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-   -   US and Euro stocks mounting one more rally before crashing? (https://www.forexfactory.com/thread/787890-us-and-euro-stocks-mounting-one-more-rally)

cat Jul 5, 2018 6:15am | Post# 1

US and Euro stocks mounting one more rally before crashing?
 
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The title and the question mark, because nothing is certain in this game, but it looks to me as if the Dow Jones, and with it all of the major global stock markets, may well be pushing up one more time to resistance before turning and putting in some big falls. When? I would say imminently, and by imminently I mean sometime this month or next.

If I turn out to be right, then the warning may alert a few people to be vigilant for what could be a great sell opportunity, and if I am wrong, and stocks continue to sail north beyond the levels on my chart, then no harm done.

The chart is hopefully pretty self-explanatory. 24,700 isn where I see the first level of potentially strong resistance, if indeed it gets that far, and if it does and continues north, then around 25,000 will create a very nice head and shoulders pattern, the left shoulder obviously being the 21st May high.

One more thing to mention is the very bearish monthly shooting star candlestick for June. The price does not always drop immediately after such a candle, it can do for sure, but just as often such a candle can be seen as a forewarning of what is to come.

Feel free to add anything you want to this thread, your own analysis or whatever, all posts are welcome as long as they are constructive. Any abuse or pointless criticism and the poster will immediately be banned from all my threads. Sorry, but after posting on ff for so many years, I've had my fill of smart asses. Serious posters and traders only please.

Also, if anyone wants to give any correlation with what is happening in the forex market or in commodities, then please feel free, as this thread is designed to help, nothing more. Similarly, if anyone has a fundamentals take on how things stand at the moment, whether it supports a big sell off in stocks or not, then that would also be most welcome.

Oh, and one more thing. Look at the 76.4% fib support plotted from the 2nd May low ( short orange line ). I was watching this level and so far the support has held perfectly.
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cat Jul 10, 2018 11:38am | Post# 2

I know this thread created zero interest, which is fine, but for those watching Dow, it's up in that key area now, having got just 55 pips short of 25,000, but high enough to form that head and shoulders pattern I mentioned above. It can still climb higher, the momentum is certainly still up, but that little sharp dip we just saw tells me that other traders are seeing what I'm seeing, and it'll be interesting whether it can now rally back up again to make a daily high, or whether it'll fail and drop back.

One more thing to add, the trend line from the all time high connecting with the 11th June high runs right through the 76.4% fib, so the price could be targeting that.

cat Jul 11, 2018 2:49am | Post# 3

Dow down over 300 pips overnight. Trump dropped a trade tariff bombshell overnight, so just lucky? Well, I don't believe in luck in trading, as the price has an uncanny way of advertising events and announcements that cannot otherwise be predicted.

We'll see whether equities can rebound today or whether there are more falls on the way.

copi88 Jul 11, 2018 3:07am | Post# 4

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My thoughts are that equities have definitely peaked and there are only downside risks at the moment.

  1. FED is in a rate tightening cycle - negative equities
  2. Yield Curve is coming closer and closer to inverting - Signals a recession
  3. DT is enforcing negative economic polices through protectionism. Never have these worked out positively for a countries economy

On the COT you can see that equities have been going up but the large specs holdings have decreased sharply. This is the transfer of ownership process from the smart money to the dumb money. This is why in the press you will be seeing lots of advice to buy the stock market etc . This whole process takes time though. Once they have dumped their holdings there is no one left to buy and we should be seeing a 25% price correction.

