ADX
Swing Trading Bitcoin With The Aroon and ADXSwing Trading Bitcoin With The Aroon and ADX
The market has continued its ranging period and is now closing in on the support level around $8,500-$9,000. Although the market has been ranging over the past two months, you can still make a profit by trading with the Aroon and ADX!
Let’s start by taking a closer look at the Aroon indicator!
Aroon
Aroon is considered to be both a momentum and a trend-following indicator. Aroon is represented by two lines, Aroon up (the orange line) and Aroon down (the blue line), and fluctuates between 0% and 100%.
Aroon measures the frequency of new highs during uptrends. If the price is continuously rising and making new highs, Aroon up will be 100 and Aroon down 0 and vice versa. However, when the price is not making new highs, it means that the uptrend is fading out, and we can have a correction or trend reversal.
The indicator generates buy and sell signals through crossovers. When “Aroon up” crosses “Aroon down” upwards, it means that a positive trend has initiated, and it signals a buy (marked with a green circle on our graph). On the other hand, when “Aroon down” crosses “Aroon up” upwards, it will send a sell signal. We have only used the buy signals from the indicator in this example.
The downside of the Aroon is that it may give out signals during a range that may not be as profitable as during a trend. Therefore we have added the ADX to act as a filter!
ADX
The ADX or average directional index is a volatility indicator that measures the strength of the trend. The higher the value of the ADX, the stronger the trend. We are going to filter out signals given when there is no clear direction in the market. Therefore, all signals provided by the Aroon must coincide with the ADX having a value greater than 25.
To filter out signals even further, you may also want to add a MESA or Parabolic SAR on the daily chart to make sure you are only trading when the broader trend is in your favor.
To exit positions opened by this strategy, we have used the following settings:
Trailing stop loss percentage 2%, arming trailing stop loss 4%
Stop-loss 3%
You can add these settings to your hopper by going into the config/baseconfig/sell settings.
SPY Island Reversal SetupLast week saw the largest decline in markets since the rally of the March low and in doing so created an Island Reversal Pattern which is a bearish type of chart pattern. Island Reversals form when price creates a gap up during an uptrend, holds above the gap level for a few days, and then reverses back to the downside while creating another gap on the move down thus creating an “island” consisting of a few price candles that are suspended above the bulk of recent trend. This Island Reversal occurred during a trend of yellow price candles which indicates that the market was experiencing bullish momentum volatility which can either be a signal of continuation or sign of a reversal. In general, after a period of bullish momentum volatility the trend will continue upward as long as price remains above the low of the first yellow candle(dashed yellow line) while a reversal tends to occur if price breaches below the first yellow candle. Price held just above the dashed yellow line on Thursday’s decline as well as on Friday’s attempted rally.
Going into the new week of trading there are two things we want to watch for as a signal of what to expect next:
1) Should price make a move below the dashed yellow line it will likely be an indication that the two-month rally off of the March low has ended and a new short-term bear trend is forming.
2) Should price hold above the dashed yellow line and move higher while filling the gap it will likely indicate that the recent uptrend is still in play while keeping momentum in favor of the bulls.
The Relative Strength Index(RSI) shows the green RSI has crossed below the purple signal line which indicates that the short-term momentum in price has shifted bearish. The green RSI is holding above the 50 level which is the midpoint of the total RSI range. In general, an RSI reading above the 50 level indicates overall bullish momentum behind price while a reading below 50 indicates overall bearish momentum behind price. Should the green RSI line cross below the 50 level it could be an indication that overall momentum is turning bearish, while a bounce up and off of the 50 level would indicate that overall momentum is remaining bullish.
The Price Percent Oscillator(PPO) shows the green PPO in a fresh cross below the purple signal line which indicates short-term bearish momentum in price. The PPO and signal line both remain above the 0 level though which indicates that overall price momentum remains bullish. In general, a PPO reading above 0 indicates intermediate-term bullish momentum while a reading below 0 indicates intermediate-term bearish momentum.
The Average Directional Movement Indicator(ADX) shows the green directional line(+DI) has crossed below the purple directional line(-DI) which indicates that the short-term trend in price is bearish. When the green +DI line is trending above the purple -DI line it indicates a bullish price trend, while the purple -DI line trending above the green +DI line indicates a bearish price trend. The histogram in the background shows trend strength and since we have the purple line above the green line it is showing us the strength of the bearish trend. When the histogram is rising it indicates a strong trend and when the histogram is declining it represents a weak trend, and for now the histogram is declining which indcicate that the current bearish trend is weak.
