Tag Archives: elliott wave

Market Correlations – Statements and Assumptions | 20th June, 2017

Occasionally, members and visitors to this website make a statement along the lines of “market X is doing this, so how come you think Gold is going to go up / down?”.

Such statements are based upon unacknowledged assumptions that the markets have a correlation. The problem with assumptions is they can be wrong. So is there a simple mathematical technique to determine if two sets of data are correlated, either positively or negatively?

Gold Daily 2016
Click chart to enlarge.

Yes, there is: by looking at the correlation co-efficient range between two sets of data.

Correlation co-efficient ranges from -1 to +1. A perfect positive correlation will have a correlation co-efficient of +1. A perfect negative correlation will have a correlation co-efficient of -1.

Two sets of data which have a positive correlation will have a correlation co-efficient between +0.5 to +1. Two sets of data which have a negative correlation will have a correlation co-efficient between -0.5 to -1.

Any two sets of data which have a correlation co-efficient between +0.5 and -0.5 are not correlated.

Any two sets of data which have a correlation co-efficient that spends any time between +0.5 and -0.5 does not have a correlation which is reliable. This area of unreliability is shaded in the chart above for several markets which are often assumed to have a correlation to Gold price.

GDX, US Bonds, US Crude Oil, the US dollar index and even Silver do not have a reliable correlation with Gold price. All of these markets have correlation co-efficients which spend time in the shaded areas.

Even if these markets do sometimes exhibit a correlation with Gold, the point is that because this is not always true that when it is so it cannot be assumed to continue. The math shows that it does not.

To base an analysis of Gold on an assumption that another market is moving in a particular direction, and therefore Gold must move in a particular direction, is to base the analysis on assumptions and not data. Such assumptions are unreliable, and why you will not find then in my analyses.

To base an analysis of Gold on actual data and math is more likely to lead to accurate predictions and profitable trading. This does not mean the analysis will always be right, but it does mean the analysis will be based on facts and not assumptions.

This analysis is published @ 04:13 a.m. EST.

GOLD Elliott Wave Technical Analysis – 12th April, 2017

Upwards movement continues as expected. Members have been advised to move stops up now to protect some profit. Profit targets are still the same. A new channel on the hourly chart will be used to manage long positions.

Continue reading GOLD Elliott Wave Technical Analysis – 12th April, 2017

GOLD Elliott Wave Technical Analysis – 7th April, 2017

A strong upwards movement was expected on Friday. This is what happened, but then price reversed and retraced almost all of the upwards movement.

Continue reading GOLD Elliott Wave Technical Analysis – 7th April, 2017

GOLD Elliott Wave Technical Analysis – 4th April, 2017

The main Elliott wave count expected upwards movement for Tuesday’s session, which is what has happened.

Continue reading GOLD Elliott Wave Technical Analysis – 4th April, 2017

Trading Room – 13th March, 2017

Today’s Trading Room looks at Copper, US Oil, NGas, USD Index, EURBGP and USDJPY.

To learn what the Trading Room is about see first Trading Room analysis here.

Trading Room will focus on classic technical analysis. Elliott wave analysis will be for support and for targets / invalidation points.

Copper

TECHNICAL ANALYSIS

Copper Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Volume supports downwards movement. Copper has broken below support and is now trending down.

Lighter volume for the last upwards session is slightly bearish, as is the long upper wick. On Balance Volume is at resistance.

Two concerns: Price may yet move higher before it turns back down and ATR is still declining.

ELLIOTT WAVE ANALYSIS

Copper Chart Daily 2017
Click chart to enlarge.

The invalidation point is not too far away. A small fourth wave correction may be complete.

The next wave down may exhibit some increase in momentum as it’s a fifth wave for a commodity.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

US Oil (WTI Crude – Spot)

TECHNICAL ANALYSIS

USOil Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

RSI and Stochastics can remain extreme for reasonable periods of time when US Oil trends. Oversold conditions for these two indicators does not necessarily mean a low must be in place.

Very strong volume over the last three days supports downwards movement.

Sometimes after a breakout price curves back to retest prior support or resistance. It is possible here that US Oil may turn up for a test of resistance about 50.70. However, this does not always happen.

HOURLY CHART

USOil Chart Hourly 2017
Click chart to enlarge.

While price remains within this channel expect it to continue downwards. If the channel is breached, then a larger bounce may be underway.

ELLIOTT WAVE ANALYSIS

USOil Chart Daily 2017
Click chart to enlarge.

A larger flat correction may be unfolding for a fourth wave (EWG members should refer to the US Oil monthly chart for the bigger picture here). Within a flat correction, intermediate wave (B) must retrace a minimum 0.9 length of intermediate wave (A) at 28.61.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

Natural Gas

TECHNICAL ANALYSIS

NGas Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

It is concerning that the Magee trend line is breached.

