JTH

The Charts don't lie

Regardless of Friday's news induced market action prices can always be justified by looking at the charts.

For AGG This is a large pullback for such a short period of time. I myself exited the I fund on December 2nd and entered AGG because I believed we would catch support at the 38.3% Fibonacci level which also coincided with a trendline from the 3rd to 1st previous swing low. Turns ouy this level didn't hold, so we tested the next lower level at 104.45

We ended up briefly breaking through a 61.8% retracement and bouncing off the second lower trendline which also coincides with the 75 Day Simple Moving Average. If we break through this level then we should be very concerned.

But I suppose there is a glimmer of good news to be found in the huge spike in Friday's volume. This could be telling us buyer's weren't willing to let prices fall further and as a result we could have put in the next swing low. Only time will tell...


If you want to be confused, just listen to me spout about and fumble through the S&P 500. The way I see it, intraday prices are forming a descending triangle while closing prices are forming a Broadening Bottom. But the truth of the matter is in the bigger picture we are trading sideways within an ascending price channel.


Here's some good news, the Transports made and closed with a higher high.


The Dollar did precisely what I thought it would do, I just didn't think it would do it all in 1 day. I wouldn't be surprised to see it break out above this channel , however I do believe if it does it will be briefly and will resume the downward direction within the descending channel.


Now for the real story behind Friday's wild price action... Looking at the gold ETF GLD we were given the first clue on November 24th when the ADX trend strength indicator peaked at 47.59 That's the highest ADX number going back over 5 years and when a really strong ADX peaks, it often is a sign of a top or bottom.

The second clue was the two successive gap ups in price on Dec 1st & 2nd. I saw these same gaps in Silver and this was one of the reasons I exited the I-fund.

The third clue was price which peaked out at 119.54 just shy of the big fat 120 mark. Did you notice the last major swing low was at 100.65? Like it, hate it, believe it or not sometimes common rounded numbers can have an effect on how we trade the markets.

It was the perfect suckers play and all the smart traders got out at the top. Prices retraced to the 38.2% Fibonacci level before fighting back. Will they hold from here?


Take care... Jason