Watching and Waiting

Watching and Waiting

Last week’s analysis turned out pretty well. The NASDAQ index dropped as the bearish Pullback 23 which we pointed out last week indicated it probably would. Gold had a nice downward move as was predicted in last weeks analysis, and the Crude Oil chart provided a nice short fade-trade from the range high. We also saw the EURUSD test the down trendline, which we publicly anticipated here last week, and this enabled us to fulfill our target on that long position.

This week there are fewer clear trading signals than last. As the ‘Fiscal Cliff” looms closer, most of the markets I am watching appear to be moving sideways in a relatively low volume holding pattern. They appear to be waiting for the American politicians to find a compromise which will address a way to pay off the federal debt which has been accumulating since President Clinton left office with a balanced budget at the turn of the Millennium. It’s interesting to note that the tax policies of the United States have not been able to generate enough revenue to balance the budget since tax cuts were passed in 2001. And then the economic crash of 2008 obviously exacerbated the problem. Consequently, the United States Treasury has had to sell even more promissory notes recently, mostly to Chinese buyers, and thereby our national debt and the threat of inflation have been accumulating even more rapidly. Now the markets are waiting to see if a few well funded legislators are willing to send the world over the cliff rather than solve the problem. I doubt the answer will come this week.

As the markets are waiting, I want to show you how I am looking at a few of my favorite charts. On the examples below I explain my analysis for several of the most commonly traded markets using some of the most highly regarded technical indicators available. These are used by both institutional and private traders across the globe and are built into many of today’s most popular trading platforms. However, if you are not familiar with these indicators please follow this link to a legend describing these tools.

The Charts and Analysis

Index Futures:

NASDAQ

(The trend orientation signals on this market are conflicting. While Radar3 Trend Strength still indicates that this market is in a bearish trend, we also see a nice pullback into the short-term Trender of a bullishly synchronized Triple Trender. As long as the Radar 2 Price Leader is still moving downward and Radar 3 Trend Strength is still bearish I will maintain my bearish bias. However, if the Radar3 Trend Strength indicator crosses above the zero line I will reassess my analysis.)

Equities Setups:

(Buy)HCP– HCP Inc.

(Notice how at the beginning of December the Radar3 Trend Strength indication crossed below zero while remaining blue. Now those blue Radar 3 histogram bars are shrinking back up toward zero again and the Radar 1 Fear/Greed and Radar 2 Price Leader indicators are bullish… This is a bullish setup. Also note that the Triple Trender has recently identified a pullback into the short-term Trender after all three Trenders turned bullish.)

Commodities:

GOLD

(No clear trading signals here, but the bears still have control as indicated by the Triple Trender, the Radar3 Trend Strength, and Radar1 Fear/Greed. Don’t sell short until the Radar2 fast line crosses back under the Radar2 slow line.)

CRUDE OIL

(This is still a range bound market, but the bears have a slight advantage. Triple Trender is bearish as well as the Radar3 Trend Strength Index. I have set the Radar1 Fear/Greed alert line at the bearish equivilant of the most recent bullish peak (-9.5). If Radar1 Fear/Greed closes significantly below that level then I will no longer consider buying the low end of this range.)

Forex:

EURUSD

(As predicted last week this market went up to test the down trendline and was rejected. Now we look for a test of the up trendline which may create a bullish pullback opportunity… we’ll see when we get there. Radar 3 Trend Strength looks more bearish than bullish.)