cad/jpy

A chart for luis who is having difficulty in this pair in getting direction.

The reason Luis is not seeing a clear picture is due to not looking from the 10 miles view. Always start from a high time frame and drop down. First chart is of the monthly, it is clear that price has hit sellers and is dropping back, nothing unusual or mysterious in this and is typical of how the market reacts to historic trading. Our bias on the monthly is bearish and we need see how price is playing out on lower time frames.

Monthly chart.

Weekly chart.

Two blue lines on this chart with the upper showing where the monthly supply was and the lower is weekly supply just visible on the left of the chart. The price is now within the range setup by these two price areas and last weeks weekly candle close shows no willingness on the part of the bears to push price lower and the best they have done is hit what is support....for who knows how long.

The ellipse shows price as it pushed up into the weekly supply area and how much effort was required to get through in order to reach a higher target. Clearly the amount of money placed in the market to do this must be put to work and the pace at which price dropped off two weeks ago (3rd candle back) is a clear sign of bulls wasted from the effort and plenty profit taking done.

The area within the ellipse wont have many buyers remaining and while I dislike making any predictions it typically results in price being able to fall easily through that area with little bullish reaction until buyers lower down come into play.

Daily chart.

This is where Luis focused his attention and lost out on all the good intel on the charts above. You have to know where price has been in order to have a better understanding of where it can go next. The upper blue line on this chart is weekly supply and once this was pinned the profit taking came in hard and fast, this caused the market to fall off quickly and on this time frame there was no opportunity to take a short trade. The lead up to this was a range play and difficult to find quality entries with low risk. Given the market was bullish you would have to look for entries off the bottom of the range and only when there was clear intent to take the market back up. Going down to the 4hr and lower is essential for better entries in ranges, if thats the kind of trading you prefer.

4hr chart.


Upper blue line is higher time frame supply which is clear from what we have seen already. The profit taking is very clearly seen from long bodies bearish candles breaking numerous historic buying areas. The subsequent pull back took a much longer period of time and no interest from pro money. The game for the bulls was up at this stage and now was a simple matter for pro money to get enough time in which to place their short orders into the market before it drops away.

Two minor pull backs with small ranges is what they used to sell into. The purist supply and demand traders got wiped out in this because that kind of trading alone does not take the dynamics of market sentiment into account and where a pull back is looked at as a reason to continue the previous move. This is why you must look at higher time frames to get direction and if that means waiting a week or more for the main move to continue, then it pays to do so.

Finally, the bottom of the chart shows a blue line just in view. This is the range setup from the previous time frame and you see a closer view here of this range and how price reacted off both sides of the range. The near current reaction at the bottom of the range is so far showing no interest in climbing back up.

Note the dominant bullish candles are reducing in the price range of their real bodies and over all range. The bearish response to these candles is also clear, there is a slow shift in sentiment and we have to wait for another bounce or break out of the lower end of the range. At this day of the week there wont be a good setup for a trade on this pair until at least next week.

I will leave the lower time frames out because they will only show noise at the moment and until there is better price action no closer in views are helpful.

usd/cad

An after the fact series of trades taken off the 4hr chart and exit on the 15min. I didnt drop to lower time frames for an entry because the bug I had happened upon did not make for longer periods of concentration. Even so I netted over 1100 points on three trades and scaled in for lower risk.

Weekly chart.

Blue line is weekly supply/resistance. The down arrow shows a test of the historic price action on the hard left edge of the chart. That test resulted in little interest from the bears and an immediate reply from the bulls with obvious buying coming in over a few sessions. 

Daily chart.

I now have two blue lines to show more recent price action and where support could come in. The bounce shows classic buying from the place I want to see it most, off support and where the intention is clear. You wont always see price action so clear on all time frames and its best to take your lead off multiple time frames. Clear for all to see is the buying with strong and immediate response to any bearish activity. There was a long wait for such long trades if you had missed the entries months ago.

4hr chart.


These were the three entries I took and scaled into the position. My stop was below the swings and not much risk involved. You can see how much effort went into taking price higher by the bulls, they had to allow price come back down low several times before enough orders were to the long side and where they had enough reserve to give price one hard push over 4hrs to break through resistance and take the heat of short orders, note the instant pull back, they really wanted price out and gone from this area quickly.

