Market Report: It Has Started
Well not quite, but it's very possible now a high is in place. In last week's I was looking for a push higher to test the prior highs. We have been tracking an ending diagonal for the past few weeks, only the trouble with that pattern is they have a tendency to morph and waste time.
It's the time wasting as it forms the wedge shape that frustrates traders, until a point it breaks hard and almost all traders are not aware what has happened.
When markets are like that I strongly encourage members to look at other markets, with over 25 markets that we follow a decent idea is never far away.
Well we finally got what appears to be the break we were expecting, and we even followed it lower to cover our shorts on the end of a 5 wave move.
If the bounce remains under the prior swing high at 1531SPX, we are looking to put shorts back on for what I expect will be a strong breakdown towards 1450SPX.
With our risk known, it offers a higher reward for a small risk, exactly the sort of trades that I encourage members to take, I think if the market fails to see a strong break above 1520SPX, it should setup for a decent move lower, having put in a 5 wave decline it's a strong start that a peak is in place.
As always we use stops and know our risk before we put the trade on.
As mentioned above, some members trade the ES, so we have almost 24hr coverage of the markets. If members want an update as to the ideas, they can come into the chat room and ask questions or see the latest ideas in the forums. With the extensive range we trade there is always a market for everyone.
Some members, including myself were short the ES well before the move as we knew the risk to the idea was just under 1540SPX, so using the ideas on the SPX for risk control on the ES.
I was personally short from 1517-20ES as suggested in our swing trades service, so members had the ability to follow my personal trades.
Once the markets finally broke it was a matter of counting a 5 wave decline.
The market followed our path very well, and we are simply watching for a rejection from our 1516-1520ES target, where members can look to get short again, as most of us covered shorts and looking to resell a 3 wave bounce.
If what I think is happening turns out to be correct, then the next decline should be a good one.
If not, we take the trade down and re-evaluate, and move to the next idea. But I do like the idea of a strong reversal lower, based on the daily setups we are working, which I posted in the last article.
So we got a setup we are closely monitoring from Sundays Globex open.
The NDX has been the weaker market between the major US markets, and we were watching an ending diagonal idea on this market, all we wanted was a final new high, it was one of the reasons I was expecting a new high in the US markets as the NDX needed a new high to finish its pattern.
Well we got the new high, and like the other US markets we also have the 5 wave decline we wanted to see, and it's bounced nicely to just under our preferred target to sell.
I would like to see this fail around 2740-50, that is where it will offer us a trade setup to sell with stops at the highs made last week.
The one major advantage futures traders have over the traders that only trade the US cash market hours is that whilst I would like to see a bit higher, there have been many times its fell a little short of targets, so with the electronic system it allows members to enter trades in Globex, as it could be completed and if the European markets sell off hard on Monday its likely to create a gap down and the cash market traders miss out.
But if we get a bit higher it will reduce our risk exposure on both the NQ and ES. The NQ is virtually the same setup.
So some setups for readers to take advantage of next week, even if you are not a member I hope my articles help readers make $$.
As I try to encourage members to look at other markets to trade, there are times that some markets really do offer a high reward trades, and just a little bit of effort can go a long way.
An example this past week was Soybeans, I was watching for the end to a 5 wave advance, and just before the strong breakdown I posted this chart to members and said that bean traders needed to be watching for a strong reversal and I felt it was ready to puke lower, but a poke above $15 was expected.
2 hours later it puked, it was such a sweet move it was almost like we had foreseen the move, I am good at what I do, but I don't have mystical powers. Now it doesn't always go as great as that but sheeshhh I wish it would, the best thing is that I think Soybeans has got far lower to go. And last week's move was the start of a substantial move lower.
I have rarely seen reversals like that get fully retraced, usually they are the kick start of a substantial move, in this case a break lower.
That's a outside reversal that took out the prior 2 day lows, I would be amazed if that was retraced completely, so much as that I am very confident Soybeans has started the next move lower and one market I encourage members to be trading as when grains get going in a trend they are like forex and can see some strong moves. Take a look at last week's report Corn has been in a strong down trend the past 2-3 weeks.
The sideways nature of price action over the past 3 months suggests it's a simple correction, so it's likely to see a continuation lower from the move that started way back in Sept 2012.
I have not spoken about the EURUSD much in these pages, but I will use this week as a good time to let traders and readers know my thoughts.
We started off the week looking at the buy side as I felt the 134 area would be tested, as we almost reached our goal of 133-13280 but a test of 134 in a corrective advance was the idea, and aggressive traders could have looked to buy into the decline with a stop at 13305.
As time went on I had to adjust the ideas, we were really seeing some nasty chop, but I still thought we could see the 134 area, so long side traders could get out and switch to the short side for a move towards our long standing 13150 target, which again I felt needed to be tested, as the patterns had un-finished business with lower prices.
Well it pushed higher, almost to 13450, so a welcome prize to members that held on, but it was from that area I felt both ideas needed to see 13150, so above 134 I was looking at switching back to the short side and look to sell for a move into 13150.
This ended up being a great move for members and from the feedback, most caught at least 150 pips of the decline, but with the target hit, it was time to take the $$$ and see what the market wanted to do.
With both ideas focused on the 13150 target the bounce from that area would tell us a lot and we could finally ditch one of the ideas and focus on the most likely idea, but with the bounce being a non event from 13150. I decided that the market is guilty until innocent, and now have gone with the idea in black, which has been our primary idea.
Unless we see something substantial on the upside I am now focused on a move towards 128.
I would need to see an aggressive move back above 133 before it would warn us our idea is looking wrong and we need to change ideas, but having followed this whole move from 137, it's been a great ride for us, suffice to say that even if the EURUSD reverses hard to the upside, we can simply reverse our bias and follow it higher.
It really makes no odds to us as we don't marry a trade or bias, if it works we stick with it, if not we find an idea that does work.
This is how we consistently stay in the loop with the markets and find high reward setups.
EURUSD VS SPX
One of the reasons I tend to think that the EURUSD could see downside is that it's been a clue for the US markets, and finally the downside in EURUSD has seen the US markets respond. Both the EURUSD and SPX have responded well together. But recently we have seen a large divergence and with the EURUSD leading lower (US$ higher) I felt it would only be a matter of time before the US markets responded, the European markets have already responded to the EURUSD decline, the DAX has sold off heavily I covered that last week along with the EURSTOXX50.
But with the SPX in the suspected ending diagonal and the EURUSD breaking down, it further it gave me the confidence to stick with the plan of selling the US markets.
It appears we may have got the markets back in sync again, so if the US markets break down, I think the EURUSD breaks down with it, hence I switched to the idea in black.
Until next time,
Have a profitable week ahead.
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With that I will close out, there was so much I wanted to post especially about the precious metals, but I will save that for another time.