Tuesday, 25 February 2014

Equity Markets continued.. DAX, ES, YM, RT,NQ etc... where do we stand now? Are the bears running for the hills or does this market still stink?

Let's take a cold and rational look at where we are viz a viz price action and let's all remember that none of us earn money from calling tops and bottoms but by making prudent trade entries and managing risk. We may massage our ego's by getting the right reversal level but as the old saying goes "those who pick bottoms
(or of course tops) get dirty fingers". I have spelled out in detail to my valued subscribers my unease about equities and have presented both fundamental and technical reasons in a dispassionate way. It's been a difficult week to be bearish and yesterdays early and mid session left me pulling my hair out and re evaluating the charts in detail until by the time a few hours later I had reinforced my initial convictions about this being the end of the road re the topside we had seen a full false break out and subsequent selll off late afternoon on many if not all the equity indices. The ES  and Russell emini could easily display a double top depending on what data system you use.There is a cautionary point to make here which is that no down sloping Andrews pitchfork has had a touch on its centre line except in very low time frames and price has been very reluctant to retrace in any major time frame (60 min etc) and now we are moving sideways (among the DAX's Centre lines (from the two major pitchforks)) this test cannot be applied but as this drama unravels and we either see a trend continuation or a decline there is no denying the the recent price pattern was exceptionally strong... 11 consecutive days with higher closes which makes a weekly candle that is a tonic for the previous drop lower and as yet we still have to see this trend broken by a lower low but the pace and momentum has become almost hysterical as can be seen in the first chart below with shallower and shallower retracements and shorter and shorter waves higher. You can draw what conclusions you wish from this but it appears that some people have taken leave of their senses and now live in the land of wishful thinking.
Provided we continue to see price fatigue set in at these levels around 1840 we will need another day or two for price to be 'ripe' for a move lower (or another higher attempt again). Bar counts can be useful tools and time plays a more significant role than we credit it. 13 bar decline and rise- H to low to H( not a John Crane count).
So lets have a nice easy and basic look at the DAX in easy peasy charts with minimal clutter ( ML's RL's). For background re pivots and pitchforks you can always refer to the January and subsequent posts HERE

 OK, so we are faced with a pattern forming where some indices have made higher highs (all time highs) and some like the YM and DAX have made lower highs but we have two options as illustrated below. . Higher to new pastures in the heavens towards 1900.00(ES) and 10000 (DAX) or lower back to see a HEALTHY retracment.Retracements that will in the longer term enable us to go higher. I put this case in 2012 regarding gold
Today has opened with another false break out up and we have seen a small drop and 1840 ( trades as I write) sees good linear support. I suspect today will be an inside bar so lets have a look at the daily and what the candles+ price action are telling us.

We wait for the setup  and break either way (1851 and 1836 ES H14)  but price remains resiliant and there is no short trade here yet and short term setups must be made from the long side.

No comments:

Post a Comment