After having discussed the disastrous indices situation in 2016 ever since the new year had started, these markets were finally able to make a decision. Instead of bouncing around the heavy support areas for yet another week, they are now retracing back up into the balance zone – saying goodbye to a crash scenario. This doesn’t mean that on the long-term timeframes I like to look at, these markets have become bullish. No, they are simply running back into the balance zone – for now telling us that they don’t know where to trade next, therefore taking a break on a weekly timeframe to make out new resistance areas before the World Indices can decide which direction to break out next.
It could be months before we’ll know.
The weekly chart of the Nasdaq provides a decent impression on the current circumstances in the World Indices. It is obvious how strongly the support area has acted so far, only by creating a Pin Bar four weeks ago price was able to penetrate the indicated support making a new low. This price level then wasn’t even held up for one week, instead the Pin Bar tells us that prices really don’t want to stay trading below that support level, instead there seemed to be a need to trade back up, in the same week! The indicated Pin Bar closed higher than it opened, really giving bulls a chance to turn this market right at the support level in the short-term.
With the break of the indicated, important support area, the trendfollower had all reasons to assume a significant market decline was about to unfold, but as it turns out those were false breakout signals. And now prices are back breathing inside of the balance zone.
If prices are trading in a corrective mode on the higher timeframes, the daily also doesn’t yield the greatest opportunities to trade. Short trades haven’t been the best on this timeframe in the last couple of weeks, long trades are also tricky. As the daily Nasdaq Chart indicates, prices are trading right between the weekly support area and now a new established daily resistance area. I had mentioned this important level last week, where we also saw a Pin Bar right inside of this zone. Even though friday trading sent prices higher, this market wasn’t able to break the resistance zone yet. More so, there are four fractals making up this area, it will be completely up to the market to see how fast and decisively this zone can be taken out.
Altogether, trading trends on World Indices isn’t the best idea as of now, except you have the time and energy to trade really low timeframes. On a daily and weekly perspective these markets need more time now to find out where the next breakout levels are. Until then, there won’t be much going on except for sitting on the sidelines and waiting for the respective signals to occur, it could be weeks if not months before that happens.
Attached is a Gold Daily chart which will make the case for the trend reversal in this precious metal. A couple of weeks ago I already mentioned the significant breakout of the first buy fractal on a weekly timeframe. While since 2011 the trend in Gold was down, we are now seeing the first established bullish trend on the daily Gold chart. This one is already showing us some divergence, but after running from the breakout at around $1114 to where we are trading now ($1267), that isn’t a surprise. Combining the weekly and daily perspective there is not much doubt left that Gold successfully turned around and may yield profits in ongoing trends to the upside.
Numerous fractal buy signals have been taken – not just on the daily chart. Even though on the latter the trendfollower will have to watch closely already to see if this first leg of a new weekly uptrend scenario is ending, but at the same time you would be looking out for the next entry to buy in Gold. This underlying could actually yield quite some profits in 2016, let’s just follow the trend further, no reason to assume it will all be over soon. And should something in this regard come up, we’ll simply follow the trading plan to bank profits and cut losses.
I would also like to draw your attention to a market that has been very boring for trend traders, but that could continue its overall trend. The EUR/USD may not have been worth anything since the beginning of 2015, but now, roughly a year later, the trader for whom patience is a virtue, new opportunities may arise.
Looking at the monthly chart to ensure we don’t lose sight of the bigger picture, it becomes obvious that the downtrend was never over. Price has simply been correcting inside that still ongoing trend to the downside. This monthly chart shows that the balance zone moving averages weren’t even touched, instead price bounced off of the short-term moving average (dotted) numerous times. New fractals indicating sell areas have been created and we’re really just waiting for them to be hit. The EUR/USD would then simply continue what it has started 1.5 years ago.
Even though it looks like it could still be a while until any of those fractals are hit, the weekly chart shows some more details to evaluate a good next fractal sell entry. There is no lack of support levels, but prices are too far away from them for now, especially since this market traded upwards last week. Still, it is very important to keep this FX Pair in mind, sooner or later the continuation of the downtrend will occur, and then it’s your task not to miss it. It’ll most likely be a no-brainer trade, just jump on the wave and ride it until it loses steam. All the while considering your risk and trading rules!