Stock Market - Key Reversal Day

I think today's price action proves to me at least why I am so glad not to have a position in this market. The stock market is chopping around shaking out both longs and shorts. Just when it looked like the market was breaking low things suddenly and violently turned around.

Today the NASDAQ broke to new lows for the year around noon time but about two hours later the NASDAQ staged a powerful rally putting in a key reversal day with good volume.

I still have no position in this market and will patiently wait for signs of a low risk high reward trade. I will say this much, today's key reversal at the year low may very well be the technical signal that the market needs to kick off the season rally that is due around this time. Only time will tell.

Forex - Money Moves Into The Yen

The rally in the Japanese Yen that I was looking for 2 weeks ago seems to be underway however I did not buy this currency. There was one day about 6 days ago where the Yen dipped below the 20 day moving average which made me think twice about buying this currency. Looks like I messed this trade up.

Gold Breaks Down

Last weekend I posted about the bear flag in Gold that was setting up and as you can see in the above chart Gold is now selling off. I'll post my downside target for this metal either tomorrow or the day after.

Stocks Head Lower

The stock market was down again today negating the potential 1-2-3 formation that I posted about the other day. I continue to have no position in this market and I will continue to wait patiently for some kind of setup to present itself where the risk/reward is favorable.

U.S. Dollar On The Move

The U.S. Dollar has broken out of a picture perfect symmetrical triangle. If you recall I first wrote about this setup last week and you can see the original post by clicking here.

I think we'll see gold and the foreign currencies come under pressure if the move up in the dollar continues. Looks like the bear flag in the Euro was confirmed today.

Is This The Bottom In The Shanghai Index?

The Shanghai Index is a market that I don't really trade but I do follow it from time to time. Right now I think this index is possibly forming a bottom based on several technical tools that I use.

Above is a daily chart of the Shanghai index and in the lower panel is the MACD with the standard default settings of 12,26,9. You'll notice the multiple bullish divergences that have been taking place since last May. One of the mistakes traders make is that they fail to combine their technical indicators with other tools. A trader who makes decisions based on just one indicator (in this case a MACD divergence) would have lost money trading this index over the past few months. I prefer to combine indicators as well as time frames to increase the odds of finding a winning trade.

Looking at the above daily chart we see the multiple MACD divergences which usually means at some point there is a chance this market may rally. Like I said in the previous paragraph, I need some other tools to help confirm the daily MACD divergences before I actually turn bullish on this market. In order to see the bigger picture we'll now take a look at the weekly chart.

Below is a weekly chart of the Shanghai Index along with the MACD in the lower panel. What I find significant about this chart is that the index is now sitting on a very powerful and meaningful support area. In addition to this major support area we see the weekly MACD is now about to give a buy signal. So as you can see, the pieces of the puzzle are beginning to come together. We have multiple daily divergences, the index is at a very significant support area on the weekly chart and the weekly MACD is about to give a buy signal.

Does this mean that there is a 100% chance that this market will rally because we now have all this confirmation? Of course not but the odds of making money buying this market are much greater now than they were for the trader who was trying to pick a bottom over the past few months based on using only one indicator.



Combining indicators is a very effective way to trade and increase your bottom line which is why I only take trades that have at least 2 or 3 technical tools screaming at me to make a trade. As always folks we'll see what happens.

Nikkei Forming A Bottom?

I just wanted to post this chart of the Nikkei which appears to be forming an inverse head and shoulders bottom. The pattern will be confirmed only if prices move above the neckline which is the red trendline you see in the above chart.