The Volume indicator shows a two-day spike in volume as price gapped down after a period of relatively low volume in April and May. The volume on Thursday and Friday was at its highest levels since the March selloff which indicates that more traders were active on the late-week selloff.
Overall the dominant trend in price remains bullish, but could turn bearish based on the island reversal setup as well as weakening lower trend and momentum indicators. Watch for support above the dashed yellow line as a signal that price may move higher; watch for a move below the dashed yellow line as a signal that the uptrend has ended. Current view is neutral, but I opened a short-trade on Friday due to the possibility that the island reversal pattern was a sign that the two-month rally has lost steam and is at risk of reversing to the downside.
Second round for ADX?Double Bottom Pattern for ADX gave us a chance for 12.6% profit
Second round? 🧐
Long ADCOCK (AIP) DailyJSE:AIP is showing strong growth after a terrible knock it took during the coronavirus lockdown. On the chart it is clear that JSE:AIP is moving toward its Weekly Rectangle Resistance Level. A breakout is possible out of the daily consolidation block on heavy volume.
The DI + lines is above the DI- lines that indicates more bullish trend movement, with the ADX slanting upwards.
Investors can target a growth of 28%.
TP : R55,20
SL : R39,50
RR : 3,56
Historical compare S&P 500 vs. VIX vs. ADX - June 2009Was trying to find some direction for the market in the coming weeks. I took a look through history to see if I could find a time when the SPX, VIX (volatility), and ADX (trend strength) all had similar values. The best match I could find was the beginning of June 2009. You will have to zoom in on the time frames to get a better view of the data.
I know, I know, this time is different. Anyways, take it for what it's worth (free analysis from some random guy on the internet :)
During the first week of June 2009,
S&P had a breakout of 9 days with several new highs without pullback.
During that time the VIX held relatively flat and
the ADX sunk to a low of 14.38.
During those 9 days I can only imagine how everyone must have thought the bear market was over. The irrational exuberance much have been at an all time high. However, the S&P then went on a 19 trading day decline (the rest of June) erasing much of all the gains made over the previous month. On the upside, after the market shook that off it rallied for something like 2 months without a meaningful pullback.
There are clearly parallels that can be drawn to today. The fact it is almost June I assume is just a coincidence, I doubt it is an omen ;)
Today we have had about 5 days of new highs with out a significant pull back.
The VIX has been flat for the last several days of new highs and
the ADX has reached a low of 15.4.
Obviously, the Fed was not as aggressive back in 2009 and things are different in many ways. Maybe we will rally for 2 months without a pullback, but I doubt it. Pullbacks are a natural part of the market cycle. The question is not if but when and how much. We could easily climb up for a few more weeks before we see a pullback to a level that we see today. Hopefully it will become clearer soon. Be ready to pounce one way or the other. Hoped this helped and happy trading.
#ADX/BTC (May 27)ADX is at the bottom zone and it is too good to accumulate in the range of 900-950sts.
It is forming a big Cup & Handle pattern and targets are : 1200 - 1800 - 2300
If price drops below 800sts, it would be dangerous
Short GBPJPY 4HFX:GBPJPY is in a long term downtrend and therefore we should look to enter only entries to the downside.
The black lines on the chart represent Fib Retracement level on the Daily Chart. We will now continue to the smaller timeframe to find an accurate entry point.
A nice downward parallel channel further indicates downward movement and we will set our TP target on the fib retracement line. The ADX also have downward movement that indicates bearish action.
Risk:Reward - 2.00
TP :129.700
SL : 131.600
Silver Testing Trendline ResistanceSilver(Sl1!) closed at $17.90 on Tuesday for a $0.53(+3%) gain on the day. Price is currently testing the $18 level which is just below a diagonal trendline which stems from the August high near $20. Price has also created a series of yellow candles over the past 4 trading sessions which indicates that there is bullish momentum volatility behind price according to my candle color momentum algorithm. The yellow candles indicate that price may be due for a pullback which wouldn’t be a surprise considering how fast silver has moved from below $16 to its current level, especially with overhead resistance in the diagonal trendline.
