At this point, it’s more likely than not going to be a situation where you are waiting for signs of exhaustion that you can start shorting.

The British pound has reversed quite massively during the trading session on Thursday, recapturing the 1.20 level as traders are now starting to focus on the jobs number coming out for the Friday session. At this point, the market is likely to see a lot of resistance, perhaps near the 1.22 level. This is an area that previously had seen a bit of selling pressure, and of course, we also have perhaps the possibility of a bit of short-covering causing the recovery.

At this point, it’s more likely than not going to be a situation where you are waiting for signs of exhaustion that you can start shorting, because the US dollar is extraordinarily strong, and should continue to be so going forward. Because of this, the market then will more than likely continue the longer-term downtrend, and once we get the jobs number out of the way one would think that there should be a bit of continuation.

If we were to turn around and break above the 1.22 level, then it’s possible that we could go looking to the 50 Day EMA which is at the 1.24 level, which is also an area where we have seen interest in both directions. In other words, there should be a bit of “market memory” at that level, which could cause some issues as well. At the very least we need to get above the 1.24 level to take any rally seriously. I do believe at this point we have a situation where the market is going to continue to see rallies sold into, but that might be a tall order heading into the jobs number. The real tell on where we are going next will probably show up at the end of the day on Friday, as by then people will show whether or not they are willing to hold British pounds or US dollars heading into the weekend.

The real trade probably shows up on Monday, because even if we were to turn around the entire trend, you have plenty of time to get involved. A trend change is a process, not something that happens immediately unless there’s some type of external factor. We do not have an external factor this point so patience will be key.

You may need to pay attention to Asia, specifically the Nikkei 225, and how it behaves overnight to get an idea of how the DAX may behave.

The German DAX Index initially rallied on Tuesday to reach the €13,450 level before turning back around. By doing so, it suggests that we are going to continue to see negative pressure, especially as the dreaded “shooting star” formed by the end of the day. It’s worth noting that the most recent impulsive candles have all been red and that suggests that there is plenty of interest in selling.

That being said, we have bounced quite sufficiently from the €13,000 level to suggest that perhaps it is important, and there are buyers down there willing to defend it. If we break down below the €13,000 level, then it is likely that the DAX will break down rather significantly, perhaps reaching down to the €12,500 level. The German index will have a lot of the same issues that other indices have around the world right now, as there is a real concern about growth, or perhaps the lack thereof. With that in mind, feeding rallies continue to make sense, which is exactly what people did during the day.

The alternative scenario is if we turn around and take out the big massive red candlestick from Thursday of last week, meaning that we can break above the €13,750 level. If we do that, it would be a very positive turn of events, perhaps opening up a move to the €14,000 level where the 50-day EMA presently sets. I’m not looking for that move but would have to pay close attention to it if it does in fact occur. Keep in mind that the DAX should move right along with other indices around the world, so you may need to pay attention to Asia, specifically the Nikkei 225, and how it behaves overnight to get an idea of how the DAX may behave. Granted, it doesn’t have to follow it, but it gives you a good idea as to what the risk appetite is going to be around the world.

I do think eventually the sellers come back, so not looking for the market to end the downtrend anytime soon. Because of this, I’m simply looking for signs of exhaustion that I can sell into. Unfortunately, it happened much quicker than I would’ve thought so, therefore, I’m still looking for opportunities at this point. Ultimately, DAX is likely to continue falling.

I would be cautious about my position size, but I certainly only have one direction in mind.

The gold market had initially fallen on Friday and then fell even quicker once the inflation numbers came out much hotter than anticipated. However, the bond market reversed as people started to buy bonds in fear of a recession, and in a bit of a knock-on effect, this market has skyrocketed to pierce the 50-day EMA.

Looking at this chart, if we continue to go higher from here, we will more than likely attack the $1900 level. If we can break above the $1900 level, then it’s likely that we could see the gold market looking to the $2000 level. In general, I do like gold for the longer term, and after the action that we had seen during the day on Friday, it does suggest that there are plenty of buyers out there. I think now you can look at this as a “buy on the dips” type of scenario unless we see a significant shot higher in interest rates.

If we were to turn around, you have to believe that there is a significant amount of support at the $1835 level. Furthermore, you probably have support at the $1825 level as well. In other words, this is a market that will continue to be noisy, but it certainly looks as if people are willing to get involved and start getting long on any type of value that is offered. Ultimately, I do think that we eventually find the $2000 level, as the old correlation between inflation and gold reemerged during the Friday session.

I would be cautious about my position size, but I certainly only have one direction in mind. The Friday session changed almost everything, and now it’s simply a matter of trying to find some type of value. I don’t know that I would jump into this market right away, but if we get an opportunity to take advantage of value, then that’s what you should be doing. The 200-day EMA is flat and slicing through the candlestick for the day, so it shows that we are going to continue to see a lot of consolidation, and if we were to get the second impulsive candlestick, that will change the entire complexity of the market.

At this juncture, I believe that it is easier to buy the dips than it is to sell the rips.

The West Texas Intermediate Crude Oil market initially fell during the trading session on Thursday to reach the crucial 50 Day EMA. This is an indicator that begins significant support all the way down to the bottom of the channel that I have clearly marked on the chart. The fact that we have pulled back to that area and balanced is a good sign, and it does suggest that we are probably going to continue to see buyers take advantage of value as it occurs. Ultimately, I think this is a market that tries to get back to the top of the channel, which is closer to the $115 level.

