Prediction: The rally is probably over!

...there, I said it!

For you 'equists' out there (is that a word?), I hope I'm wrong...but there is a lot of evidence that is pointing to a correction from here, and I want to show you some things that I have found.

I mean, it's bound to happen, right? We've come so far and it's not healthy investing in a market that is obviously overbought. Unwind those oscillators, darn it!

Reason 1, the trade triangles tell all

One of the biggest reasons that this account is doing so well is because of the Trade Triangles of Market Club. I often post my statements on this blog, and the triangles are a lot to do with their great success.

Check out the DOW chart I drew in Market Club. I went back to October 2008 because that is the Dow's all time high. In July, there was a green weekly triangle issued BUT, I suspect we will get a red DOWN triangle issued soon (clicking on the charts give you a clearer view):

Notice how far it retraced and how it seems to be stopping at the 38% Fibonacci line. Now in this next chart, I went closeup. Take a look at the MACD and see how it is crossing:

Reason 2, Dollar inverse Head and Shoulders?

I showed you a chart of a Dollar ETF that Jack Steiman drew, last weekend. You'll see that we are due for a breakout of some sort. Ok...now take a look at the following chart from Action Forex. See the inverse head and shoulders?:

Reason 3: Where's the inflation?

(fundamental)

(I am short 1/3 of a lot of Gold.) The Fed kept rates at 0-0.25%, which was expected. Normally, the Fed would actively try to maintain a specific rate of inflation, usually 3-4%. Now, obviously, the goal is to make it cheap to borrow. If rates continue to stay here, I would suggest that, at least for now, inflation is low, and it may be a while before Gold breaks $1000.

Consumer consumption is weak, unfortunately...because I have my own retail business. And CPI had its biggest decline in 60 years.

(technical)

Are commodities going to keep moving up? Well, here's another DOWN trade triangle issued by Market Club, this time for the CRB index. Also note the MACD about to cross. I'm not sure the exact percentage of Gold in this, but I think it's around 12% (clicking on the chart gives you a clearer view):

Reason 4: The 10 Year Treasury

It looks like the Dollar has based here. There are a few charts to show you, but the most significant is the 10 Year Yield chart:

Notice the top trend line. It just looks like we have hit a high in the 10 year yield. I don't trade this, but, to be safe, if there is a close below 3 1/4%, you can see treasuries rising from here, which will push the Dollar up. If the Dollar is done with it's correction, we will see equities and Gold go down.

Just shorted Gold

Gold was trading at the upper end of an obvious wedge that we discussed a few days ago, so I decided to take profits.

After that, the wedge was broken to the downside. So, based on that, I put a sell order in to go short @941. The position never hit...but then we broke again. So what I did today was short at the market a small 3 mini-lot position...and then I will add to it if we get a close on the 4H below 940...one of the fundamental techniques used by Bob Iaccino.

However, he determines these prices differently (proprietary.) My analysis here is based on my charts and Market Club...which just issued a new, red, DOWN triangle for Crude today, and I think Gold will follow based on the above trendline.

Both of the aforementioned have been very effective and crucial to my account's success...they are just very different.

That was quick!

I just placed a Buy Limit to go long on the same USD/Yen pair @94.12. This looks like an excellent trade because of Fibonacci support...Still trying to confirm...but I think I'll take this if it happens. Given the support here, I'll give myself a tight stop. This just looks like a retracement waiting to happen...

Dow down 129 while the USD/Yen travels toward my limit (hopefully.)

Trade Update

Out of US/Yen trade with almost a $1000 loss. If you are a Bob Iaccino fan, like I am, you'll know that they focus on CUMULATIVE pips and are doing great for 2009. (Also, they make all the trades that are recommended.)

Most times their trades work, sometimes they don't. Cumultively, they are even for the last 2 weeks...THAT'S TRADING! (You lose a couple of rounds, but win the bout.)
...and that's why I do my own research as well e.g. the trade before this one. Using multiple sources has given this blog's accounts the success it's had.

Searching for additional trades but looks like slim pickings...

New Trade

Just went long 1 Lot USD/Yen. It is important to note that Trader Outlook came up with this trade, not because anybody believes that equities are going up here (although they may,) but because of technical analysis and previous support and resistance levels.

Entry= 95.72
T1= 97.59
T2= 98.33
Stop= 94.79

The way the trade is set up is that after first target is reached, half the position is covered while the Stop is moved to b/e (entry point of 95.72.)

Remember that as a trader, we should all look for confirmations for our decisions. One of the many for this trade is the breakout of the wedge for this pair I discussed in an earlier post. (Just remember Steiman's levels if you are equity traders.)

Trade analysis

Here are the recent trades (clicking on the image gives you a clearer view):

For those who don't use stop losses, I suggest you reconsider trading this way! I didn't think it would be a good idea to hold this position with the Fed making their statement today, but if I had, my use of stop losses makes trading stress-free. Because I already knew my worst (and best) case scenarios before even entering the trade, the news had no affect.