I closed all positions manually a few hours before the market close. Now it is a matter of wait and see how far price will come back and look for more long entries. One other thing I will point out is the false bearish move before my left most entry. If that didnt get you short and you saw the bullish reaction, there was a good sign of who was in control and that more was likely to come if you wait.

usd/jpy

Been unwell for the past few weeks and only now coming back to normality, I have had little interest in trading while my system fought off some unwanted invaders. Anyway, lets get down to business.

Here is a long term view of usd/jpy which is setting up nicely and a few other pairs have a similar profile and this will attract the interest of long term investors. This is my 10 mile view and the chart is zoomed out for an overall best big picture look. What we see is long term support and buying on the bottom grey box which price reached back in March of 2012 and spent a few months in there before leaving and returning for a second hit which is where professional money bought the usd by the truck load. There is nothing magical happening here and its simple support/buying at the major areas of interest on the higher time frames.

The middle grey box was near term target for the pro bulls and it is also a support and resistance area. While not very clear on this image is price is now testing this area to see will it hold i.e is there enough interest to continue with the bullish move. Finally the upper box is the next bullish target is price decides its time to go. Patience is key to letting these time frames roll around and let the next cycle begin. But most day traders are too fixated on the 1min and 5min chart with the little candle ticking away on the hard right edge of the screen driving their decisions. You cannot catch the bottom or top of any move so let price move and gain support if it is going in the bullish direction and let it hit resistance if it is going bearish, then soon after you will see if pro money is interested, or of the move was nothing more than a fake move.

Monthly chart first.

Weekly chart.

This is getting interesting here, I left the middle grey box so you can see how price is reacting. We pierced the upper part of the box and then came back down into it and closed the week with a bullish candle where the tail touched near term support (on this time frame) and the body closed at the top of the box. So far this is nothing more than a pull back with no proof yet of continuation or the start of a bearish move. What I see is the bulls still control this pair. It is a good place to watch carefully for an entry on a lower time frame.

Daily chart.

Once you get a feel for the pair long term it is time to get closer into the daily price action. The grey box to the left is the same box you see from the chart above. The box to the right is where this mess will sort itself out. There is an 84 point range where the fight will be conducted and you can see from the down arrow to the left of the box we saw a large bearish candle that took out historic sellers....relatively historic because on this time frame its all selling from only a few days ago. That bearish candle closed strong with a long body, but with a tail and this came about by buyers. Knowing buyers are active in that area it is a great place to hit day traders with a fake move. The market was gapped down, closed with a tiny bearish candle and because the buyers were taken out and day trading bears now in the market price had to drop away. The next day shows continued selling and pro money interested only after the shake out where the bulls took back control. If bears were in control we would not see a major reverse in price in one day and price close at the top of the candles range and above the previous and highly bearish looking candle.

The next day saw more buying and the next day again a bearish candle but its body closing within the 3rd last candle. The bears are not in control. Finally the last candle where shows no interest from anyone and price closed still within the range of the 3rd last candle. The range of the grey box is where the action will play out and take note of the candle arrowed, there are no sellers in large numbers within that area, which makes it much easier for price to rise. You should also know by now that selling takes place from higher prices and not lower price. The setup for a major move is not something that should come as a surprise, all is planned well in advance by professional money.

What we can say for certain is that the bearish move did not result in lower prices after the big bearish push. It could be there is too much buying, but speculation and what you think looses money. Is is far better to trade what you see and only trade quality setups where the higher time frames shout loudly about direction.

4hr chart.

 A closer look at the price action shown in the right most grey box from the above chart. You can see the interest from the bears has dried up, any attempt to push prices lower has been countered by buyers which had to use little effort (money) to hold price at these levels. I drew a new box which is yet a range within a large range, the markets are fractals of the various time frames and there are trading styles for every time frame and pocket.

In case you have not worked it out yet, the two blue lines are near term targets and also support and resistance. Which ever one breaks and is retested later on, the main move takes off from there. However not all is a 100% deal in trading and you may not see a retest with enough interest in taking price back, its a call you have to make as you develop. Note the range values I gave, thats a lot of heat to take if you get in too early. Let price action guide you.