The last three daily candlesticks complete stalled pattern. The longer upper wick on the last candlestick is bearish. Declining volume for the last two upwards days is bearish.

On Balance Volume is bullish in that it is making strong new highs with price. There is some bearish divergence as noted.

Overall, it does look like this is a counter trend movement. But there is no indication it is over at this stage, so it may move higher.

ELLIOTT WAVE ANALYSIS

NGas Chart Daily 2017
Click chart to enlarge.

The fourth wave is now very close to first wave price territory. If this portion of the wave count is correct, then there is very little room for NGas to move into. The target expects a long strong extended fifth wave, typical of commodities.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

USD Index

TECHNICAL ANALYSIS

USD Index Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

If there is a resumption of the larger upwards trend, then this next wave up is in its very early stages. In the short term, it looks like USD Index has made a relatively deep correction. Support is about 100.60. If price can break above resistance at 103, then next resistance is about 103.50.

ELLIOTT WAVE ANALYSIS

USD Index Daily 2017
Click chart to enlarge.

The structure of primary wave 5 is still incomplete. If the current correction moves lower, it should find support at the lower edge of the trend channel. If that trend channel is breached, then the wave count would be in doubt.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

EURGBP

TECHNICAL ANALYSIS

EURGBP Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

It looks like EURGBP is currently at resistance and may move into a small consolidation for a few days. This may bring Stochastics down from overbought. Price may find support about 0.8635.

It looks like there is a new upwards trend beginning.

ELLIOTT WAVE ANALYSIS

EURGBP Daily 2017
Click chart to enlarge.

The upwards movement should unfold as a three wave structure, so there should be downwards movement for minor wave B within it. If the target is wrong, it may be too low.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

USDJPY

TECHNICAL ANALYSIS

USDJPY Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

This pair has proven tricky to find an entry. It is currently in a consolidation with resistance about 115.55 and support about 111.55.

The short term Fibonacci 13 day moving average has just crossed above the mid term Fibonacci 55 day moving average giving a bullish crossover.

RSI is not extreme. Stochastics is extreme, but this may remain extreme for long periods of time when this market trends.

VOLUME ANALYSIS

USDJPY Chart Daily 2017
Click chart to enlarge.

Volume for the last three upwards days showed an increase to support the rise in price. The long upper wick on the last daily candlestick is bearish.

On Balance Volume is squeezed. A break above the purple resistance line would be a reasonable bullish signal. A break below the yellow support line would be a weak bearish signal.

ELLIOTT WAVE ANALYSIS

USDJPY Daily 2017
Click chart to enlarge.

The structure of cycle wave III is still incomplete. The fifth wave up needs to unfold.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

DISCLAIMER

As always, it is essential that anyone using this analysis for trading advice manages risk carefully. Follow my two Golden Rules:

1. Always use a stop.

2. Never invest more than 1-5% of equity on any one trade.

Trading is about probabilities, not certainties. Failure to follow my two Golden Rules of trading indicates failure to manage risk.

Accept that this analysis may be wrong. It is impossible for any analyst to predict with certainty what a market will do next.

TRADING ROOM SUMMARY TABLE

New to Trading Room is a simplified table to summarise Trading Room. (Thanks to our member Dreamer for the idea.)

Subsequent posts will add a separate table for Open Positions and when applicable a third table for Closed Positions.

[Content protected for Elliott Wave Gold members only. To subscribe click here.]

 

This analysis is published @ 03:20 a.m. EST.

GOLD Elliott Wave Technical Analysis – 3rd March, 2017

Downwards movement continued as expected for the main Elliott wave count.

Continue reading GOLD Elliott Wave Technical Analysis – 3rd March, 2017

Trading Room – 28th February, 2017

Today’s Trading Room looks at Copper, USD Index and DAX.

To learn what the Trading Room is about see first Trading Room analysis here.

Trading Room will focus on classic technical analysis. Elliott wave analysis will be for support and for targets / invalidation points.

Copper

TECHNICAL ANALYSIS

Copper Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

This analysis is overall neutral, neither bullish nor bearish. ADX is now declining after reaching extreme. Divergence with price and RSI (red lines) is bearish. Either a larger consolidation or a trend change is a reasonable expectation at this time, but no trend change has yet been indicated.

Volume is so far inconclusive. Sometimes at the beginning of a bear move volume can be light as the market falls of its own weight. However, light and declining volume does not support the fall in price so far.

TREND LINE ANALYSIS

Copper Chart Weekly 2017
Click chart to enlarge.

The long term green line was perfectly touched just three weeks ago. This may provide strong resistance. The lilac line has now been breached (this is seen more clearly on the chart below). However, this lilac line is too steep for reasonable technical significance. That is the risk at this time with this analysis.