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darko2010 Jul 11, 2018 6:05am | Post# 5

Dow down over 300 pips overnight. Trump dropped a trade tariff bombshell overnight, so just lucky? Well, I don't believe in luck in trading, as the price has an uncanny way of advertising events and announcements that cannot otherwise be predicted. We'll see whether equities can rebound today or whether there are more falls on the way.
Cat, have you done any analysis of night movements on the Dow and how they survive when the main market re-opens? I doubt last night's news was earth shattering compared to the general news.

cat Jul 11, 2018 6:19am | Post# 6

{quote} Cat, have you done any analysis of night movements on the Dow and how they survive when the main market re-opens? I doubt last night's news was earth shattering compared to the general news.
No darko I haven't. It really depends on the technical though. The Dow now looks set to climb higher, but on the sub H1 time frames it could continue to fall today. The reaction to the trade tariff news overnight was actually pretty small, 300 pips is nothing on the Dow. It could easily challenge 25,000 today if NY decides to ramp it up again, but the longer it sets at this level the more chance there is of it being sold further down I would say.

darko2010 Jul 18, 2018 3:44am | Post# 7

The title and the question mark, because nothing is certain in this game, but it looks to me as if the Dow Jones, and with it all of the major global stock markets, may well be pushing up one more time to resistance before turning and putting in some big falls. When? I would say imminently, and by imminently I mean sometime this month or next. If I turn out to be right, then the warning may alert a few people to be vigilant for what could be a great sell opportunity, and if I am wrong, and stocks continue to sail north beyond the levels on my chart,...
Looks like price wants to test the 25400 level after all, wouldn't you agree?

cat Jul 19, 2018 4:45am | Post# 8

{quote} Looks like price wants to test the 25400 level after all, wouldn't you agree?
Difficult to say now. 345 is the 61.8% from the all time high, and that sent it back down in June. Looks like it is coming down a bit today, but whether they ramp it up again in the NY session remains to be seen. If it does go higher, and I have no reason to think that it won't, then I have some potentially pretty strong looking resistance around 870 which is the 76.4% fib from the all time high.

I do think though that equities have peaked, and I look upon this as the build towards a major collapse, but I don't see the big one happening this year, maybe not even next. I think the big test will be if the Dow can conclusively break the 76.4% fib. It may well break it, but by how much, as it may want 26,000. If it gets above that, then I think new all time highs are a real possibility. We can only watch and see how things take shape.

darko2010 Jul 19, 2018 4:59am | Post# 9

{quote} Difficult to say now. 345 is the 61.8% from the all time high, and that sent it back down in June. Looks like it is coming down a bit today, but whether they ramp it up again in the NY session remains to be seen. If it does go higher, and I have no reason to think that it won't, then I have some potentially pretty strong looking resistance around 870 which is the 76.4% fib from the all time high. I do think though that equities have peaked, and I look upon this as the build towards a major collapse, but I don't see the big one happening...
My old craft tells me equity values make no sense at all.
The 25400 area is a strong resistance, if price also breaks that, 26000-ish is the next logical destination. Yet, I cannot resolve myself to go long and I will just bide my time until I see an attractive sell PA signal.

On a different topic, have you looked into correlations between US indices and FX?

cat Jul 19, 2018 5:45am | Post# 10

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{quote} My old craft tells me equity values make no sense at all. The 25400 area is a strong resistance, if price also breaks that, 26000-ish is the next logical destination. Yet, I cannot resolve myself to go long and I will just bide my time until I see an attractive sell PA signal. On a different topic, have you looked into correlations between US indices and FX?
I have, and there is a very good book I'd recommend should you want to go into it in some depth. However, too much inter-market analysis tends not to help me much with my trading as I only really trade the Dax these days, plus the Dow when I can get a clear signal, and being a 100% visual trader I trade what I see in front of me on my screens, without paying too much attention to what is going on elsewhere. The bigger the time frame one trades, the more intermarket analysis is useful.
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darko2010 Jul 19, 2018 6:12am | Post# 11

{quote} I have, and there is a very good book I'd recommend should you want to go into it in some depth. However, too much inter-market analysis tends not to help me much with my trading as I only really trade the Dax these days, plus the Dow when I can get a clear signal, and being a 100% visual trader I trade what I see in front of me on my screens, without paying too much attention to what is going on elsewhere. The bigger the time frame one trades, the more intermarket analysis is useful. {image}
Thank you Cat, I appreciate it.
Try as I might, there is quantitative side that remains in me and I am frustrated when I can't make sense of the actions of the market movers across instruments. I will look into this book, I haven't read anything related to trading in a while.

