The Euro is pausing at the previous swing low (1.3142) this could provide temporary resistance and cause the Euro to pullback.
The Euro is poised to pullback today. The Euro may be pausing at the previous swing low, 1.3142. Also the 50 day moving average is also providing resistance around 1.31. From here I’m expecting at least a temporary pullback possibly to the 20 day moving average near 1.29. It has already made a lower low below yesterday’s 1.3093 low but it currently trading above this level. So I would expect it to begin heading down fairly quickly within the next hour or so. If it does not then I wouldn’t count on it pulling back at all and would watch to see if it closes above the 50 day moving average or not. If it stays above the 50 day moving average then it is most likely headed higher, not lower.
Also if the ES pullback continues then I expect the Euro will follow suit. But if the Euro stays strong then it might indicate the ES pullback will end shortly too.
ES will head lower probably to the 1300 range (blue rectangle) and then bounce and test the 1329.75 downtrend line.
ES may be finally beginning to pullback. It hasn’t broken any uptrend lines yet so for now we should count on this being a minor pullback. The 1329.75 downtrend line governs the pullback and provides resistance. Yesterday’s 1309.25 low should also act as a resistance level. Support is in the 1299-1301 range highlighted by the blue rectangle. I think ES will tumble a little lower to this range and then bounce and test the 1329.75 downtrend line in the 1308-1313.5 range. If ES stays below the 1329.75 downtrend line then ES could be headed down to 1285. If ES breaks above the 1329.75 downtrend line then I’m looking for ES to rally above 1329.75 and onward to 1350.
After stating I would get short yesterday, I instead exited my short. The reason being because ES broke above 1681 which I believed it should have not tested again.
After stating I would get short yesterday, I instead exited my short. The reason being because ES broke above 1681 which I believed it should have not tested again. I know I stated in the past that I would hang on until 1767 and that I would tolerate Gold briefly trading above the 1923.7 downtrend line but when I made those comments I wasn’t expecting a break above the 1923.7 downtrend line to occur as it did yesterday.
This market looked like a good sell yesterday morning but it reversed 50 points in the other direction by midday following the Fed comments. This says very clearly to me, that my ideas on this market are dead wrong. I could not see any sell setup forming yesterday and it became very certain that Gold was headed higher. If you know you’re going to lose money then there is no point staying in a trade. Overall since making a lower low below 1535 the Gold market has not acted at all as I expected and yesterday’s explosive move up left me no choice but to exit my position.
Reviewing the whole trade, I shorted GLD at 150, 162.5 and covered both at 163 for a total loss of $1300. I shouldn’t have gotten short below 1550 as I did instead I should have been patient enough to wait for a good sell setup. I made good attempts to short Gold at 1600 and around 1645 which both briefly worked but I was eventually stopped out and I still defend getting short yesterday even though I was stopped out. Those are the points where I should have waited to short Gold at.
So why did I short Gold below 1550?
...for the same reason I shorted Crude below 98
So why did I short Gold below 1550 anyway? I remember how Crude collapsed in 2008. It broke the 50 uptrend line and made a lower low below the previous swing low around 98 in September 2008. I got short at this point (via USO) and rode out the bounce to 110 and eventually exited the trade when Crude dropped to 85. If you compare the 2008 Crude chart to the Gold one they look very similar. When Gold dropped below 1535 for the second time it broke the 681 uptrend line and made a lower low below the previous 1535 swing low. I felt I was in the same situation as 2008 and it turns out I wasn’t.
Looking back I should have exited my Gold short when Gold broke above 1643.7. It was at that point that the trade should have begun making me worry. But I was stubborn in my belief that Gold would collapse and I acted irrationally.
So what now? There is no sell setup on Gold right now but if Gold tops below 1767 (like right about now) and presents a good sell setup then I would get short again. If Gold rallies above 1767 then I believe Gold is headed to 1804. I still think Gold will drop at some point and backtest the 1923.7 downtrend line around 1650-1670 but Gold is pretty heavily correlated to the stock market right now and waiting for a Gold pullback is like waiting for an ES pullback. I don’t see one coming yet.
ES just filled a gap at 1326 from last July. ES could continue to plow upwards all the way to 1352. I think we just have to stay disciplined here and wait for a pullback.
I know I keep waiting for a pullback. It’s not because I’m hell bent on seeing the market crash but rather because I don’t think chasing a rally like this is a high probability trade. So I am going to continue to defer until the market pulls back. And it could rally all the way back to 1352 without pulling back but that’s just the situation that we’re in. I know that one day it will pull back for more than a day and I’m waiting for that opportunity.
So for now I don’t see any good trades in ES.
Instead of adding to my short today, I exited my short when Gold broke above 1681. Gold rallied strongly following the Fed statement to avoid raising rates until 2014 and I now think Gold could head to 1760.
The Euro chart is not giving us much to work with here. Let's wait for a good trade setup.