The Relative Strength Index(RSI) shows the green RSI line at the 80 level and indicates that there is strong momentum behind price. While this is bullish for momentum, the 80 level is usually where momentum tends to peak out and price can be expected to weaken in the short-term. An RSI reading above 50 indicates overall bullish price momentum while a reading below 50 indicates bearish price momentum. The purple signal line is rising above the 50 level which indicates bullish momentum in the intermediate-term. Going forward we want to see the green RSI line remain above the 50 level as well as the purple signal line on any pullback as a signal that bullish momentum is holding.
The Price Percent Oscillator(PPO) shows the green PPO line and purple signal line rising above the 0 level with the green PPO line above the purple signal line which indicates bullish momentum behind price. When both lines are trending above the 0 level the overall momentum behind price is considered bullish, while both lines trending below the 0 level would indicate overall bearish momentum. As long as the green PPO line is trending above the purple signal line, and both lines are trending up from the 0 level the current bullish momentum behind price will be sustained.
The Average Directional Movement Index(ADX) show the green direction line trending above the purple direction line which indicates a positive trend in price. The histogram in the background is rising which indicates that the current price trend is increasing in strength. In general during an uptrend, you want to see the green line rising above the purple line and for the histogram bars to be rising as a sign that the trend is increasing in strength.
Volume still remains relatively low when compared to recent advances and declines in price seen in the past. In order for the current uptrend to hold we need to see volume increase in order to sustain the move higher. There is a slight increase in volume though which is a good sign during an advance in price, just need to see overall volume increase going forward.
The overall view on silver remains bullish, but a pullback in the short-term is expected here due to the upward price volatility seen over the past week and due to the fact that price is approaching a diagonal trendline. The current stop-loss level for long trades remains at $14.70 which is near the last base made in price, or area of demand. The stop-loss line is drawn just below a series of green doji candles which were indicative of trader indecision prior to the move higher this past week. After being indecisive traders ultimately pushed price higher from that level so going forward I expect that level to continue to be an area of price demand. Should price fall below the stop-loss level it could indicate that traders no longer see value in silver at that level and a deeper pullback would be possible. The levels to watch going forward are the $14.70 level for support, while a push above the diagonal resistance line would be bullish.
S&P500 Triple Top at 61.8% Fib Resistance, And A GapThe S&P 500(SPX) closed today at $2,922.94 for a -$30(-1.05%) loss on the trading session. Price is also once again hitting 61.8% Fibonacci resistance and setting up for what could potentially be a triple top pattern. The 61.8% Fib level has acted as resistance since late April while each pullback has held at the 50% Fib making this the current consolidation range as traders attempt to figure out if Federal Reserve money printing is enough juice to override the overwhelmingly bearish economy.
Today’s price candle closed green which indicates that there is bullish momentum behind price, but the candle also closed as an inside candle which could be a sign of a reversal head. An inside candle is when the current candle’s high and low is completely inside the range of the previous candle’s high and low range, which indicates that traders were unable to move price higher or lower than yesterdays levels and are most likely indecisive as to which direction to go. There was also a gap created in the chart from Friday’s close and Monday’s open, and gaps tend to be filled so going forward we might be looking at a gap-fill this week with price falling down near the $2870 level or roughly -1.7% from today’s closing price. A gap fill would also take price back down near the 50% Fibonacci retracement level which means we’d get to see if that level will continue to act as price support.
The Relative Strength Index(RSI) shows the green RSI line trending just above the purple signal line which indicates short-term bullish momentum is behind price. The green RSI line and purple signal line are both above the 50 level which is the midpoint of the total RSI range. In general, an RSI reading above the 50 level indicates overall bullish momentum behind price while a reading below 50 indicates overall bearish momentum behind price.
The Price Percent Oscillator(PPO) shows the green PPO overlapping the purple signal line which indicates that short-term momentum has turned neutral. In general, you want to see the green PPO line rising above the purple signal line as an indication that there is bullish momentum behind price. Both lines remain above the 0 level though which indicates that price still has bullish momentum in the intermediate-term. A PPO reading above 0 indicates intermediate-term bullish momentum while a reading below 0 indicates intermediate-term bearish momentum.