cat Jul 19, 2018 7:34am | Post# 12

{quote} Thank you Cat, I appreciate it. Try as I might, there is quantitative side that remains in me and I am frustrated when I can't make sense of the actions of the market movers across instruments. I will look into this book, I haven't read anything related to trading in a while.
Neither have I, I read them all, well, a good few, years ago, which was a good education, but next to useless for my style of trading. That book is a good one though if you want to try to tie everything together. I have found though, that the less I concern myself with that which I cannot see, the better I trade.

cat Jul 19, 2018 7:41am | Post# 13

Dow is looking very bearish today, in fact it has been building all week, dropping, but pushing up to a new intra-day high each time it had fallen a bit. Not today though I don't think. It is on H1 100sma support right now, which should lift it, but there may well be a good sell opportunity, maybe somewhere between 160-190.

darko2010 Jul 19, 2018 7:42am | Post# 14

{quote} Neither have I, I read them all, well, a good few, years ago, which was a good education, but next to useless for my style of trading. That book is a good one though if you want to try to tie everything together. I have found though, that the less I concern myself with that which I cannot see, the better I trade.
PASR is enough to trade efficiently, I agree.
But I like to keep digging, who knows what I may learn about the world (and myself)?

darko2010 Jul 24, 2018 9:10am | Post# 15

Dow down over 300 pips overnight. Trump dropped a trade tariff bombshell overnight, so just lucky? Well, I don't believe in luck in trading, as the price has an uncanny way of advertising events and announcements that cannot otherwise be predicted. We'll see whether equities can rebound today or whether there are more falls on the way.
The Dow is like Jason in "Halloween"... No matter how much you shoot at it, I won't go down

cat Jul 25, 2018 2:54am | Post# 16

{quote} The Dow is like Jason in "Halloween"... No matter how much you shoot at it, I won't go down
Potential double top coming up at 400 though, and I have a lower possible resistance level at around 350, so we'll see what happens.

darko2010 Jul 25, 2018 5:45am | Post# 17

{quote} Potential double top coming up at 400 though, and I have a lower possible resistance level at around 350, so we'll see what happens.
Yes, looking at the same level as you

cat Jul 26, 2018 2:46am | Post# 18

Now that the double top has broken at 400, it looks like Dow is now set for the 76.4% retrace from the high @ 25,870. I also have a level of potentially strong MA resistance at around the same level, so that's the one to watch for me now if the price gets there.

On the Dax, I have what should be strong resistance on the Daily 200sma @ 12,770, and the price is recognizing it at the moment, or has been since the 18th July when it first reached it.

darko2010 Jul 26, 2018 2:50am | Post# 19

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Now that the double top has broken at 400, it looks like Dow is now set for the 76.4% retrace from the high @ 25,870. I also have a level of potentially strong MA resistance at around the same level, so that's the one to watch for me now if the price gets there. On the Dax, I have what should be strong resistance on the Daily 200sma @ 12,770, and the price is recognizing it at the moment, or has been since the 18th July when it first reached it.
This is what I see for now, I will play it safe as yesterday's moves were brutal
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cat Jul 26, 2018 3:18am | Post# 20

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My latest projection for the Dow.

Dax Daily 200sma level holding as I type
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cove Jul 26, 2018 4:52pm | Post# 21

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great thread Cat - thx for continuing to share your insight

ydy high volume drive up through 61.8 looks encouraging

a series of higher lows >23.6 showed the way

your 76.4 target looks good - testing the last significant Lower High (27 Feb) since the drop
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copi88 Jul 31, 2018 2:29am | Post# 22

https://www.zerohedge.com/news/2018-...ggest-february

cat Jul 31, 2018 3:10am | Post# 23

great thread Cat - thx for continuing to share your insight ydy high volume drive up through 61.8 looks encouraging a series of higher lows >23.6 showed the way your 76.4 target looks good - testing the last significant Lower High (27 Feb) since the drop {image}
Good to hear from you cove...long time no see!!