ELLIOTT WAVE ANALYSIS

Copper Chart Daily 2017
Click chart to enlarge.

The lilac line has been breached and price has now turned up to find resistance there. If the green line holds, then this lilac line should too.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

USD Index

TECHNICAL ANALYSIS

USD Index Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

This market so far is moving upwards as has been expected. I am publishing this chart again today because at this time it may be offering a good opportunity to join a trend in the relatively early stages.

ADX is below 15, so no trend is yet indicated. ATR is still declining. These two indicators together signal caution about a potential upwards trend.

RSI is neutral. MACD and Bollinger Bands are bullish.

I particularly want to draw attention to the long lower wicks of the last three daily candlesticks. These are bullish.

ELLIOTT WAVE ANALYSIS

USD Index Chart Daily 2017
Click chart to enlarge.

This chart is the same as the last published daily Elliott wave chart for USD Index with the exception of the short term support line which is slightly redrawn. Notice the long lower wicks on the last three daily candlesticks and how they all sit neatly on the trend line.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

DAX

TECHNICAL ANALYSIS

DAX Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Analysis of DAX is presented in response to a reader’s request and not because it offers a good opportunity at this time.

Some larger sideways consolidation or a deeper pullback here is a reasonable conclusion after ADX reached extreme and RSI exhibited double bearish divergence over a reasonable period of time. At this time, it looks like DAX is in a consolidation with an upwards bias. The risk here is a deeper pullback may develop.

VOLUME ANALYSIS

DAX Chart Daily 2017
Click chart to enlarge.

StockCharts do not offer volume data for international indices. This is FXCM volume data.

Watch On Balance Volume closely over coming days. If it breaks out of the current range, that may precede the next direction for price.

Strongest volume of recent days is for downwards days. This is bearish.

ELLIOTT WAVE ANALYSIS

QUARTERLY CHART

DAX Chart Quarterly 2017
Click chart to enlarge.

A Super Cycle fifth wave may be completing. Super Cycle (IV) may have been a large contracting triangle, or it may have been a more brief zigzag (alternate weekly chart below).

MONTHLY CHART

DAX Chart Monthly 2017
Click chart to enlarge.

The triangle fits, but it is not supported by MACD hovering about zero. This is not a requirement but does add confidence when it occurs.

WEEKLY CHART

DAX Chart Weekly 2017
Click chart to enlarge.

The weekly chart shows all of Super Cycle wave (V) to date. Primary wave 4 may not move into primary wave 1 price territory below 10,488.

DAILY CHART

DAX Chart Daily 2017
Click chart to enlarge.

A correction for intermediate wave (4) may not move into intermediate wave (1) price territory below 10,807. Intermediate wave (3) may be over. This is supported by classic technical analysis. A deeper pullback may occur here, maybe to the 0.236 Fibonacci ratio about 11,527. That would see intermediate wave (4) end within the price territory of the fourth wave of one lesser degree.

It is my conclusion at this time that DAX does not offer a good trading opportunity. The upwards trend looks stretched at this time, so a pullback may occur. If it does, then at its end it may offer an opportunity to join the upwards trend.

ALTERNATE MONTHLY CHART

DAX Chart Weekly 2017
Click chart to enlarge.

The conclusion for the short term may be the same even if the triangle is wrong. Cycle wave IV may have been a quicker zigzag. Cycle wave V may still be within the final fifth wave up. The daily chart would be the same for this idea.

DISCLAIMER

As always, it is essential that anyone using this analysis for trading advice manages risk carefully. Follow my two Golden Rules:

1. Always use a stop.

2. Never invest more than 1-5% of equity on any one trade.

Trading is about probabilities, not certainties. Failure to follow my two Golden Rules of trading indicates failure to manage risk.

Accept that this analysis may be wrong. It is impossible for any analyst to predict with certainty what a market will do next.

This analysis is published @ 01:12 a.m. EST on 1st March, 2017.

Trading Room – 21st February, 2017

Today’s Trading Room looks at NGas, EURUSD, USDJPY and EURGBP.

To learn what the Trading Room is about see first Trading Room analysis here.

Trading Room will focus on classic technical analysis. Elliott wave analysis will be for support and for targets / invalidation points.

NGas

TECHNICAL ANALYSIS

NGas Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Natural Gas continues lower as the last analysis expected. Today’s strong volume spike may be a selling climax. In the short term, it may be followed by a small consolidation before price may continue lower.

For the very short term, if price breaks above the steeply sloping rose trend line, then look out for a deeper correction. Expect price to fall to next support at 2.55 while price remains below that line.

This trend is not yet extreme and there is no divergence yet between price and RSI to indicate weakness.