The Average Directional Movement Indicator(ADX) shows the green directional line above the purple directional line which indicates that there is a short-term positive trend in price. The histogram in the background at very low levels after a recent decline which indicates that the overall strength in trend has weakened. In general, you want to see the histogram rising as a sign of trend strength; if the green line is above the purple line and the histogram is rising you have increasing bull trend strength. If the purple line is above the green line and the histogram is rising you have increasing bear trend strength.
Overall price remains neutral here as price continues to find resistance at the 61.8% Fibonacci level. The lower momentum and trend indicators still show a slight bullish bias, but with resistance at the golden Fib level and a lower gap in the chart the likely move going forward will be a pullback and re-test of the 50% Fib level while closing the gap. In order for me to turn bullish on the S&P500 I would like to see price push above the 61.8% level; to turn bearish I would need to see a move below the 50% Fib level and for the lower indicators to turn bearish as well.
Silver Moves Higher After Series of Doji'sSilver(Sl1!) closed at $16.15 from an opening price of $15.75 for a gain of $0.40(+2.54%) today. This move comes after a recent break above trendline resistance which was followed by 4 days of price holding above the trendline. This hold above the trendline saw 4 doji candles form which are indecision candles. A doji candle is a price candle with a small body, and upper/lower wicks of relatively the same length. Today’s candle closed above the upper wicks of the preceding doji/indecision candles which indicates that traders are no longer indecisive, and since they moved price higher the trend that follows should be a continued move to the upside.
The Relative Strength Index(RSI) show the green RSI line rising up off of the 50 level which is the midpoint of the total RSI range. An RSI reading above 50 indicates bullish price momentum while a reading below 50 indicates bearish price momentum. The purple RSI signal line has also now crossed above the 50 level as well which indicates that intermediate-term momentum is shifting bullish. Both the RSI line and signal line rising together is a sign of bullish momentum.
The Price Percent Oscillator(PPO) shows the green PPO line and purple signal line rising above the 0 level with the green PPO line above the purple signal line and indicates bullish momentum behind price. When both lines are trending above the 0 level the overall momentum behind price is considered bullish, while both lines trending below the 0 level would indicate overall bearish momentum. As long as the green PPO line is trending above the purple signal line, and both lines are trending up from the 0 level the current bullish momentum behind price will be sustained.
The Average Directional Movement Index(ADX) show the green direction line trending above the purple direction line which indicates a positive trend in price. The histogram in the background has also begun to rise which indicates that the trend direction is increasing in strength. In general during an uptrend, you want to see the green line rising above the purple line and for the histogram bars to be rising as a sign that the trend is increasing in strength.
Volume still remains relatively low when compared to recent advances and declines in price shown in the past. In order for the current uptrend to hold we need to see volume increase in order to sustain the move higher.
Overall, silver is looking good after the recent break above the orange trendline, but still needs to take out overhead resistance in the $16.50 area. The trend and momentum indicators are leaning bullish, but the lack of volume is the concerning part about this move higher. Should price break above $16.50 we should start to see more volume appear, but until that $16.50 level is taken out there is still a chance that this breakout could fail and lead to a price reversal. The stop-loss level has been moved up on today’s breakout and now rests at $14.70. This is just below the last base, or area of consolidation, prior to the break above the orange trendline. This is considered to be the last area of demand prior to the advance in price thus making it the best stop-loss level for long trades. Should price fall below that level the short-term bullish bias in price would be at risk of shifting bearish.
Gold Pennant BreakGold(GC1!) closed at $1,740.9 for a +$17.8(+1.01%) gain today. Price also made a push above the upper resistance line of the pennant formation which is a bullish move and one that was anticipated in previous chart analysis shared. While this was a bullish break above resistance, we need to see a sustained move higher for a sign of uptrend continuation. Overhead resistance from here that price needs to beat is in the $1,750-$1,800 range which is the red area and where price saw previous resistance back in April.
The Relative Strength Index(RSI) shows the green RSI line trading just above the 50 level and indicates bullish short-term momentum behind price. An RSI reading above 50 indicates bullish short-term momentum while a reading below 50 indicates bearish short-term momentum. The purple RSI signal line is also above the 50 level which indicates bullish intermediate-term momentum behind price. The green RSI line has crossed above the purple signal line which is a bullish cross and indicates that short-term momentum is increasing.