cat Jul 31, 2018 3:26am | Post# 24

Despite the title of this thread, I think an imminent sell off the size of or bigger than that we saw in Jan/Feb is unlikely just now. In Jan, Dow had climbed so far above its Daily 200 simple moving average that a correction was inevitable, and look what it did - fell all the way back down to it almost to the pip. Now, although I think the January high may well be the top for this market, support is much closer, so I feel it'll take much more than mere technicals to bring this down much further just now, another 700 to 1000 pips perhaps, but total crash, and by that I mean 40-60%, not this year. It's coming I'm certain, but not imminently. What I think we are in the process of now is the build up, and the longer this thing ranges and struggles to get up to and above 26,000, the closer we come to the crash I believe is inevitable within the next year or so.

darko2010 Jul 31, 2018 3:38am | Post# 25

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{quote} Despite the title of this thread, I think an imminent sell off the size of or bigger than that we saw in Jan/Feb is unlikely just now. In Jan, Dow had climbed so far above its Daily 200 simple moving average that a correction was inevitable, and look what it did - fell all the way back down to it almost to the pip. Now, although I think the January high may well be the top for this market, support is much closer, so I feel it'll take much more than mere technicals to bring this down much further just now, another 700 to 1000 pips perhaps,...
If Strat taught me anything, it is patience and wait for higher timeframes to show the way.
Now that I look at 2007/2008, I understand better what is unfolding before my eyes. The past never guarantees the future, but a re-test of all time highs before a real descent cannot be excluded
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cat Jul 31, 2018 4:04am | Post# 26

{quote} If Strat taught me anything, it is patience and wait for higher timeframes to show the way. Now that I look at 2007/2008, I understand better what is unfolding before my eyes. The past never guarantees the future, but a re-test of all time highs before a real descent cannot be excluded {image}
I was just going to post something about 2007.8, but you beat me to it.

I'm a great believer in the chart patterns showing the way, and this is what I look for all the time. If the market is about to crash, the warning signs should be there screaming out. The signals in January were exactly the same as we saw with Bticoin - way overbought and hyper extended above its Daily 200sma, and price always comes back to that when it gets too far above or below it for the simple reason that when it does, investors ger jittery, and it doesn't take much for the price to snowball once it begins to fall.

In 2007 on the Dow, the price corrected from its July high by just short of 1,500 pips. It then rallied to new highs, but in doing so, a perfect MACD diversion pattern was formed, and this was a strong sell signal once iot began to come down. It then fell all the way back to its weekly 200sma before rallying back up, but only as far as the 61.8% retrace from the October high. By then, if you use the right moving averages, you'll have seen that the momentum had changed completely on thew weekly, and although no one at the time could have foreseen just how far the price was then going to fall, that 61.8% top in April/May 2008 was a massive sell signal. The price did not stop falling until it hit the bi-monthly 200ema, which, as it turned out, was the buy opportunity of the century!

Looking at the Dow monthly chart now, there is nothing other than the extreme over-extended nature of the price above its 200ema/sma, to suggest that a collapse is imminent, not to me anyway.

darko2010 Jul 31, 2018 4:22am | Post# 27

{quote} I was just going to post something about 2007.8, but you beat me to it. I'm a great believer in the chart patterns showing the way, and this is what I look for all the time. If the market is about to crash, the warning signs should be there screaming out. The signals in January were exactly the same as we saw with Bticoin - way overbought and hyper extended above its Daily 200sma, and price always comes back to that when it gets too far above or below it for the simple reason that when it does, investors ger jittery, and it doesn't...
I don't use indicators but simply looking at the monthly/weekly PA both for Summer 2007 and March 2009 were clear signals to me.

cat Jul 31, 2018 4:57am | Post# 28

{quote} I don't use indicators but simply looking at the monthly/weekly PA both for Summer 2007 and March 2009 were clear signals to me.
The big difference between now and then was the distance back to the bi-monthly 200ema ( I'm using bi-monthly because for me that is the time frame that best shows the big picture. In short, there is a hell of a lot further to fall now than there was then. The major US stocks lost about 45% of their value in 2007-9. The next crash, when it happens, could well see 50-60% wiped off their value. This is why you have to ask, if I were an investor, would I be investing in the US stock market right now? The current extreme volatility of the markets suggests that the answer is a resounding NO.

cat Jul 31, 2018 5:17am | Post# 29

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This is a monthly Dow chart I posted at the end of January. One of the surest signs that the price is about to correct is a sudden burst of aggressive buying or selling. This is exactly what we saw in January. For those who are interested, this is what I wrote at the time...

