There's no doubt that the dramatic 800 point rally we have seen the past three days is practically unprecedented, but did it change the major trend of the market?
The simple answer is no, the longer-term trend for the equity markets at the moment remains negative. But please don't misunderstand what I'm saying, I was as surprised as anybody at the velocity of the rally which exceeded the Fibonacci retracement levels I discussed recently.
Today should be an interesting day to say the least, and I doubt seriously that the market can close higher and would expect to see some sort of pullback from the current levels. There is also what I would consider to be a major resistance based on the highs that were hit on Feb. 1st at the 1939 level on the S&P 500. Providing that level holds, we are still basically in a downward trending market, albeit a choppy one.
Gold
The pullback in gold (FOREX:XAUUSDO) appears to be consolidating, which is good given its rapid move to the upside. In an ideal world, I would like to see gold continue to consolidate around the $1200 level before once again moving higher. I still believe that gold has broken the back of its four-year bear trend and has now embarked on a long-term bullish trend that could take it to the year 2020. Be sure to watch the Trade Triangles for signals that gold has once again embarked on an upward move.
Crude Oil
It appears as though the correlation between equities and crude oil (NYMEX:CL.J16.E) is beginning to collapse as oil is perhaps starting to find some level of support around the $30 area. The one standout feature I see is the glaring bullish divergence on the RSI indicator. Based on the Trade Triangle indicators, I prefer the sidelines at the moment, but want to keep a close eye on crude oil.
U.S. Dollar
Today I'm analyzing the EURUSD (FOREX:EURUSD). For the past 12 months, this market has been in a border trading range between 1.05 on the downside and 1.15 on the upside. At the moment it's in the middle of this range around the 1.10 area. Technically speaking both the monthly and weekly Trade Triangles are indicating an upward trend. However, the daily Trade Triangle that you use for timing is red, indicating you should be on the sidelines. Two things I want to point out are, the RSI has pulled back to support at 50 and you want to watch the daily Trade Triangle and wait for it to turn green indicating a buy. Look for this market to move back up to the upper levels of its trading range to the 1.15 level.
Be Nimble
As I mentioned earlier in the month, be nimble and don't get carried away and fall in love with positions. The sharp rally in equities caught many traders by surprise and there was a great deal of short covering coming into the market. It remains to be seen whether the short-term trend will continue or whether we are moving into a choppy trading range environment.
Thank you for all of your comments and questions, I really do enjoy hearing from you.
Stay focused and disciplined.
Every success with MarketClub,
Adam Hewison
President, INO.com
Co-Creator, MarketClub
Dear Adam,
Compliments for One more good exercise from you.
According to my view, Both Gold and Crude Oil entered in Bear Trend intermediate rally. I have not made any time frame study, but I think, it may sustained up-to July end or around that period. However, for both Gold and Crude Oil, I doubt, and hesitate about to notice either the Bear Trend completion face, or any possible turn around. So after achieving some more higher levels, bear trend will continue again for forming a Final Bottoms, and still I am not changing my earlier lower targets of Bellow $ 1000 for Gold and Bellow $ 28 for Crude Oil.
As far as Dollar is concerned, we must remember classical theory of "Cats and Dogs Leads the Market and Blue Chips followed in last" accordingly, all other comparatively weaker currencies lost its value much earlier, and already remarkably devalued. Against this, till the time, Dollar is succeed to maintain it's both absolute and relative valuation, but since long, Dollar is facing pressure to sustain this scenario, and that will constantly increase, so at the end of the day, at certain stage / level, Dollar may lose even it's ultimate strength to sustain against any further crisis.
Meanwhile, one must study movement and exchange rate of Dollar against Indian Rupee (INR) Because when comparing value erosion of other currencies against Dollar, INR is least affected.
If we refer Technical view, Duration taken From the Fall from earlier Exchange rate of Dollar against INR, Past Top or All Time High of INR 69.23 was made on 28-08-2013, from there after down trend, or to its next consequent, and also as a last major bottom of INR 58.27 made on 22-05-14, that in between movement span had taken 182 Trading periods or 267 Calendar days, against this, in next upward movement beginning from 22-05-14 to till the date, said there after Bull run failed to form a new Top even after taking 447 Trading periods or 637 Calendar days, so technically INR can be consider either more stronger or less weaker against Dollar.
So as per my personal view, i will not surprised to find INR as a "Dark Horse" within and or after next Currency value churning, and I also point-out very strong possibilities to find lower exchange rate up to INR 58 and 48 or even much lesser against a Dollar. Being other side possibility, INR 72 and 76 are major resistance on upper side from current level of around INR 68.50 so at prevailing Exchange rate, Risk reward ratio at this stage is quite favorable.
I must also add that such changes will taken place in a very faster, sharp and sudden move.
Thanks for the update Adam!