The Price Percent Oscillator(PPO) shows both the green PPO line and purple signal line above the 0 level which indicates intermediate-term bullish momentum behind price. A reading above 0 indicates bullish momentum while a reading below 0 indicates bearish momentum. When the green PPO line is above the purple signal line it indicates bullish price momentum in the short-term, the green PPO line trending below the purple signal line indicates bearish price momentum in the short-term. Currently the green PPO line is beginning to trend up which indicates an increase in short-term bullish momentum, but needs to cross above the purple signal line as a short-term bullish momentum signal.
The Average Directional Index(ADX) show the green trend line above the purple trendline which indicates that the short-term trend direction is bullish. The histogram behind the green and purple directional lines is declining though which indicates that the upward trend direction has lost strength. In general during an uptrend, you want to see the green line rising above the purple line with a rising histogram as a sign of strength in the uptrend.
Volume has been low since late March, but is beginning to pick back up. The volume bar colors are: bright green = price and volume are higher than they were 10 days prior. Dark green = price is higher than 10 days prior but volume is lower than 10 days prior. Bright purple = price is lower than 10 days prior but volume is higher. Dark purple = price and volume are both lower than 10 days prior. The coloring is to help identify both volume and price trend.
The overall view on gold remains bullish this year with the expectation that gold will test and make a new all-time high above $1,923 which was set in September 2011. In the short-term we want to see price hold above the stop-loss level in order to maintain bullish bias, as well as continue to trade above the short-term stop-loss level, with an eventual push above the upper line of the pennant formation which will likely lead to a new upside breakout in price. The stop-loss level was moved up today on the pennant breakout from $1,660 to $1,680.
SPX Double Top at 61.8% Fibonacci LevelThe S&P 500(SPX) closed today at $2,820 for a -$50.12(-1.75%) loss. Price is coming off of a second test and rejection from the 61.8% Fibonacci retracement level which has created a potential double top pattern at that critical Fib level. Price managed to hold above the 50% Fibonacci level on today’s selloff which is the midpoint of the total Fibonacci range from the February high to the selloff low made in March. In general, price trending above the 50% Fib level is considered bullish, while trending below the 50% is considered bearish. In order to be considered in a healthy uptrend price would need to be trading above the 61.8% Fib level. The level to watch going into the end of the week is the 50% Fib and whether or not price can hold above it. Today’s price candle closed gray which indicates a loss of upward price momentum with my candle color algorithm.
We still have a broken rising wedge pattern in the chart as well and a lower price target that price could still potentially reach. For a breakdown of how this target was calculated refer to this post here:
The Relative Strength Index(RSI) shows the green RSI line crossing below the purple signal line which indicates a loss of upward momentum in the short-term. The green RSI line is also close to crossing below the 50 level which is the midpoint of the total RSI range. In general, an RSI reading above the 50 level indicates overall bullish momentum behind price while a reading below 50 indicates overall bearish momentum behind price.
The Price Percent Oscillator(PPO) shows the green PPO line crossing below the purple signal line which indicates a loss in upward momentum in the short-term. Both lines remain above the 0 level though which indicates that price still has bullish momentum in the intermediate-term. A PPO reading above 0 indicates intermediate-term bullish momentum while a reading below 0 indicates intermediate-term bearish momentum.
The Average Directional Movement Indicator(ADX) show the purple directional line crossing above the green directional line which indicates a bearish trend, or direction, in price is forming. The histogram in the background represents trend/direction strength and for now remains weak. For the dominant trend to have strength the histogram bars need to be rising, and since we have the purple line above the green line indicating a bearish trend, and a low histogram reading, the current shift to a bearish trend is weak for now.
Volume spiked to a 9-day high on today’s selloff which indicates more traders entered the market to sell today than seen on any single day over the past 9. Going forward we need to pay attention to volume on potential any selloff continuation as rising volume during a decline would be a bearish indication.
Overall price remains neutral here, but is forming a bearish bias with the double top at the 61.8% Fib level and lower indicators that are hinting at short-term bearish trend/momentum forming. The short-term support level that needs to hold is the 50% Fib retracement level which is right near where the stop-loss level is for long trades. Should price move below the stop-loss level the shift from a bullish trend to bearish trend will increase thus putting the lower target near $2,423 in play going forward.