1hr chart.

Now we start getting into the noiser side of trading and you need to develop and good eye before venturing to the 1hr and lower. It is easier for pro money to reverse price and play all sorts of games from the 1hr and lower in order for them to gain cheaper prices for their intended move.

There are three clear groups of buying came in to support price, can you see them?..if not, put some time into price action research. The white box is a small range where 1 and 5min scalpers will have great fun and high heart rates playing the range. Good luck to them, you wont find me at that game.

The longer amount of time price spends in a range, the more spectacular the break will be when it comes. There is a lot of money keeping price up and keeping price down, someone (many) will have to be funded well enough to retain their positions and push price out of the range in their direction, and hold the tide against the other side when the pull back comes, but if they manage to do this the flood of stops and new orders to help price move even faster in their direction will be the ultimate pay off. We are at a price area of interest and there will be plenty time to get on the right side of the move. 

The sobbing course retailer

An upset online retailer of lies (secret course) sent a snotty email lecturing me that it is not nice to reveal the secrets of the market and put a single view point as the only way to trade. Well Mr. Retailer, if you took the time to check around you would see I never claimed to have the one or only way to trade.

And as for your secrets. Let me say this, nothing is secret in the markets and there are no hidden signals or special indicators. You are selling junk that does not work and I can prove it over and over again.  If you have a secret indicator I will be happy to poke holes in it. But the 497USD asking price tag wont be paid by me. If you are the developer of such a fantastic course, how come you dont trade with it and make a lot more money trading rather than looking for more victims, er I mean customers.

It is the season of giving and I found a little picture just for you. Replace the tree with your secret course.

Indicator nonsense

I could fill a library with the amount of effort and time I put into examining all sorts of indicators over the years. But in the interests of keeping my sanity and yours, I will give a brief demonstration of why the use of indicators will negatively effect your trading.

Excuse any typos and other errors, I have a wintery gift of a chesty bug. Doc has self prescribed Whisky for this.

A few charts of the EUR/JPY on the daily will suffice for demonstration purposes.

Here is a very common method used by both expensive online courses and so called 'secret' indicators. It is nothing more than two moving averages and the most common values are a 7/21 or 8/21 moving averages.

The people who they invented or discovered this clearly have not yet reached the age of reason or applied logical analysis to the approach. In fact the same approach has been used for many many years and in this age of electronic communication we see the same thing rehashed over and over again.

Cast your eye over the chart below and look for the three red up arrows to the right. The entire 'secret' of this method is that price gets support in the case of a bullish move off either of the moving averages. On the chart it looks plausible. As I have mentioned many times in the past, engage your logical brain and now remove said moving averages from the chart and has price still moved?

Of course it has, any moving average has a zero net effect on price and the fact of a line or lines plotted against price means price WILL and HAS moved long before the indicator paints the next part of its path. What about the rest of the chart. Can you pick out where price is either valid against a bullish pr bearish move inside the range, I cant.

In a trending market you could use a lucky rabbits foot, crystal ball or some voodoo doll and still be correct, because in trending markets everything will show it works. All indicators fail within ranges and all fail prior to a trend is established. The key is being in the market before the major move.

Lets move on to the next popular indicator, the MACD. Focus on the indicator and take note of the price swing and the indicator peaks on either side of the zero line. Note the over shoot and this is common to many other indicators too. Some use the MACD for what they like to call divergence. This is fantasy dressed up as reality. Price DOES NOT and CAN NOT diverge. It is the silly indicator that diverges from reality/truth. I tore apart the math in these indicators and I kept asking myself the same question, why does the programmer take it upon himself to more and decide some function must be made around price for his indicator to work. It makes no sense to manipulate price so that there is an error plotted in an indicator which distracts you from what you should look at, price itself.

Next up, Bollinger bands. Does anything escape?...nope!

On the above chart ignore the blue arrows, same here, these are for a later chart.

