Global Stock Markets
We cover the S&P500 (SPY) extensively on we will move on to a market we usually don’t, the Russell 2000 ETF (IWM).
We often look for a trend to unwind in the same way it began, giving rise to equality targets where wave 5 is equal in length to wave 1. IWM is particularly interesting, as not only is wave 5 comparable in size to wave 1, but the structures are similar too (shown by the pink outlines). This suggests it should continue higher to the $156-159 area, but it also warns this trend is mature and should complete soon.
The continuation/midway gap (circled) occurred just where it should, in the middle of wave iii of 3 and the strongest part of the trend. Using this as our midway point projects a high in the same area, $159-$160.
Leading stocks also help form a view of the broader market. Here is Apple (AAPL), which is reaching for the $180 equality target. And Amazon (AMZN), which is again late cycle and poking through the top of the trend channel. Netflix (NFLX) has a clear trend which will complete on the next highs. Alphabet (GOOGL) has an interesting fractal where the price action following each earnings gap repeats (on a smaller scale). This suggests a period of consolidation before another small rally. The main takeaway from these charts is they are late cycle. Swing trades are still very rewarding, but this is certainly not the time to buy and hold as when these trends complete there will be a large correction.
Precious Metals
Gold (GLD) and silver (SLV) have gone to sleep, but the question is, which way will they jolt when they wake up? We are still looking for a significant move higher, although the price action is very messy in this range. The gold miners ETF (GDX) probably has the clearest view, and may be setting up a bullish triangle. We wouldn’t want to say the low is definitely in, but as a general guide, the next significant move should be higher, and break the $25.6 highs.
Oil (USO)
Oil got to within a dollar of the $60 target and should now pull back to $55 again. We would buy the dip if it looks ‘right’ (we will try and leave a comment when/if price tests this area), but as it would be the second re-test of the $55 break-out area, we have to be careful as a failure could get bearish very quickly. The bigger picture shows stiff resistance at $59-60 with dual channel highs and the 161.8* Fib extension.
Natural Gas (UNG)
Natural gas continues to trade very erratically, at least from a technical perspective. The breakout of the triangle was textbook, as was the re-test. but then it all failed completely, only to recover again.
Actually the price action reminds us a lot of this time last year. First there is a sideways range over summer, then a fake break higher, before a much larger rally. It suggests NG could continue higher until the end of the year before making a top.
The Dollar (UUP)
The dollar reversed from 94.9 to re-test the broken trend channel. It should now recover to a lower high (below 94.9) before resuming lower. EURUSD (FXE) has a bullish pattern, but this will probably only lead to erratic moves around the 1.185 levels rather than a high probability trade.
Conclusions
The above charts map what we think are the most likely scenarios in various markets and are based on our interpretation of probabilities. Combined with other analysis, and good money management, they can help frame profitable trades.
We often look for a trend to unwind in the same way it began, giving rise to equality targets where wave 5 is equal in length to wave 1. IWM is particularly interesting, as not only is wave 5 comparable in size to wave 1, but the structures are similar too (shown by the pink outlines). This suggests it should continue higher to the $156-159 area, but it also warns this trend is mature and should complete soon.
The continuation/midway gap (circled) occurred just where it should, in the middle of wave iii of 3 and the strongest part of the trend. Using this as our midway point projects a high in the same area, $159-$160.
Leading stocks also help form a view of the broader market. Here is Apple (AAPL), which is reaching for the $180 equality target. And Amazon (AMZN), which is again late cycle and poking through the top of the trend channel. Netflix (NFLX) has a clear trend which will complete on the next highs. Alphabet (GOOGL) has an interesting fractal where the price action following each earnings gap repeats (on a smaller scale). This suggests a period of consolidation before another small rally. The main takeaway from these charts is they are late cycle. Swing trades are still very rewarding, but this is certainly not the time to buy and hold as when these trends complete there will be a large correction.
Precious Metals
Gold (GLD) and silver (SLV) have gone to sleep, but the question is, which way will they jolt when they wake up? We are still looking for a significant move higher, although the price action is very messy in this range. The gold miners ETF (GDX) probably has the clearest view, and may be setting up a bullish triangle. We wouldn’t want to say the low is definitely in, but as a general guide, the next significant move should be higher, and break the $25.6 highs.
Oil (USO)
Oil got to within a dollar of the $60 target and should now pull back to $55 again. We would buy the dip if it looks ‘right’ (we will try and leave a comment when/if price tests this area), but as it would be the second re-test of the $55 break-out area, we have to be careful as a failure could get bearish very quickly. The bigger picture shows stiff resistance at $59-60 with dual channel highs and the 161.8* Fib extension.
Natural Gas (UNG)
Natural gas continues to trade very erratically, at least from a technical perspective. The breakout of the triangle was textbook, as was the re-test. but then it all failed completely, only to recover again.
Actually the price action reminds us a lot of this time last year. First there is a sideways range over summer, then a fake break higher, before a much larger rally. It suggests NG could continue higher until the end of the year before making a top.
The Dollar (UUP)
The dollar reversed from 94.9 to re-test the broken trend channel. It should now recover to a lower high (below 94.9) before resuming lower. EURUSD (FXE) has a bullish pattern, but this will probably only lead to erratic moves around the 1.185 levels rather than a high probability trade.
Conclusions
The above charts map what we think are the most likely scenarios in various markets and are based on our interpretation of probabilities. Combined with other analysis, and good money management, they can help frame profitable trades.
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