[Weekly Recap|10/16] WTI and Indices back in Neutral Zone, Gold possibly about to Breath

That World Indices are not collapsing during the next trading days as was assumed during the beginning of the year, should be clear by now. So far trendfollowing has taken care of us well in 2016, no matter if markets are up or down, no matter how much they are up or down. Looking at the Nasdaq chart we can see some new developments that are worth mentioning in this regard.

In the multiple timeframe analysis we’ll go from monthly down to weekly and finish up looking at the daily chart. All to determine if there could be a new significant move unfolding either up or downwards.

Nasdaq Monthly

Nasdaq Monthly

After enough time elapsed since markets saw their heavy drops in January, the monthly chart reveals that prices really did fail at important support levels. Marked by fractals as well as the balance line moving averages (dynamic support), we can clearly see how on this timeframe the Nasdaq wasn’t even able to close exceptionally low. That would’ve indicated a stronger conviction of this market to look for lower prices, but instead what this chart shows is a continous bounce off of the lower support level (blue MA). As of the end of last week the Nasdaq has even reached the upper end of the balance zone, now trading near the green MA. Looking at the Momentum Oscillator at the bottom of the chart it becomes clear that the divergence is minimal as of now, meaning that price might as well have enough steam to reach new All Time Highs in this particular market. This may not be true for all major world indices so far.

The weekly chart supports what the monthly is suggesting. We do not find here a fractal sell breakout that was just hit, instead the market has traded towards the upside for the last four weeks.

Nasdaq Weekly

Nasdaq Weekly

Even though it was fighting with the lower border of the balance zone just three weeks ago, it didn’t seem to be too big of a deal for price to keep trading long the following two weeks. Being there now, last week price closed right in the middle of the balance zone, not indicating any further shorting opportunities for a new big move on the weekly. Quite the contrary, the failure of penetrating the indicated support zone marked by fractals and the balance lines, speaks volumes that all previous sell fractals occurred not in a trending phase, but in a correction while the actual market direction being either a choppy sideways market or already a new move making new highs. We’ll have to wait and see to confirm that.

Nasdaq Daily

Nasdaq Daily

After looking at the previous two higher timeframes it naturally follows that the daily chart must be trading upside with more or less steam, too. While that is the case, it shouldn’t be overlooked that this chart has had a lot of time to form new resistance levels while trading into the balance zone from the low end to the higher end. This means we’re not in a smooth and stable trending phase, but still running the danger of getting whipsawed in a sideways correction. With that many fractals making up the resistance zone as can be seen on this Nasdaq daily, accompanied by a lack of upside pressure in price, it seems unlikely that the monthly scenario will be fulfilled straight away. It might be more likely that on this daily timeframe fractals will keep being formed and hit, only so price can fall back into the balance zone. That would be typical correcctive market behavior – not a good place to be for the trendfollower.

WTI weekly

WTI Weekly

WTI was in focus a couple of weeks ago, and there isn’t really much to say about the current market behaviour in this underlying. The bottom WTI is looking for seems to be in now, the market is trading back up into the balance zone looking for some “air” to breath as a huge bearish trend seems to be finished now. That doesn’t mean that new lows are possible, but the question will always be with how much steam the market can really unfold a new significant move. There doesn’t seem to be too much of a case in WTI for this possibility right now, the double divergence is almost argument enough. Add to that the lack in volatility and momentum, plus the past market behavior on the monthly chart.

WTI Monthly

WTI Monthly

There WTI wasn’t even able to close once below the indicated support level. Instead price created a pin bar and hasn’t been as low as the close of that bar ever since. Chart formations and failed support penetration are usually a good indication of price not having enough sellers to take it through that level, but a correction becomes more likely, maybe even the end of a bear market in Oil. While that is much too soon to say, the trendfollower should simply follow his trading system to bank profits from the previous downmove and enter a new trend in whatever direction it may occur.

While the trend in Gold on a higher timeframe (weekly) is very much intact and as of now does not give any reason to assume that it is coming to an end, the picture on the daily chart is different. If you were to trendfollow Gold on the daily, you should have tight stops in place and prepare for an exit of your long positions. That should yield some nice profits, considering the trend went from the first breakout at $1114 to currently $1250, a 12% increase.

Gold Daily

Gold Daily

I had already mentioned the obvious divergence in Gold and the last week of trading seems to support the view that bulls are out of breath on this timeframe. Especially the last candle (Friday) with a higher high but a close below the open of the previous day, makes a very bearish impression. It’s not only the candle itself, but have a look at the chart where it is situated. Right on top of the beginning of the balance zone prices didn’t seem to be able to stay away and move further outward in the direction of the trend. It seems likely that next week will see some lower Gold prices, at least temporarily, before the weekly trend direction will be resumed. Since nobody knows how deep and how long that correction will be, one should again simply follow the trading rules and risk management parameters to be there when the real huge move will unfold in this underlying which had been in correction for four years, losing 45% of previous gains.


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