ELLIOTT WAVE ANALYSIS

MAIN WAVE COUNT – WEEKLY CHART

NGas Chart Weekly 2017
Click chart to enlarge.

This wave count expects Natural Gas is in a new bear market to last one to several years.

MAIN WAVE COUNT – DAILY CHART

NGas Chart Daily 2017
Click chart to enlarge.

If a deeper correction does develop here after the selling climax, then it may be a primary degree fourth wave that may last a Fibonacci 13 or 21 days. First, the rose trend line on the TA chart above must be breached to indicate primary 3 is over. So far it is less than 1.618 the length of primary wave 1, so it is likely to continue further.

ALTERNATE WAVE COUNT – WEEKLY CHART

NGas Chart Weekly 2017
Click chart to enlarge.

Downwards movement from the last high may be primary wave B coming to an end as a very common expanded flat correction.

ALTERNATE WAVE COUNT – DAILY CHART

NGas Chart Daily 2017
Click chart to enlarge.

Minor wave 3 has only just broken below the lower edge of the base channel. This is how a third wave should behave. The selling climax of the 21st of February may be followed by a brief shallow correction before price continues lower to complete minor wave 3. Minor wave 4 may not move into minor wave 1 price territory.

Both Elliott wave counts expect Natural Gas to continue lower from here at least to make a new low below 2.549. That has not happened yet.

USDJPY

TECHNICAL ANALYSIS

USDJPY Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

I have published this pair often in Trading Room. That is because I consider it to be a good opportunity at this time. The idea of Trading Room is to look for markets that are trending and find entry points to join the trend in order to have a wider range of opportunities to profit from.

This is my favourite trade set up: a breach of a trend line followed by a back test of support or resistance. USDJPY has done this with the blue trend line.

The risk with this set up is that the trend line is too steep and not often tested, so price may break back below it. The risk does not at this stage look to be high, but it must be acknowledged.

Trading advice for members only: [Content protected for Elliott Wave Gold members only. To subscribe click here.]

ELLIOTT WAVE ANALYSIS

USDJPY Chart Daily 2017
Click chart to enlarge.

This market is behaving as expected so far.

EURUSD

TECHNICAL ANALYSIS

EURUSD Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Last analysis of this pair expected a bounce to unfold after the candlestick of the 15th of February showed a bullish long lower wick. This was followed by a strong upwards day, and now a strong downwards day.

This is not correctly a bearish reversal pattern; the red candlestick for the 17th of February does not engulf the green candlestick for the 16th of February. However, it is still a strong downwards day and is bearish. Price may now be finding some resistance at the Fibonacci 13 day moving average and the mid line of Bollinger Bands.

ELLIOTT WAVE ANALYSIS

EURUSD Chart Daily 2017
Click chart to enlarge.

On Balance Volume remains bearish. A purple resistance line is added. The last test is another small bearish signal.

EURGBP

TECHNICAL ANALYSIS

EURGBP Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

This pair is presented in response to a member’s request. While the Elliott wave count is bearish, this classic analysis is not so much.

The last two upwards trends reached extreme. Since the high on the 16th of January downwards movement has brought ADX down from extreme. There is again room for a trend to develop.

This market currently looks range bound. Resistance is about 0.8650 and support is about 0.8450. The bottom line is a breakout would be required before any confidence may be had that this market is trending.

ELLIOTT WAVE ANALYSIS

MONTHLY CHART

EURGBP Chart Monthly 2017
Click chart to enlarge.

The large downwards wave labelled Super Cycle wave (II) will not fit as a five wave structure. It will only fit as a three. This may be the end of the bear market.

The upwards wave labelled cycle wave I looks like a very good five wave impulse. It should be expected to reasonably be followed by a three wave down movement for a second wave correction, which is most likely to end close to the 0.618 Fibonacci ratio.

DAILY CHART

EURGBP Chart Daily 2017
Click chart to enlarge.

C has not yet moved beyond the end of A to avoid a truncation. The target has a good probability.

While classic analysis is not very bearish, this Elliott wave count is.

Use the lilac line for resistance.

Volume analysis:

The strong volume for the last session of the 21st of February supports this wave count. The fall in price is supported by volume here as a third wave should be.

On Balance Volume is giving no signal, either bullish or bearish.

DISCLAIMER

As always, it is essential that anyone using this analysis for trading advice manages risk carefully. Follow my two Golden Rules:

1. Always use a stop.

2. Never invest more than 1-5% of equity on any one trade.

Trading is about probabilities, not certainties. Failure to follow my two Golden Rules of trading indicates failure to manage risk.

Accept that this analysis may be wrong. It is impossible for any analyst to predict with certainty what a market will do next.

This analysis is published @ 12:10 a.m. EST on 22nd February, 2017.