It is worth noting that the candlestick does look a lot like a hammer, and it does suggest that we are going to continue to see a lot of buyers on dips. That has been the case for a while, even though the market has been rather choppy. It is worth noting that there are concerns about demand, but that being said it is likely that we are going to continue to see more concern about the lack of supply. With that being the case, we will continue to see a lot of noisy behavior. However, one of the easiest ways to trade this market is to simply pay attention to the price.

It is difficult to imagine seeing anything other than an up-trending channel at the moment, and the price has been pulling back only to find buyers yet again. There is no reason to think that it is going to change anytime soon, and therefore I think it is likely that we will continue to see more of a grind higher. The market will continue to be noisy, but at the end of the day, it is a market that is trying to find its way to the $120 level.

However, if we were to turn around a breakdown, it is not until we get below the $100 level that I become concerned with the uptrend. At that point, it is possible that we could see a significant breakdown in price, but it will take a significant amount of selling pressure to make that happen. At this juncture, I believe that it is easier to buy the dips than it is to sell the rips.

 

I think it is probably going to continue to be very difficult and volatile trading.

The FTSE 100 broke down rather significantly on Friday as the futures market got pounded from the start. The futures market drop down to the 7300 region before bouncing rather drastically, perhaps in a bid to stay in the consolidation area that we have been in for a while.

Looking at the chart, you can see that we continue to look threatening, but it is probably worth noting that support did hold fairly well. If we can break down below the 7300 level, then it is likely that we will go much lower after initially wiping out the 200-day EMA underneath. If we were to break down below that level, then we will have a brutal selloff that should continue to be followed, perhaps allowing the FTSE 100 to drop down to the 7000 level. After all, one of the biggest problems that we are going to see in the FTSE 100 is the fact that the Bank of England has recently stated that they are going to anticipate a recession, and that suggests that the British economy is going to continue to struggle.

Looking at the chart, if we were to rally and take out the 7500 level, we may make another attempt to break out to the upside but I just do not see that being likely. If we were to see that happen, we could begin to build up massive pressure and perhaps even start to look at this market through the prism of an inverse head and shoulders. That seems to be very unlikely, but I suppose at this point in time anything is possible. If the Bank of England starts to loosen monetary policy, then it is possible we may see London traders celebrate. However, I think there are a lot of moving pieces out there that continue to put risk into the market, not only this one but pretty much every other market that I follow.

Pay close attention to other indices around the world because they all tend to be moving in the same general direction as of late. There are concerns about inflation, war, and shortages in the supply chain. Because of this, I think it is probably going to continue to be very difficult and volatile trading.

The market is more likely than not going to continue to see buyers on dips, as we have seen for quite some time.

The West Texas Intermediate Crude Oil market pulled back just a bit on Tuesday as we continue to see a lot of consolidation in this market. Regardless, there does seem to be a lot of buying pressure underneath, and it does suggest that every time we pull back there will more than likely be buyers willing to step in and push this market higher. The 50-day EMA sits just above the $100 level, and I think a lot of people will look at that as a potential support level.

If we were to break down below there, then it is possible that the uptrend line from the massive triangle could offer plenty of support. In general, if we break above the shooting star from the Friday session, it opens up the possibility of a much bigger move to the upside. At that point, we would break above the $110 level, and go looking to reach the $115 level.

If we were to do the upward movement, then the market could continue the overall uptrend, which could therefore bring in even more momentum. Keep in mind that there are a lot of concerns about Russian oil, and that will be reflected in the market. The market breaking above the $115 level could send the market much higher, perhaps reaching as high as the $130 level.

If we were to turn around and break down below the uptrend line from the bottom of the triangle, then we could see this market break down to the $90 level. That being said, the market is more likely than not going to continue to see buyers on dips, as we have seen for quite some time. The “measured move” of the triangle could be back to the highs at $130, but I do not think it will make it there easily. It certainly looks as if we have seen a lot of upward pressure in the short term, so I think it is probably only a matter of time before the buyers overwhelm the entire situation. The US dollar strengthening could cause a little bit of downward pressure, but at the end of the day it is only a sideshow, so I think both could rise at the same time over the longer term.

Gold continues to be very noisy, but it is obvious that the market is at least trying to defend the overall uptrend as things stand.

Gold markets initially fell on Thursday to break down below the crucial $1880 level. However, by the middle of the session, it appears that there has been a complete change of heart, as traders have stepped in and started buying again. The hammer that is forming for the day is right at the bottom of the support, and quite frankly where you need to see it if you are even remotely bullish on gold.

While it is obvious that the US dollar is strengthening against almost everything, gold has been moving higher with the dollar for the most part, at least until the last couple of days. At this juncture, we could see a potential move much higher, but we need to get past the $1905 level. If we clear that area, it would be a significant sign of strength and could cause a complete turnaround in this market. It is probably worth noting that we tested the 200 Day EMA, or at least came close to it during the trading session.

With a lot of inflation out there, it does make quite a bit of sense that people will be looking to buy gold to protect their wealth. That being said, bond yields in America have been a major detriment to the gold market, so we will have to pay close attention to that. The ability to gain “real yields” in the bond market makes the paper much more attractive than metal.

If we were to break down below the 200 Day EMA, I suspect at that point gold would more than likely go looking to reach the $1800 level. I do not expect that move, and quite frankly we are oversold regardless. A simple bounce to the 50-Day EMA could be expected, but that does not mean that it is going to be easily accomplished. If we break above the 50-Day EMA, then gold more than likely will go looking to reach the $1970 level above. Because of that, then I think you could start to see a case made for longer-term bullish pressure. Gold continues to be very noisy, and therefore you have to be cautious, but I think it is obvious that the market is at least trying to defend the overall uptrend as things stand.