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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

* See UPDATE below...

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


* UPDATE Thursday, June 30th:

As shown on the following updated 20-Year Quarterly chart of the SPX, the 2016 Q2 candle closed today at a higher level than -- on what was a previously potential bearish hanging man -- the Q1 candle. This bearish reversal warning was not confirmed.

Instead, what we're left with, at the moment, is a wide-range high-base consolidation for the past 6 quarters, with price now near all-time highs.


As shown on the following 20-Year Monthly chart of the SPX, a solid breakout and hold to the upside of this large range could produce a rally to a confluence of the top of a long-term channel and a 200% Fibonacci Extension level of 2280 (yellow) by roughly October of this year, and, eventually, another confluence of the channel top and a 200% External Fibonacci level of 2485 (blue) by approximately December 2017.

That's a very bullish scenario and one that may take quite a bit longer to play out, with, possibly, a lot more volatility sprinkled into the mix than what I've shown...anything can happen between now and then, but the potential is there, nonetheless.


Saturday, June 25, 2016

Currency Canaries

* See UPDATE  below...

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.

* UPDATE Thursday, June 30th:

Something's gotta give...Q2 closed out today with an even wider spread between the SPX and the Pound:USD Forex pair, as the SPX continued to rally and the Pound continued to fall, as shown on the 3-Year comparison chart below.


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.