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Showing posts with label FTSE 100. Show all posts
Showing posts with label FTSE 100. Show all posts
The Tide is Turning
Hello to all who take an occational look at this sorry excuse of a blog, I must again apologise for not posting anything here is such a long time. University life has been quite overwhelming lately, the Libertarian Party is having a candidate stand in St Albans and I have been helping out with the campaign organisation/management...
anyway, I will try and make posts more frequently, but with only the ability to have daily/weekly/monthly charts, I think I will only post when there has been some significant development.
And so here are my 2 charts for FTSE and the Dow Jones. I chose not to do SPX because it is pretty identical to the Dow Jones in structure (as is obviously expected).
Looking at the FTSE chart above, I must first say that I have a small short of this market as of Monday this week. Last time I posted this FTSE chart I was very bearish and the market just shot up slightly higher taking me out, I have since re-entered a short position and am now pretty much on break even considering my previous loss.
Now there are quite a few reasons for my bearishness... I’ll start with the waves.
According to my count we are looking at a wave 4 of a big A down... now for this count to stick, this wave 4 cannot overlap the low of my wave 1 (5350). As you can see on the chart there is a bold red line marking this wave 1 low. This area has seemed to have worked as great resistance, with several doji candles and no real progression of the market. The FTSE has seemed to have rallied stronger than the Dow and SPX in the sense that the other 2 are not anywhere near their respective wave 1 lows. But so far the count still holds.
The second factor is that the market has stuck between the 162% Fibonacci projection (purple) and the 62% retracement into wave 3 (blue). If you look at my waves “a-b-c” structure since the march rally, you will see that “b” retraced perfectly into “a” by 38% before moving further on up. This is a very clean retracement and projection, and it seems to be working rather well as it clusters quite closely with the wave 3 retracement.
A third factor to consider is the “Counter trend channel” that seems to have formed. This supports the analysis that the overall trend is still down and that this rally is corrective.
And finally take a look at the MACD. There has been some real divergence of this indicator for AGES! (to my annoyance). This really suggests that this market has been overbought for quite a while, but if you look what it has done recently, you can see that it is breaking out of its “wedge” range, this is VERY bearish.
So as a conclusion, in short term, I think we may have a small bounce to make a small wave 2 before we fall further. Medium term the trend is down, Long term the trend is down.
NOTE: The above chart does not show FTSE activity today. It is currently down around 80 pips, at its low so far it was down nearly 100.
Looking at the Dow Jones, the first thing to mention is that it is in an upwards wedge formation. This works as a counter trend pattern and again supports the analysis that the rally we have seen since march is corrective and not impulsive.
Now you can see that the Dow has not rallied as far as the FTSE in relation to its wave structure. Looking at the “a-b-c” formation here, there is something that this chart does not show but it could be of significance. The running flat I have for wave “b” actually hits the 27% retracement into wave “a”. Now this IS a fib retracement level, but not one of the more well know ones (38%, 50%, 62%).
With this in mind, we can see that the market has rallied slightly past the projection and just above the 50% retracement of wave 3. This area has however caused some serious resistance to emerge and the market has dipped off the highs made and has not managed to hold the magic (psychological) 10,000 mark.
If you look at the MACD indicator for this market, you can also see that the Dow MACD has actually broken out already and has just retested the MACD channel. This is something the FTSE has not yet done, but none the less it is a bearish sign that this market may be ready to start breaking down soon.
Like the FTSE this market has also had a lot of MACD divergence for a while, but it has just gone up and up and up... it still suggests that this market is overbought.
Short term trend, again as with FTSE there might be a slight bounce coming. Medium and Long term the trend is down.
With both of these markets, I am calling a top. An accelerated breakdown will of course confirm this.
Weekend Review
I thought it was about time I made another Weekend Review, mainly for the reason that I am finally looking to make my first trade on Monday and I will be going SHORT.
Take a look at these charts. First the FTSE. This too me looks like it has topped, with wave “c” being a perfect projection of wave “a” with fib extension levels. I think its pretty unquestionable that the fib. Levels have worked perfectly. Retrace to 61.8%, and then a perfect 161.8% projection!
You may also notice that in my last “weekend review” I was arguing for an expanding wedge formation in all major indexes, it seems that I was correct with this analysis.
I will be looking to short this market with a stop loss above the most recent highs. Even looking at the candlesticks, this market looks like it has hit some REAL resistance. If the bearish scenario does play out as planned, a key level for the FTSE to break will be 4500 (just above), which is the top of wave “a”, this will really serve as a confirmation that the pattern is complete, otherwise we could be looking at a 4 retracement, with a 5 making a higher high, suggesting to me that the bear market is over! (but I think this unlikely)
However, the headache I have is the internal wave count. If you look, you can obviously see that what I thought was a 3 is now the shortest of the impulsive waves, contradicting the purple count...
so where from here. Well, a possibility is that purple 3 and 4 are just 1 and 2 of wave 3.
Another idea is that it isn’t a 5 wave structure, but an abc-abc to make a double zig-zag “c”.
What are your views?