" Last night was Donald Trump's first State of the Union address, and in it, as expected , he spoke of America's 'booming' economy and the soaring US Stock Market which , from the very first day he won the Presidency, has risen meteorically in the biggest stock market rally in history, though in fact, it did actually begin back in March 2009 when the lows were reached following the 2008/9 financialmeltdown which really gathered pace with the collapse of Lehman Bothers in September 2008.

Ironically however, on the day of the State of the Union address, US Stocks had their worst day since Trump won the White House, falling nearly 500 points, a pretty big single day fall by any standards.

The recent almost frenzied buying of US stocks so far this year is a sign, though no more than a sign, that this remarkable bull run may, and I stress may, be close to running out of steam.

Time will tell, but this is one of the very first signals of an impending correction analysts look for - signs of exhaustion at extremely overbought/oversold levels, and this month's potential ' Death Throe ' candle ( the highest white bar you can see on the chart ) which is far longer than any monthly candle previously, is a potential early indication that the stock market may have peaked, or be close to doing so.

This is exactly what happened with Bitcoin in the run up to Christmas, and whilst many pundits and the mainstream media were screaming ' BUY BUY BUY BEFORE IT'S TOO LATE.. BITCOIN IS GOING TO THE MOON! ', the technical signs that it was about to correct/crash were building, and on the 17th December down it came, crashing almost 50% inside a single week, no surprise to those who read the signs, but a big surprise for those who failed to.

That is not to say that the same thing is about to happen to US Stocks. The Dow Jones Industrial Average and S&P 100 are still very well supported technically in complete contrast to 2008, and they certainly cannot be compared with the extreme volatility of Crypto currencies, but I would say we have just had our first sign that the haymaking could be coming to an end, at least temporarily. Certainly, the Stock Market is currently hugely overvalued and in no way representative of the health of the US economy where massive structural problems remain. It is therefore not a question of 'if' the next financial crash will take place, but' when '.

If you are exposed to US, British or European stocks, best contact your broker/fund manager for a low down, because many investors, especially those who rely on others to invest their money, get caught out when the Stock Market turns south. They did in 2007/8, and they will do again when the next crash happens."


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cat Aug 1, 2018 8:19am | Post# 30

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This probably won't concern most of you, but it looks as if the FTSE is building to come down, wiping out all of this year's gains so far. A succession of very bearish candles on the weekly would be something I'd be looking to sell if this was on a smaller time frame.

We have a BOE interest rate decision tomorrow, so maybe this will be the catalyst. An interest rate rise will be good for the pound, bad for UK stocks for fears that the UK economy is fundamentally too weak, and levels of household debt far too high to support rising interest rates. we shall see.
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cat Aug 7, 2018 2:57am | Post# 31

25,600 is an important level on Dow now. If it can break it conclusively, than my next level will be anywhere from 850-26,000, and that level should provide a real test as to whether it is going to go higher or not.

tzamo Aug 7, 2018 3:47pm | Post# 32

25,600 is an important level on Dow now. If it can break it conclusively, than my next level will be anywhere from 850-26,000, and that level should provide a real test as to whether it is going to go higher or not.
Dear Cat,
Really appreciate you continuing to post your views and insights, thank you. I also expect to see the 25,800/ 26,000 level hit, but I would not be surprised to also see all time highs if 26,580 is broken. I suspect this because I see a gap formed on my chart right at the top just before 26,435 and because price may have to retest the highs before any significant downside from my current experience. One thing for sure, it will return to the moving average eventually. I am using the DJ industrial average chart on TradingView for this one, so I am not sure of the quality of the data.