I was convinced that equities would sell off today, but the Fed was very positive and equities responded upwards...HOWEVER, I don't trade the news, I trade charts.

Combined 4 accounts are up over 100% since January. The following two are active right now. I'll get to the other statements soon:

Update on this account here. (Zip file.)
Update on Bob Iaccino account here.

Trade Update

Late last night, I decided to cover the second half of the short for an additional $400 profit. New statement later.

A Bob Iaccino trade technique employed...

This was not a trade by Trader Outlook (Bob Iaccino,) but the techniques were...

I covered half my position (1 Lot) and moved my stop up to b/e for the second half (also 1 Lot.) You'll notice a b/e point different then the stop from the last post because I added to the position, thus changing the average entry price to 1.4153. The first half netted a $180 profit.

By doing things this way, I am guaranteeing myself a profit and I can let the other half run to 1.40 if I choose, and know that the worst I can do on the other half is finish with a zero loss.

p.s. Gold trade hasn't hit yet (GTC.)

Considering adding to the trade

There is a company out there called Keystone Trading. They are strictly stock traders...but it's one of their basic trading premises that apply to this post.

They discuss "momentum" and adding to a winning trade (I am slightly up as of this writing.) I am going to consider shorting another Lot because of the way the S+P closed today and the 'hammer' that printed for yesterday's daily close.

The SDS ETF (which is a short equity fund) also closed at a higher high today. Not much data, but that also looks like it's forming a base. (Clicking on the chart gives you a clearer view):













This is a chart from Market Club...one of the four biggest factors in this account's success. Notice that all three monthly, weekly and daily triangles are down. BUT, I have a feeling that an UP daily will be issued in my mailbox soon.

New Trade

My Gold trade has not been triggered yet, but I did just go short the EUR/USD. The charts show continued equity weakness and I think this pair will follow along. I try to implement techniques I learn from other traders e.g. Bob Iaccino, and this one has a superb risk/reward.

Entry= 1.4156
T1= 141.09
Stop= 141.86

Could be shorting Gold

Last night I set a Sell Stop to sell Gold at 941...

I wrote about taking profits on Gold a few days ago. Note the wedge and where I may take profits this time.

Dollar update

Looks like the Dollar ETF I discussed earlier has broken out of that wedge. Of course nothing concrete yet...you want to see confirmation to trade this...but here's the email I got from Market Club just now:

(I set an alert when I made the post over the weekend and I got something like what you see below. You guys should try this free for 30 days. They are a big reason my accounts do so well.)

-----------------------------

MarketClub Smart Scan Alert for UUP Price Breakout Above POWERSHARES DB USD BULL (PACF_UUP) has broken above your preset level of 23.58 and is now trading at 23.59 +0.11 (+0.47%)
UUP Streaming Chart
http://www.ino.com/info/191/CD3603/&dp=0&l=0&campaignid=8
UUP Chart Analysis Details
http://www.ino.com/info/191/CD3603/&dp=0&l=0&campaignid=8

POWERSHARES DB USD BULL (PACF_UUP)
Last 23.59 Net Change +0.11 (+0.47%) Score -55
Volume 1385884
Open 23.54
Day High 23.59
Day Low 23.50
Prev Close 23.48

Oh, by the way...

With regards to the last post...

Does anybody read Jamie Saettele of FX Daily? Well, check out this eerie article he did April 30th based on Elliot Waves. Equities (and the EUR/USD) had barely made their move when he wrote this. Scroll 3/4 of the page down and pay particular attention to where he said equities would go back then, and where it will go now...ouch!

Scary how much he's got right so far. I trade Forex, so it doesn't really matter. But, for the person who is looking to chase the market here...just be careful, and look for 4 hour or daily closings above the price points that Jack Steiman discusses in the last post before deciding to get in (Nas 2015 and S+P 1036.)

And now...a case for the bears

I think thet the breakout in the US/YEN is very bullish for equities, but I just finished reading Jack Steiman's weekend analysis of equities and he points out some dangerous points to watch. (Could this be a false breakout in this pair?)

We all know the dollar has taken a beating and is obviously oversold...and below is a chart that Jack drew which is worth watching. See the killer wedge in this Dollar ETF? If it bounces out of that, equities could be history, at least for now...and so could Gold:

The positive divergence in the MACD is very telling as well. Let's put it this way...I don't do equities, but I do trade Gold. As I wrote the other day, I sold my Gold position because of its own wedge and I would look for a pullback to get in again.

Jack Steiman is a good chartist (and doesn't pay me to say that!) At the same time he drew the above, he also drew this chart which has two divergences including one on the stochastic...NEGATIVE:

p.s. Core Machinery Orders for Japan comes out this evening. According to Forex Factory, the estimate is for 2.8% growth this month. Will the Yen continue to do badly against the Dollar if this percentage is higher?