The Euro has rallied strongly after breaking the 1.4241 downtrend line but has now dropped pretty far today. As the chart currently stands I don’t see a good trade opportunity one way or the other. I tend to shy away from shorting follow big down days but if I had to guess one way or the other I would bet on further downside at least to the 1.2869 support from the 20 day moving average. However the Euro just barely broke yesterdays 1.2956 low and is hovering in the vicinity which could turn into a trap reversal back to the upside so it’s just not worth shorting it at this point.
The trap reversal trade idea is fairly low risk, today’s low is at 1.2933, currently the Euro is at 1.296, so you would risk about 27 pips on a trap reversal trade. But again the Euro is still in a downtrend. It would have been nice if the Euro had broke above 1.3142 or at least the 50 day moving average before turning back to the downside, that might make buying this dip a little more attractive. Furthermore there’s nothing stopping the Euro from dropping to new lows (below 1.2627) from here. It could happen!
I would rather wait a few more days for a better long opportunity to present itself. I’m not keen on shorting the Euro just yet either because having broken the 1.4241 downtrend line, I’m still expecting a big bounce to the 1.37 area.
ES is overbought and a pullback to the 1280 range is likely. But I believe this is a dip to be bought and that most likely ES is headed over 1373.5
The stock market rally from mid December up until now is overextended and appears to be topping just above the 1373.5 downtrend line. I believe a pullback is overdue and possible in the next few days to a week. ES has support at about 1285 (20 day moving average), 1280 (H&S Neckline and 1147.5 uptrend). The pullback could drop ES briefly below the 200 day moving average but overall I believe ES should stay above the 1068 uptrend line.
I believe that whenever ES pulls back that it will be a dip to be bought. My reasoning is that the rate of descent defined by the 1373.5 downtrend line is low (60 points in 7-8 months). This is not a strong downtrend anymore. I think buying ES on a dip at or below the 1280 range should be good for a rally back to 1300 at the very least and there is tremendous potential for further upside (possibly above 1373.5).
In the worst case situation ES will continue to trade sideways in a large 1350-1250 range. But even in this case I still believe ES is at least a good short term buy when it dips below 1280.
I just got back from vacation and need a few days to get myself back into day trading mode. But I am looking at getting short ES today and holding it for a few days to see if the pullback materializes. I’ll try to keep you posted if I take this trade.
Gold should now stay below the previous 1681.8 swing high. I will add to my short Gold position on any bounce that tops below 1681.8. I am estimating that I should be able to get short around the 1661-1665 range.
Gold is finally reacting to the 1923.7 downtrend line and turning down. I will now add to my Gold short in the 1661-1665 range. Yesterday’s low was 1661 so I am estimating that Gold will at least test that level again today. I believe Gold may continue to test the 1923.7 downtrend line in the days to come but should now stay below the 1681.8 swing high. If Gold does break above the 1681.8 swing high then it is possible that Gold will head to 1760. If Gold stays below 1681.8 then it’s just a matter of time before it drops back to 1600. Gold has support at 1644 and 1629 from the 200 and 20 day moving averages and at 1600 from the 681 uptrend line.
I will continue to short via the GLD ETF as opposed to the higher leveraged GC futures contract. I am already short 100 shares from 150. Looking back this looks like an extremely bone headed move to have made but I am trying to position myself for a drop to the 100-120 range and it has been my plan to ride out any bounces so I will continue to stick to it. So I hope to get short around 162-163 when the market opens. I planned on being short no more than 300 shares (before profitability) so my latest short will bring my share total to 200 shares short.
I don’t have much insight on ES. I don’t see any reason for ES to pullback tomorrow. Today actually looks like a day of hesitation before ES makes another 10-12 point move up tomorrow. The only reason I can think of that ES would not rally tomorrow is if the Euro sells off. The Euro chart is a little weaker looking than ES and it could drop tomorrow. Still even if the Euro drops I’m betting ES simple moves sideways to slightly up. The Euro weakness hasn’t affected ES much this year.
Gold just doesn't look like that great of a sell today.
I wanted to add to my short Gold position today but it just doesn’t look like a great entry today. The problem is that Gold dropped briefly below yesterday’s 1649.2 low and then trap reversed strong to the upside and is threatening to take out the 1670.6 high made a few days ago. So the price is not headed in my intended direction.
Now right at this moment Gold is testing the 50 day moving average at 1667 and it’s possible that Gold hesitates here and reverses to the downside, but the price is giving us no indication that it will do so. So even though the short setup here is low risk (entry=1667, stop=1670.6), the final element of price topping and heading down is missing and so without any other knowledge about the Gold market, shorting Gold right here is probably not a good trade entry.
I now think it is likely that Gold will break above 1670.6 in the next day or so but this market like ES is very overbought and I’m still expecting some kind of good sell setup to form any day now.