Today’s decline seemed to be influenced by a statement from Federal Reserve Chairman in regard to the Fed not looking at taking the Federal Funding Rate into negative territory, which many traders are expecting as a possibility going forward this year. Chairman Jerome Powell also expressed concerns about the economic recovery and basically said that we are not out of the woods yet and that more headwinds lay ahead for markets:
There were also a few bearish articles released today from some of the titan traders on Wall Street, such as Stanley Druckenmiller and David Tepper, who stated that markets remain overvalued and look similar to the dot-com bust.
Bitcoin Halving 61.8% Fibonacci RejectionBitcoin(BTCUSD) has moved back below the 50% Fibonacci retracement level after hitting 61.8% Fibonacci resistance near $10,000 this past Thursday into Friday as traders pushed price higher ahead of the halving event which took place today. The rally on Friday was also fueled by legendary trader Paul Tudor Jones announcing that he has entered the cryptosphere as an inflation hedge. The push up to the 61.8% Fib level was strong enough to create yellow price candles which indicate bullish momentum volatility according to my price candle algorithm. During periods of bullish volatility it is risky to short or exit trades as price is most likely to head higher, but once the bullish momentum volatility goes away the move that follows is important to watch. As a rule, if price remains above the first yellow candle then the trend and momentum bias is still to the upside. If price falls below the first yellow candle it shifts the bias to bearish. For now price remains above the first yellow candle seen leading up to the rally into 61.8% Fib resistance which indicates that there is still a bullish bias, or a positive trend behind price.
Today’s price candle is indicating trader indecision as the candle color has shifted to gray which indicates no momentum. Today’s candle is also a doji candle which is a price candle with a small body and upper/lower wicks of relatively the same length. This shows that traders attempted to push price higher and lower but were able to maintain the upper and lower price levels and ultimately are going to close today’s price near where it opened. Neither bulls nor bears were able to direct price with conviction in either direction.
The Relative Strength Index(RSI) show the green RSI line retreating from highs near the 80 level which indicates a loss in upward momentum. The green RSI line has also crossed below the purple signal line which is a bearish cross and indicates further weakening in short-term upward momentum. The rate of decline in the green RSI line as decreased just above the 50 level which is the midpoint of the total RSI range. The green RSI line trending above the 50 level generally indicates overall bullish momentum while an RSI reading below 50 would indicates overall bearish momentum. Going forward the RSI line needs to hold above the 50 level in order to maintain bullish momentum bias.
The Price Percent Oscillator(PPO) show the green PPO line crossing below the purple signal line which is is a bearish cross and indicates a loss of upward momentum in the short-term. Both lines remain above the 0 level for now though which indicates that the overall momentum is still positive. A PPO reading above 0 indicates overall bullish momentum while a PPO reading below 0 indicates bearish momentum.
The Average Directional Momentum Index(ADX) shows the green directional line declining and close to crossing below the purple directional line. When the green line is above the purple line it indicates a bullish trend direction in price, when the green line is below the purple line it indicates a bearish trend direction in price. The histogram in the background is declining which indicates that direction strength is weakening, and since the green line is above the purple line at the momentum the declining histogram indicates a weakening bull trend in price.
Volume has been on a slight increase during the run up in price, but overall is still relatively low compared to volume seen during previous advances and declines in price.
Overall, the current view on Bitcoin here is neutral based on the rejection off of the 61.8% Fibonacci level, the cross back below the 50% Fib level as well as the return to a gray price candle. The momentum and trend indicators are pointing to a period of consolidation or pullback as they are showing a loss in upward trend and momentum. For now the main level to watch is the red line stop-loss level near $7,300 which is just below the 38.2% Fib level. This stop-loss level is placed just under the first yellow candle which is when bullish momentum volatility began leading into the halving event and is the level that price needs to remain above for price to be considered in an uptrend. Falling below the 38.2% Fib level would also put price back into the purple shaded area which is a bearish area of the total Fib range. In general, you want to see price trending in the green shaded area above the 61.8% Fib level as a sign of a strong uptrend. The move now is to wait for a move above the 61.8% to go bullish, while a move below the 38.2% would be bearish.
