So, here is how we are faring with a long to short term view...
Below is the ES monthly chart. What is clear is that we just passed the third top, a lower high, and are now testing the monthly 200MA for the second time. If the daily 200MA is sacred, imagine what the monthly 200MA would be. IF October ends below the current level (likely to at this point), then the markets are really in deep bear territory which could last a lot longer than the previous rout in 2008. Notice also that the monthly MACD is turning for a crossover, risking a move into bear territory in the months to come.
The weekly ES chart shows a clear break of the FiboEMAs and multiple testing of the weekly 200MA which is starting to show a bearish inclination as it tapers downwards. A weekly sell signal was just generated last week after a late week sell-off.
The daily ES chart is most intriguing in my opinion. Remember the bear flag I wrote about on 18 September? Price broke down the flag and quickly retested the support-resistance, having broken into the flag. This probably threw many chartists into bewilderment and two days later, it failed that break. If I do not know better, a failed attempt (a test) is bad enough, but this was a failed break-in, which suggest much worse. In addition, the 200MA is now inclined downwards, and the MACD has had a bearish crossover in bear territory. It looks like a visit to the August panic low is in the cards over the next few weeks as we start a brand new Buy Setup.
The 30 minute chart on the right clearly shows on an intrepaday basis how the rollover was followed by a breakdown of the bear flag and the retest of the bear flag support-resistance. Price action patterns confirm a trend change.
Looking at the USD futures (/DX) would be good as the flood into "haven" bonds tends to result in a spike in the USD due to transactions that boost demand for the USD. From the monthly chart, a bullish divergence was observed months ago and had since resulted in a rally, followed by a higher low. At this point, the USD looks to have more breath to increase in the coming months.
The weekly DX chart on the right has a breakout of the weekly 200MA resistance and a bullish crossover of the MACD into bullish area.
The DX daily chart appeared to have gone parabolic and was about to retrace, however, last Friday's action suggests that a new top would be in place due to another rally wave. The daily MACD is clearly showing the extent of the USD rally.
Gold has seen an awesome selloff, and many reasons have been given for that. While expected to rally again, with the steep rally in the USD (/DX), Gold prices would face a lot of pressure as the initial panic drives money from an already parabolic Gold into Bonds. Looking at the monthly chart, a similar rally was consequently followed by a correction before another huge rally. This correction was 100% of the price spike and took about 38% of the relative time to the rally. Simply by projection into the current parabolic spike, the magnitude was two-fold, and if correction time was to be similar at 38%, then a very possible support would be at about $1200 and should end about April 2012. While this is just a geometric projection on my part, the weekly (and monthly) MACD have some way to correct.
Oops... I just realized that this snapshot was flawed.
In any case, it appears that the daily open interest have been recently dropping as Gold prices dropped ~10% in a week. This signals that shorts are closing their positions and that buyers are likely to appear soon. The 30 min chart shows a triangle with a potential breakout on Monday.
**I took this photo on Sunday, and in the Asian hours of trading, Gold had already broken out of this triangle. To demonstrate this, I am not inclined to replace this chart.
Crude monthly chart has a sell signal and is currently testing the monthly FiboEMAs. The weekly chart on the right has price breaking down the TDST support, with a sell signal, hence looking very bearish, at least for the rest of October.
The Crude daily chart has a nice "ice-hole" failure and the 200MA is rolling over and downwards. This puts crude in line with the weekly bearish sentiment.
The 30 min chart on the right panel shows price testing thrice the weekly TDST, and failing to break above, which again shows how bearish crude is for now.
Given the above charts, it is obvious that the USD is rallying due to money movements into bonds, and out of equities and commodities. The bear flag scenario or the early 2008 scenario is starting to play out in uncanny similarity.
Fundamentally, the news today is that Greece is not doing enough of cuts, and the panel of liquidity meets today to discuss if Greece qualifies for the next instalment due mid-October 2011.
Needless to say, outlook over the next two weeks does not look good and the markets are already moving.
Real question is... ARE YOU?
The MadScientist
3 October 2011
Note: Any material posted here is of my sole opinion, and my opinion may differ or change. This is NOT a solicitation nor advice proceed with anything else as a consequence of reading these materials. The materials presented here are intended for educational purposes only.
Charts by ThinkDesktop by TD Ameritrade IP Company Inc.
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