Some more chart-dumping here at the moment, but this is pretty pivotal, and will have a rather quick play-out, so go for the analysis after the evidence.
To address this opportunity in the gravity it deserves:
Well, just look at it, particularly how well it tagged levels than are important fibs as it fell down almost as if the traders knew this would happen in advance. No conspiracy theories, but this marvellous fib attachment on the way down when the fib move hasn’t been created yet will create unusual opportunities for targeting when/if we break the levels – if you’re trading on this time frame, you won’t get this clear P/L decisions in a long time – take it while it’s hot!
The massive falls on the down move pretty much fell right into the fib areas, which means that some caution is warranted but great price action trading opportunities have already amassed at these levels and will act as extra resistance or juice for any breakout push.
If you’re uncomfortable with the peak I picked, you can be a little more “aggressive” and use the more supported level price action wise of about 1746 rather than 1756. If you’re reading this, I expect you to mentally be able to subtract the respective percentages from the relevant price levels you’re looking at. It’ll get you into trades earlier, but they might also move against you much easier and is slightly “fuzzier”. Not a R/R-ratio I like.
Falling trend line broken!
Hint: white and fat. Looks pretty much like a snug fit, and the bulls pushed back. not much more to see here, but it’s somewhat related to the fibs story, and it provides a rather interesting view should we fail to initiate Bollinger Band surf. This speaks for itself.
Bollinger Band bullishness:
You should know how I use these raffs by now, but anyhow, it’s the area that will be filtered out in the next few hours. Thus, if price doesn’t replicate this move, (esp. from 1600 to 1560) then the 72 hr SMA which is the central line for the Bollinger Bands will rise! Given how tight they are as well, and pushing towards the top, the next few (say, 6-8) hours without any new market action should lead to an upwards push on the upper BB. If price follows is another matter, or more importantly, it needs not to fall back below 1580. Fingers crossed for Wall St.!
Moving Average madness:
The 72 EMA/SMA spread is bullish, with price just pushing above the 72 EMA. Also, SMA is flattening out as we saw before if we don’t get a new fall. Translation: Bullish, if the MA’s start turning and the EMA leads the curvature, big moves tend to show up. This is still fragile (1.5% price differential, we could wipe that in 2 hours these days!) but once that comes, the EMA will act as support, as will then later the SMA, preventing larger falls. Also, the 24 hr SMA is showing positive signs of support but is rather anonymous at the moment as the market seemed to die a little bit from losing all that air from 1756 to 1563.
MACD / Magic-D:
MACD not above the zero line = Negative.
Divergence between MACD and 24 hr moving average going upwards and forming a long bottom higher than the previous bottom = Positive.
The trend/1day average is sloping upwards, as is the MACD itself = Positive.
In general, this tends to shift the curve of possible market moves upwards,and also limits the downside risks, but again, it’s a slightly risky proposition. It could however be one to watch if we do get a good rally!
Summary – Technicals
All in all, we have a rather positive outlook in this time frame. Again, taking a look anywhere outside of it, we still see the 4 hr frame (what little consolidation?) or the 1 day time frame (oh, we’re back here around 1600 like after the CME margin hike? Tell me when something exciting and bullish happens!) which aren’t very supportive of this thesis. More interesting would be if we do break upwards with some force, as the longer term time frames have quite a bit of bearish latitude to catch up with, so this could be interesting if there is a larger push into the gold market. [Staring at China begins yesterday.]
One of the factors that could overturn this is if gold fails to unshackle from its correlation with the euro which would somewhat mildly put spell disaster for price and again activate the cases for the lower ranges of 1340-1200 for gold discussed in the link above. There will be sinterest in watching this, but it’s rare to have such conflicting indications between asset classes, and even time frames on the same asset class from a momentum standpoint, and still be a prisoner to correlations. Watch with great care and run in whatever direction breaks out and becomes dominant…
Markets seem rather restless, and understandably so. Again, correlations are now really the only game in town, maybe even some different beta-equivalents if you like to long/short or invest in foreign risk to take on currency risk as well, so unless they break, things will look hairy for any fundamentals viewer for the while being. Of course, you can look at repatriation of European-owned assets to explain things, but you can’t still predict anything from that thesis unless and until you dig through droves of data that will arrive too late for you to trade on anyhow. Thus, correlations are all you have left if muddle-through continues. But then again, correlations also break too late for you to trade on…
Solution: tight stops and trade your view more cautiously than before. Better be slowed down than dug down, so make sure to stay alive out there! If it matters for you to front run a correlation break trade, then by all accords you should be agile enough to rotate out of your winners and leverage them up when you have better momentum and R/R-ratios working for you!