On this chart I am sure many of you will look at it and think, hmm this might work, each time price hit the lower band it showed a valid long entry until it hit the upper band. Ah, how great is life when viewed through rose tinted glasses. This is once again the trend nature of indicators which lull you into a false sense of security and you start to develop a dependency on one or more indicator that you feel has proven to work over time. Let me burst that bubble in the next chart which is also using Bollinger bands.

Lets see what different in this chart. Oh dear, the previous longs of the lower band no longer work. In fact trades taken off the upper band only work on a few occasions too. How can this be, who lied to you. The fact remains no indicator is infallible and all fall foul of reality. Ask the most basic question you can, if any indicator worked there would be no need to pay large salaries to institutional traders and computers could do it instead. Correct and also incorrect, if the market for driven purely by computers it would fail to work in a short period of time because too much logic comes into play and all the emotional driven trades and the failures of humans would no longer be there to allow all the clever tricks manipulate the market.

What?!.....you are telling us the financial markets are manipulated?...welcome to the real world!

Last chart is my own simplistic view of the market.

First up is the clear nature of the chart, although I have cluttered it with some arrows for your benefit. The red arrows are the moving average guys entries, the blue arrows are my entries and taken with the knowledge of supply/demand, support/resistance, price action and the patience to wait. Of course I would also have taken the red arrow entry (1 only) but for my style of trading they are icing on the cake and nothing more than further scaling into the position. The last two red arrows would not have been a valid entry due to price being too close to a higher time frame target and I want to be far away from that before I take a trade.

The upper blue line is higher time frame interest which has been broken and may yet act as support. Clearly is has been broken in grand style, but note the latest price action, it is slowing down and all the other indicators on the various charts are way over cooked and in cuckoo land.

If you use anything that takes price and performs some action on it that results in a new way to view price, all you do is remove yourself further and further from a key part of trading. When I trade I have nothing at all on my charts and the lines and arrows you see here are all for your benefit. The only tool I use in the cross hair to let me check if price is getting close to a price range that has peaked my interest long before price has even moved toward the price range.

In closing out the year, I wish you all seasons greetings and better trading for 2014.

Doc

Gold, alternative intel collection

Gold on the monthly.

Not much new you say, correct. For the moment just keep an eye on the lines. Note price has not broken the most recent low and as I mentioned before, this I believe is weak support and I cannot see buyers coming in.

Gold on the monthly.

I know what you are saying, why two Gold monthly charts Doc, too much Christmas cheer?

Not at all, this is a monthly Gold chart but traded in Euro and not US Dollar. Now take note of the same lines and see how price has comfortably pushed through what was weak support and no buyers came in. Given the month is not yet finished there is the possibility of the monthly candle closing with a long tail. Until I see it I cant forecast any further, however on the balance of probability I think it is unlikely it will close above the line.

Gold has always been a risk haven and given the US Fed has not had a negative impact on the US markets with the taper program and the Europeans same day announcement of a new banking fix for the future...which of course was a pure fluke both news releases came on the same day (insert much eye rolling here) the effect on US and EU markets was not negative, in fact positive.

The sky is no longer falling and the once poisonous banks are again attracting stock buyers and some property companies loading up on bricks and mortar. A sign pro money from the practical world feel its time to invest again.

With that kind of outlook Gold then looks less attractive when there are better opportunities around the corner and faster ways to make money. Also the tool of using more than one financial outlook on any market comes in useful for hints at whats in store. Like always, make your own decisions and use all the tools you can and all the info you can get, once it comes from valid sources.

The falling Gold price will likely send the AUD lower and the CAD will also be one to watch. The good Canucks may see a boom time if their eneregy reserves can be sent to the US via practical means. In plain english, get that pipeline in place and it will be great for Canada. And while on the energy track, there will be interesting times for US companies involved with shale gas exports. Russia will then become more competitive with their pricing and the 100USD a barrel for oil suddenly becomes less of a problem like it has always been. Politics, dont you just love to hate it.

US Oil

A reminder to watch US Oil for near term direction.

Weekly chart showing 100USD with a blue line. This is an area that needs careful attention to see where the pro's will take it.

4hr chart.

Note to real sluggish price action and the last major push resulted in sellers coming into the market and the last buyers still unable to break the most recent high. The bulls have yet to show their interest in higher prices and the second last candle shows indecision.