now on the SPX:VIX ratio, as well as the 1600 level on the World Market Index, as shown on the following updated Daily charts of both. If so, it looks as though equity markets are in for a new bull run...possibly to new highs sometime this year. Otherwise, another failure of both of these levels will likely begin a new bear run to new lows."

The last sentence is the most important one to note.

Friday, June 24, 2016

The BREXIT Vote Wins...A Catastrophe Awaits

Further to my UPDATES noted on my last post, a massive Head & Shoulders pattern has formed on this GBP/USD Monthly chart...catastrophe awaits as price flirts with the neckline.

But, the FTSE 100 Index closed the week 234 points higher than last week...Weekly chart below...

...so, while it has not yet experienced the plunge like that in 2007/08, it is threatening to at major support (where it has languished for the past year), as shown on the Monthly chart below.

While volatility remains elevated in world markets, it will be difficult to get an accurate read on firm and sustainable market direction for the foreseeable future...particularly if the Pound remains below 1.40 and the FTSE 100 remains at or below current levels.

Sunday, June 19, 2016

British Pound Hovers Precariously Above 30-Year Critical Support

* See UPDATES below...

In advance of Britain's "Brexit" or "Bremain" vote on Thursday, June 23, the British Pound has gained momentum as of last week, and Sunday evening as I write this post.

The current price of the GBP/USD Forex pair is 1.4581, as shown on the Monthly chart below. It will need to break and stay above that level and, potentially retest 1.50, which represents the next long-term resistance level.

A break and hold below the 30-year major support level of 1.40 could have catastrophic repercussions, not only for Britain's FTSE 100 Index, but also other major world indices. Price retested this long-term critical support level last week and is rallying.

Wednesday, June 15, 2016

Equities Look Vulnerable

What a mess! A drop and hold below 100 will signal that a big downdraft is in store for equities, as shown on the following Monthly SPX:VIX ratio chart.

Further background information can be found at this last post on the ratio.

WTIC Crude Oil & Canadian Loonie

If WTIC Crude Oil breaks below it's current (very tight) uptrend line, watch for the Canadian Loonie to tank.

As shown on the following 5-Year Daily chart comparing the two, they normally trade lock-step. Note the recent divergence of the Loonie starting in April and the fact that the RSI and MACD have fallen below the 50 level...which are hinting of further weakness ahead for Oil.

If Oil falls, I expect the Loonie will do so, as well. And, I'd be watching for a solid break below 75.00 on the Loonie as a possible signal that Oil will continue a drop to, perhaps, around $40.00, or lower, as shown on the next two 5-Year Daily charts.

Sunday, April 17, 2016

USD/CAD Forex Pair Overdue for a Bounce

The USD/CAD Forex pair is well overdue for a bounce at the median of a long-term regression channel and the 40% Fibonacci retracement level, as shown on the Monthly chart below.

The Canadian dollar is price-sensitive to the price of WTIC Oil, so I'd keep a close eye on its action following the inaction of the participating countries to lower oil supply at this weekend's Doha meeting...Oil is -2.21 at 39.50 as I write this post on Sunday evening.

P.S. I'd also keep a close watch on the banks and DB.

Saturday, April 09, 2016

On Vacation

I'll be on vacation as of this date, so I won't be posting much until late June (although I may slip the odd one in if time and circumstances permit).

In the meantime, I wish you all good luck in the markets!

Thursday, April 07, 2016

Financials ETF Looks Weak

In my post of December 29, 2015, I stressed the importance of the Financials ETF (XLF) in, potentially, propelling the SPX to an increase of 5-6% for 2016.

You can see from the Daily ratio chart below of XLF:SPX, that price weakened considerably afterwards and fell to new lows not seen since 2012. Price is attempting to stabilize above that low, but all three indicators are still in downtrend and display new "SELL" signals, and price action is still under the bearish influence of the Death Cross formation of the moving averages.

If price drops and holds below near-term support of 0.0105, we could see a significant drop in the SPX, likely to new lows for the year, as I mentioned on April 3.

Sunday, April 03, 2016

SPX:VIX Ratio Reaches a Critical Crossroads

Further to my posts of January 29 and February 17 (& March 3 update), price action on the SPX:VIX ratio has rallied and is now in between major support of 150 and major resistance at 160, as shown on the following monthly chart. The momentum indicator has also risen above the zero level and is hinting of higher prices to come at some point on this longer term timeframe.

Equity bulls will need to keep the price on this ratio above the 150 level, as well as break and hold above 160, and keep momentum above zero, in order to convince traders/investors to continue their buying spree to send the SPX to new all-time highs (currently at 2134.72, as shown on the following monthly chart of the SPX).

Otherwise, a drop and hold below these levels will see volatility return to the equity markets -- likely in a substantial manner -- to send them to, potentially, new lows for the year. It should be noted that the momentum indicator on this chart is not yet above zero and is still in a downtrend, so it is not yet confirming that higher prices are in store for the SPX...so, keep a close eye on the SPX:VIX ratio for signals.