I think the top looks too convincing to me right now, we have a MACD sell signal with divergence, we have a perfect Fib extension hit, and we have it hit perfectly the top of my expanding wedge. Is this really all coincidence?
Looking at the Dow, we haven’t got the fib extension like the FTSE, but we have a perfect 50% retracement of the bigger picture wave 3! (what I argue is wave 3). We have a perfect touch of the top of the expanding wedge, and we finish with a MACD Sell Signal with Bearish Divergence!
I think next week, the markets are going to be painted blood red.
What do you think?
Last high for FTSE?
Well FTSE certainly has done something interesting in the past two days. On Monday it gapped up and rallied right up to resistance, at this point I did think there is the possibility of a double top, keep the green count very much alive. Today, the green count has been negated as we have made a higher high...
However, this leaves us with some interesting conclusions to try and make. Yes it made a higher high, but the market absorbed all the buying and the final candle was not able to close about 4950. Readjusting the purple count from my last post, we are arguably in the last stages, the question is: will we see a candle stick sell signal tomorrow? There is still room for FTSE make slightly higher highs and touch the top of the expanding wedge. But a failed 5th in a pattern is common.
So, tomorrow if we see the market open gapped down, this could end up being an “evening start” bearish pattern. This could be taken as a sell signal as the top could be in. To confirm the top we would really need to see the price action break below the labelled purple 4 and the 25 daily moving average. The purple lines I have drawn are just an idea of the situation that could possibly play out, with several support line retests.
A trading strategy I may be looking to adopt is: IF a candlestick sell signal is given tomorrow, to take it with half my usual stake (perhaps even less), with a stop-loss just above today’s high. If the price action continues to play out accordingly and breaks the 25dma and the level of purple 4... then wait for the retrace/trend line retest, and double up to normal lot size when the retrace breaks down bellow the recent low, readjusting your stop-loss to just above the top of the retrace...and so on.
The above strategy is slightly more aggressive than just entering after a retrace, but with smaller stakes it is affordable (for me personally).
Weekend Review
THE BIG PICTURE
This is the chart of the FTSE 100 UK Index
This is the Dow Jones.
This is the SP500
All three of the above charts show the "Bigger Picture" that I am arguing for. It seems remarkable that if you look at all three, the start of the crash shows all three making a "Descending Broadening Wedge" formation (perfectly). I am arguing that this formation, with 5 internal points be counted as a 1 down (red count). The rest as follows is 2 and 3, thus this rally we are seeing is a 4!
I am interested to hear what other Elliot Wave theorists make of this analysis, because I have yet to find someone who has been able to pick up on this pattern in all three markets. This pattern suggests to me that this move down is in fact a 5 wave (red count) big A.
So the expected decline will break the march lows, but perhaps not as far as expected by the permabears, and then we will have another big rally to make the big B, followed by one more fall to make a big C, completing the correction for this bear market. This possibility to me seems increasingly realistic, as it would allow for plenty of downside room for the big C.
RECENT ACTION
This is the recent FTSE activity.
This is the recent Dow Jones.
This is the recent SP500.
Now these three chars also have an interesting pattern, they all look like there is the possibility of an "Ascending Broadening Wedge", marked by a purple count on each chart. This also leave the possibility that the Dow and SP will push up once more towards the 50% retracement level of my argued wave 3 (red count). FTSE on the other hand looks more complete, so perhaps some sort of double top if the other two play out according to the purple count. FTSE has already hit and found trouble at the 50% retracement.
The other possibility that I consider is that the tops are in, and that the green counts will unwind in the early days of next week. There is a case that the red lines of resistance on Dow and SP will not be broken (with Dow there is also a cluster of resistance and the 50% retracement). However, looking at the Friday rallies for Dow and SP, they look particularly strong from a candlestick point of view compared to FTSE, this makes me think that the purple count is still a valid option.
I hope these charts have given you an alternative view that proves interesting. As Roy used to always say, "keep an open mind" so I am trying my best.
Please let me know what you think.
Tsunami Warning?
Firstly my apologies about not posting on here for such a long time to anyone who follows this blog. During the summer I have had the opportunity to do quite a decent amount of traveling and thinking... I took some chart print outs with me and was looking over and over and over them, searching for "The Count".
I can say that something quite interesting struck me and I have since changed (sorry) my count once more. I can say that in my last post I was expecting a retracement in FTSE that never came, this leads me to believe that it is pretty overbought at the moment... BUT, don't trade what you feel, trade what you see.
If you look back to an earlier post, I said that I thought we were seeing a double zig-zag a-b-c a-b-c, I couldn't see a clear 5 impulsive for my ( a ), but a clear 5 wave for my ( c ), so I concluded that a double zig-zag was probably on the cards.
However over summer I spotted this. Take a look at the red circle, its an expanding formation, with 5 points! In these sorts of patterns, the individual 5 waves tend to breakdown in 3 wave moves. The clearest of these are waves 3 and 5, which have a 3 wave internal structure. (so far so good)
Thus I re-label my bigger count (now in red) with he possibility of a 5 down. What this means now, is that the rally we have been seeing is still likely to be a 4, so I re-adjusted my Fib. retracements and look what we get, ESPECIALLY with today’s sell off.