Kind Regards,
Tzamo

cat Aug 8, 2018 4:33pm | Post# 33

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Dow peaked yesterday at 25,890, forming Nice MACD diversion on my H6 chart and down it came today. I would expect to see the selling continue tomorrow, could potentially be a big down day, but at least the 76.4% fib @ 25,250 should be in range.

Dax is looking less clear, however, there's a real MA squeeze on the Daily, so if it also falls tomorrow there is the potential for a 400 pip drop back down to the 12,200 level.
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cat Aug 8, 2018 4:36pm | Post# 34

{quote} Dear Cat, Really appreciate you continuing to post your views and insights, thank you. I also expect to see the 25,800/ 26,000 level hit, but I would not be surprised to also see all time highs if 26,580 is broken. I suspect this because I see a gap formed on my chart right at the top just before 26,435 and because price may have to retest the highs before any significant downside from my current experience. One thing for sure, it will return to the moving average eventually. I am using the DJ industrial average chart on TradingView for...
You're very welcome tzamo.

cat Aug 9, 2018 3:24am | Post# 35

Dow peaked yesterday at 25,890, forming Nice MACD diversion on my H6 chart and down it came today. I would expect to see the selling continue tomorrow, could potentially be a big down day, but at least the 76.4% fib @ 25,250 should be in range. Dax is looking less clear, however, there's a real MA squeeze on the Daily, so if it also falls tomorrow there is the potential for a 400 pip drop back down to the 12,200 level. {image}
Both Dax and Dow falling currently having pulled back a little during the Asian session. Dax looks to have pretty strong support around today's S1 pivot which I have at 12,555, which is also the H4 200sma which is why it should offer potentially strong support if it gets there. I also have higher potential support around yesterday's low, which is the 76.4% fib level plotted from the low on the 6th August.

The initial Dow support looks to be the H1 200sma initially at 25,442, so whether we get the big falls today that I predicted were possible last night remains to be see. Probably needs to be some catalyst, so perhaps some unscheduled announcement later to drive the markets down, and there's red flag US data at 13.30 UK time.

cat Aug 9, 2018 4:02pm | Post# 36

So, right at the end of the trading session, Dow sees some selling, not the selling I thought we might see, but it is a second consecutive down day, just, unless it puts in a last minute rally. with the Dax support holding well to keep it in its range for the fifth day in a row.

Daily candle is a bearish shooting star on the Dow, which suggests a down day tomorrow, so we'll see.

darko2010 Aug 9, 2018 4:15pm | Post# 37

So, right at the end of the trading session, Dow sees some selling, not the selling I thought we might see, but it is a second consecutive down day, just, unless it puts in a last minute rally. with the Dax support holding well to keep it in its range for the fifth day in a row. Daily candle is a bearish shooting star on the Dow, which suggests a down day tomorrow, so we'll see.
I am on holiday, so no trading for me, but I looked at PA after seeing your post and I wouldn't sell on this daily candle. It may look like a shooting star but its position is not where real shooting stars are. More importantly, I see no selling on the weekly chart yet. In any case, I will watch from afar...

cat Aug 10, 2018 2:42am | Post# 38

{quote} I am on holiday, so no trading for me, but I looked at PA after seeing your post and I wouldn't sell on this daily candle. It may look like a shooting star but its position is not where real shooting stars are. More importantly, I see no selling on the weekly chart yet. In any case, I will watch from afar...
I sold before the daily candle closed and held overnight, so already well up. The H2 200sma is @ 350 so I'll be watching that level closely. This may run down to 200 or so though, or, if it drops through all the support levels on time frames above the daily, it could fall to 24,600 or thereabouts.

Dax is at a big potential support level now @ S1 12,590, so it should be an interesting day.

Enjoy your hols!

cat Aug 10, 2018 3:07am | Post# 39

Dax S1 well and truly blown, so should run to 500 now.

cat Aug 10, 2018 4:08am | Post# 40

That was a very nice drop for a Friday on Dax. Looking at the Daily TF, you can see that 500 should be a pretty strong support level, so we may well have seen the low for the day, and already the price is rebounding quite strongly following that last strong push down to 12,478.


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