Market Report: Chop Shop Markets
Nothing really much went on last week other than the US markets still appear to be struggling to find their footing, so rather than me trying to re-invent the wheel I thought I would share this weekend's newsletter with readers.
I am sure it will be of some value to readers, if you trade 1 or 2 markets in this letter.
I still consider this to be one of the best newsletters on the market, but then I am biased, but for this report I will post a sample of the letter and also include the link where you can simply download the PDF file from the members section.
For $20 a month I think you will be hard pressed to find a letter of such value.
I have also started posting much of my free work on the blog spot website at: http://wavepatterntraders.blogspot.com/
If you're an active trader you can follow my free ideas over at that blog, I generally post 2-3 setups that members are watching each week.
Bottom line: The markets spent the past week simply creating havoc for most swing traders, and not really confirming any direction, so the previous ideas still stand on the US markets and still looking for a move to fresh new lows and complete what I suspect is a choppy correction.
AUDUSD VS Oil
The correlation between Oil and AUDUSD is still strong and I don't think you are going to see a strong move lower in risk markets whilst these 2 markets are firm.
The bulls in both markets are defending key areas:
AUDUSD - 1.0300
Oil (crude) - $102
Each time the bears have tried to take out those areas the markets have held firm, that's a positive for the bulls in risk and the bears need to respect that, dips are buying opportunities against the lows made on 11/04. But I prefer to buy the dips around $102 on Oil and $1.0300 on AUDUSD, as if you are going to see a "full on" risk sell off, those areas imo wont hold, but the declines in most risk markets are corrective atm and support the idea of looking higher in "some" not all but "some" markets.
I suspect we are going to see other markets peel away, but a select few are still holding firm, noticeably these 2 markets.
NYSE McClellan Osc
Another test of the 0 line is looming, as the markets chop around I suspect failure to get above the 0 line will align with a failure to get above the 50 mark on the daily RSI as well as a failure to hold the 1395SPX area.
So we can watch this indicator for short term guidance, if it suddenly breaks the 0 area and strong bid arrives in the markets then the bears need to step aside and respect any new wave of buying.
SPX Short term
There is still some confusion to decide if we need to see a test of the 1395SPX area and run some buy stops again, or drop straight to 1355-1350SPX from here, it will come down, to holding above 1371SPX as that keeps the triangle idea alive.
Then there is always the aggressive wave count which atm I am not a fan of this idea, but if it really let go and we saw a strong break lower, then I could get behind this idea, but the idea I currently favor is potentially a move to 1350SPX then see a move higher potentially past 1422SPX, but as always I will adapt to what I see with regards to price action.
No point being on the wrong side of the trend and stubborn, I would rather kill an idea and reverse and get on the trend.
It really needs a move higher to test 1395SPX as there is a number of 3 wave moves and the last decline is a 3 wave drop, which is ok for the idea of seeing 1350SPX for such a strong bearish idea, this is not really looking that impulsive, considering that this is a "forced" wave count hence I don't tend to the favor this idea.
This is the alternative wave count.
It still looks like a bear flag, so currently the direction should push lower once it's finished.
After breaking under the resistance band between 1386-1392SPX its doing a decent job of stopping any bounce from moving higher, I suspect that area gets defended again, if another attempt is seen early next week.
This market is already showing promise of seeing new lows, as it is considerably weaker that the SPX and DOW, as the small caps via the RUT and tech via NDX is far weaker.
I simply can't find a way to label that impulsively but it virtually filled that open gap and found sellers and suggests now moving towards a measured target at 2636.
The alternative which I suspect would align with the SPX/ES ideas of seeing a test of 1396ES etc would be a push early next week towards 2740 in the alternative [x] idea.
Above 2712 suggest seeing 2740.
For the moment I am treating the decline over the past 2 weeks as corrective so still looking a bit lower as per the ideas, I don't see the evidence just yet to suddenly turn around and say the market is about to collapse etc.
Of course anything can happen, but I am looking lower atm, so if the market suddenly crashes, fine we are short and looking lower anyhow, but I am not aggressive short, I am looking for that 1x1 target at 2636, then I will evaluate again.
Like the SPX we have 2 working ideas, the idea shown in black needs weakness on Sunday/Monday and should hold under the 1380ES area and see this push towards 1350ES or lower as the market would be in the last part of a correction.
Simply put I would want to see this under 1380ES in globex and head lower.
The other idea is the triangle setup and stays above 1366ES and gets ready to thrust higher towards 1390-1395ES, to its really about 1380-1366ES, as that range can help us decide the direction going into next week.
As per the SPX idea, it would need a really strong decline before I am convinced this is a bearish tape, atm this appears very corrective although I still feel that 1350ES is possible, from there I will evaluate further and decide if a low is near then we should be setting up a reversal etc.
The decline from 1417ES really looks like a 3 wave decline, then we have the sideways chop spending the best part of last week chopping up traders, but I am still expecting a test of the lows around 1350ES or a bit lower potentially run to 1340ES.
So a down-up-down sequence from 1417ES, as shown in idea 2.
Key resistance is 1380ES; key support is 1366ES from those areas we can confirm/negate which idea.
When you look at the globex chart, you can see its really only a 3 wave decline, which whilst we can see under 1350ES, it don't exactly warrant getting really aggressively bearish here, hence I think the market is working a correction from the 1419ES globex highs and targeting under 1350ES in a choppy 3 wave move, as per the pit session chart above.
However like the SPX idea we can't rule out a triangle here and rally back to take out buy stops above the last high around 1395ES etc and then fail and push to 1350ES etc.
So it's about the 1380-1366ES area short term from Sunday-Mondays tape direction.
You can read the rest by clicking on this link: http://www.wavepatterntraders.com/ElliottNewsletter/Safehaven.pdf
This will let you receive access to the rest of the PDF newsletter and give you a taste of what is included.
Until next time.
Have a profitable week ahead.