Need to watch MACD for any hints on divergence. Also please note that for this case to be valid, we need to stay below 108$ during trading early next week.

Here is another possibility:

This drop in SPY to ~104$ should coincede with the drop of CLF to 44.00 area. This is where I am planning to take some profits off the table. After that I would be looking for a rebound to ~48$ and then another push lower to 38-39.

Best sectors to be invested in right now are financials and energy.

I expect turbulence to continue in the EUR/USD currency pair. To save the truth, I was looking for 1.37 this week. It looks like I was dead wrong – even though we’ve had a nice base in the pair, the jobs report has send it below support lines on Friday and the next likely target is 1.34 – 1.3350. See the clear H&S pattern on the 1H chart?

Oil and Gold are definitely on the roll here. I continue to believe the yellow metal is going to 1160$ short term. As for the Black Gold, I expect it to outperform all the other asset classes. My first target is 90$, looking for 100$ by the beginning of the Summer. The price action from the February to June of last year may serve as a guidance.

My potential long would be POT, potential short is GS.

Have a nice weekend.

I have no idea of how long this party will be going, so I am placing my bets accordingly. Looking to short SPX futures near the 1135 area or on a breakdown below 1130 (see the chart below). Looking to add on the way down, otherwise will close for a loss.

SPX is continuing forming its rising wedge. To say fair enough, the chances of the sudden rise and the sudden fall are equal. For now I’ll stick with my view of a sudden collapse and will be looking to place short bets at a 1125 – 1135 area (see the chart below). There is also a possible Wyckoff Formation in the making.

GOLD also indicates, that the current rise might be done. See the resisting trend lines above? So, if you are into gold trading, I would suggest to short at 1122-1130.

PS. GOLD and SPX are trading at exactly the same level right now.

Even though, the price indicates, that the top might be in, MACD and Volume are saying we might have another push higher. Also we need to factor in Seasonal factors and continued EUR/USD weakness.

So, right now, I would be looking for the last push lower to the 1095-1100 level to close the gap. This is a good area to start accumulating longs (Divergence and Classical Patterns might help to chose the right entry point). From there on, I would be looking to a traditional yer-end rally to 1140-1150 area.

The current action looks like a classic distribution by bigger players, who were unloading their longs into the crowd. For the past couple of days, every open was met by a selloff.

My projection, is that we are stuck in a conjection area (20.00-25.00) for some time. I expect the market to continue lower, and RSX to reach 21.00-20.00 at some point. That’s a great buying point, which should coincide with 950-960 in SPX.

Phase A
In Phase A, demand has been dominant and the first significant evidence of demand becoming exhausted comes at point 1 at Preliminary Supply (PSY) and at point 2 at the Buying Climax (BC). (See the chart above.) It often occurs on wide spread and climatic volume. This is usually followed by an Automatic Reaction (AR) and then a Secondary Test (ST) of the BC, usually on diminished volume. This is essentially the inverse of Phase A in accumulation. As with accumulation, Phase A in distribution may also end without climactic action and the only evidence of exhaustion of demand is
diminishing spread and volume. Where Redistribution is concerned (a TR within a larger continuing downmove), we will see the stopping of a downmove with or without climactic action in Phase A. However, in the remainder of the TR the guiding principles and analysis within Phases B through E will be the same as within a TR of a Distribution market top.

Phase B
The points to be made here about Phase B are the same as those made for Phase B within Accumulation, except clues may begin to surface here of the supply/demand balance moving toward supply instead of demand.

Phase C
One of the ways Phase C reveals itself after the standoff in Phase B is by the “sign of weakness” (SOW) shown at point 10 on Schematic 3. This SOW is usually accompanied by significantly increased spread and volume to the downside that seems to break the standoff in Phase B. The SOW may or may not “fall through the ice,” but the subsequent rally back to point 11, a “last point of supply” (LPSY) is usually unconvincing and is likely to be accompanied by less spread and/or volume. Point 11 on both distribution Schematics 3 give us our last opportunity to cover any remaining longs and our first inviting opportunity to take a short position. An even better place would be on the rally testing point 11, because it may give us more evidence (diminished spread and volume) and/or a more tightly defined danger point. An upthrust is the opposite of a spring. It is a price move above the resistance level of a trading range that quickly reverses itself and moves back into the trading range. An upthrust is a “bull trap” – it appears to signal a start of an uptrend but in reality marks the end of the up move. The magnitude of the upthrust can be determined by the extent of the price move to new highs and the relative level of volume on that movement. Looking now at Schematic 3, Phase C may also reveal itself by a pronounced move upward, breaking through the highs of the TR. This is shown at point 11 as an “Upthrust After Distribution” (UTAD). Like the terminal shakeout discussed earlier in the accumulation schematic, this gives a false impression of the direction of the market and allows further distribution at high prices to new buyers. It also results in weak holders of short positions surrendering their positions to stronger players just before the down move begins. Should the move to new high ground be on increasing volume and “relative narrowing spread” and then return to the average level of closes of the TR, this would indicate lack of solid demand and confirm that the breakout to the upside did not indicate a TR of accumulation, but rather a formation of distribution. A third variation not shown here in schematic form would be an upthrust above the highs of the trading range with a quick fall back into the middle of the TR, but where the TR did not fully represent distribution. In this case, the TR would likely be too wide to fully represent distribution and there would be a lack of concentrated selling except in the latter portions of the TR.

Phase D
Phase D arrives and reveals itself after the tests in phase C show us the last gasps or the last hurrah of demand. In Phase D, the evidence of supply becoming dominant increases either with a break through the “ice” or with a further SOW into the TR after an upthrust. In phase D, we are also given more evidence of the probable direction of the market and the opportunity to take our first or additional short positions. Our best opportunities are at points 13, 15, and 17 as represented on our Schematics 2 and 3. These rallies represent “Last points of Supply” (LPSY) before a markdown cycle begins. Our “averaging in” of the set of positions taken within Phases C and D as described above represent a calculated approach to protect capital and maximize profit. It is important that additional short positions be added or pyramided only if our initial positions are in profit.

Phase E
In Phase E, the stock or commodity leaves the TR and supply is in control. Rallies are usually feeble. Having taken our positions, we must monitor the stock’s progress as it works out its force of distribution. Successful understanding and analysis of a trading range enables traders to identify special trading opportunities with potentially very favourable reward/risk parameters. When analysing a TR, we are first seeking to uncover what the law of supply and demand is revealing to us. However, when individual movements, rallies or reactions are not revealing with respect to supply and demand, it is important to remember the law of “effort versus result”. By comparing rallies and reactions within the trading range to each other in terms of spread, volume, velocity and price, additional clues may be given as to the stock’s strength, position and probable course. It will also be useful to employ the law of “cause and effect”. Within the dynamics of a TR, the force of accumulation or distribution gives us the cause and the potential opportunity for substantial trading profits. It will also give us the ability, with the use of point and figure charts, to project the extent of the eventual move out of the TR and help us to determine if those trading opportunities favorably meet or exceed our reward/risk parameters.