Right on the money, 50% retracement of the big wave 3/C (now looking more likely to be a 3) causes real trouble for the market, resistance is strong and we see a sell off today (a strong one at that). If you look at the two blue circles, you can see that the MACD is suggesting the rally is surviving on borrowed time, we see a higher high in the price action, but the MACD has halted... this is pretty bearish.
What am I expecting to see?
At this point, the two most likely scenarios for me are:
1. The market starts to break down rapidly, making a 5 wave down formation to take out March lows (although a failed 5th is possible) and the REAL bear market rally takes off.
2. market pulls up once more to perhaps around 5000 or so, 4800 could be support, in which case we make a 5th wave up to complete c of big 4, this formation would have a extended 1st wave. THEN we start to crash.
I am feeling VERY bearish right now.
Geometric Coincidence or the Ghost of Gann?
W.D Gann was one of the most successful, and most complicated, traders that I have come across in the past year since I started looking into technical analysis. For those of you who have not heard of him, his main approach to markets was based on the idea that they moved in and displayed certain geometric, mathematical patterns. His trading record would suggest that he was not far from the “Holy Grail” of technical analysis, unfortunately he did not write down his trading secrets in an obviously revealing way, so we do not know his EXACT trading technique.
Now whilst I am no expert on Gann (although I am interested in reading his texts) I’m sure that he would have viewed Fibonacci patterns with some interest. At first I thought that Elliott Wave and Fibonacci retracements/projections were a bit of a “voodoo art”, but then I started using them more and more in my observations and now it’s my guiding theory when it comes to markets.
Here is a chart of recent FTSE activity.
The recent 3 week rally has been very sharp, very sudden and largely uninterrupted. Now although there is no RSI indicator on this chart, I suspect that it would be SCREAMING overbought. Looking at the circled recent few days of trading, it seems the market has been stunned by inactivity. We can see an “inside day” followed by a doji-ish bar, with a long upper shadow, this is pretty bearish. I suspect that this could be the top of a wave 1 of ( C ), what this means is that I expect a corrective fall before the rally continues up.
This is where the Fibonacci retracements come in. I have added the Fib. Levels from this wave low to its potential top, these are the levels which may provide areas of support for the retracement. Notice how the 50% retracement (Gann’s most important level) lies on the 4400 level. I think it important to comment that however strange it may be, the market does often take note of these “psychological” levels. Take a look at what has happened on the previous 3 occasions when the market reached 4600... it consolidated and retreated. So because of this cluster of retracement level and psychological level, my suspected target for a market retracement now is 4400, lets see what happens.
Now for the interesting part... where will it go from there? Well, this is the inspiration for the post title. There are two Fibonacci projections which you can see, these are projections of wave ( a ) and the potential wave 1 of ( c ), there is also a black dashed line running across the chart, this is the 50% retracement level of the entire market crash since late 2007 (when it began) to its lowest point. What are the chances that all 3 levels are within 100 points of each other, and that one of the Fib projection levels, is almost EXACTLY in line with the 50% retracement? I would be very surprised if the market were go to this cluster area and not show any sign of a reversal or resistance.
So perhaps Gann really had a point, perhaps mathematical and geometric patterns are more important in markets than most people would ever consider. Certainly the idea of psychology and geometry playing important roles in market movements would not be welcomed by most academics and “efficient market theorists”, but let’s see what happens from here.
Short Trend: Down? (corrective)
Medium Trend: Up
Long Trend: Down
FTSE Mirroring Dow Jones?
With the FTSE I must admit that I have had to revise my count to reflect the Dow Jones. Previously I had the FTSE labelled as a 1-2-3 down, with this recent bear market rally expected as a wave 4. It hasn’t played out the way I expected (although it’s still a possibility), I expected the market to fall away more impulsively than it actually did. Having looked at it again, I am now using what was my alternative count.
FTSE like the Dow Jones has seen an (a)-(b)-(c) decline to make a large wave (A) (again apologies for not being to label the big A). The recent bear market rally is an (a)-(b)-(c) structured wave (B). This view reflects the price action on the Dow Jones better. FTSE and the Dow Jones have historically tended to move in unison, as with other European markets.
Looking at the Fibonacci retracement levels, FTSE has found some resistance at 4720, at the 61.8% level. I suspect that it could start to make a small correction here before more upside to make a 5 up wave (c) of (B). Also notice the slight cluster of the (a) of (B) Fib. Projection and the (A) 50% retracement level (again much like the Dow Jones) between 5110 and 5190. This could be a likely target for wave (B) to terminate before the market falls away again to take out the March 2009 lows and go lower still.
The FTSE MACD is a lot more compressed than the Dow, giving the FTSE less room for manoeuvre, but none the less keep an eye on this indicator, it can prove a useful early sign of a wave (B) top. If it breaks down below its support line the market would look quite a bit more bearish and might not have enough momentum to reach 5110.
Short Trend: Down? (corrective)
Medium Trend: Up
Long Trend: Down
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