SPX Weekly $2,950 Resistance TestThe weekly SP500 chart shows price testing, and closing at, $2,950 which has been a major support and resistance level going back to September 2018. Price briefly held above this level for two weeks at the beginning of the coronavirus selloff, but ultimately failed to hold and fell down to the $2,200 level before the relief rally that we’ve seen over the past 7 weeks which has taken us back to this critical level. This will be the main level to watch this upcoming trading week and will likely be the deciding factor as to whether price moves higher, or is once again rejected and puts a re-test of the March lows back in play. Unlike the green candles seen on the daily chart which indicate a bullish trend, the weekly chart failed to show bullish momentum and instead shows gray candles which indicate no momentum behind price which could indicate that a rejection at the $2,950 is more probable than a push above this resistance level.
The Relative Strength Index(RSI) shows the green RSI line hesitating just below the 50 level which is the midpoint of the total RSI range. An RSI reading below 50 indicates bearish short-term momentum while a reading above 50 indicates bullish short-term momentum. The green RSI line is still below its purple signal line which is another bearish momentum indicator.
The Price Percent Oscillator(PPO) shows both the green PPO line and purple signal line both below the 0 level which indicates bearish momentum. However, the green line is rising and on a path to cross above the purple signal line which would be a bullish momentum cross. If that cross occurs, we would want to see both the green PPO line and purple signal line move back above the 0 level. A PPO reading above 0 indicates bullish momentum while a reading below 0 indicates bearish momentum.
The Average Directional Movement Index(ADX) shows the purple directional line above the green directional line which indicates that price remains in a negative direction bias. This histogram behind the directional lines is above the 25 level which indicates a strong trend, but is beginning to tick down which means that the negative trend in price is losing strength. Going forward, we would want to see the green line cross above the purple line as a sign of a bullish price trend, and for the histogram in the background to rise indicating a strong bull trend.
Volume remains bearish with a series of purple bars which indicates that price volume is in a bear trend. Bright purple indicates that price is lower than 10 days prior and volume is higher. Dark purple indicates that price is lower than 10 days prior but volume is lower. Bright green indicates that both price and volume are higher than 10 days prior, while dark green indicates that price is higher than 10 days prior, but volume is lower than 10 days prior. Going forward we would want to see the volume bars turn shades of green in order to reflect a bullish trend in price and volume.
SPX 61.8% Fib Test & Rising WedgeThe S&P 500(SPX) closed Friday at $2929.81 for a +$48.61(+1.69%) gain. Price closed right at the 61.8% Fibonacci retracement level which is where price peaked on April 29th(red arrow) before seeing a slight pullback to the 50% Fibonacci level. The 50% Fibonacci level is the midpoint of the total Fib range from the all-time high of $3,393.52 made in February to the coronavirus selloff low of $2,191.86 made in March. Price trending above the 50% Fib level indicates a bullish trend in price while trending below the 50% level indicates a bearish trend in price. A strong bull trend would require price to be trending above the 61.8% level while a strong bear trend would need price to be below the 38.2% level. Price has already been rejected from the 61.8% level once on this relief rally so testing this level again will be significant going in to next week. A move above the 61.8% level would be considered bullish, while a second rejection would be considered bearish and likely lead to price falling back down to test the 50% level again.
Price has created a rising wedge pattern which is a bearish type of price pattern. Rising wedges are a price pattern that have a wide base(A-B) and as price moves higher the distance between the highs and lows decreases creating a more narrow range. Once price reaches the apex of the wedge and falls below the lower support line of the wedge a measured move can be calculated in order to determine a potential lower level that price can be expected to reach. The measured move is calculated by taking the distance between the high and low of the base(points A and B) and subtracting that difference from the opening price of the first candle to open below the lower line of the wedge(C). Candle A had a low of $2,191.86 and Candle B had a high of $2,637.01 for a difference of $445.15.
(A $2,191.86 – B $2,637.01 = $445.15)
This value is then subtracted from the opening price of candle C which is $2,869.09 and gives us a lower price target of $2,423.94.
($2,869.09 - $445.15 = $2,423.94)
While a lower target can be calculated, it doesn’t indicate that price will definitively reach the target as rising wedge patterns only have a 60% probability of success, but it remains a pattern to keep an eye on regardless.
The Relative Strength Index(RSI) shows the green RSI line trending above the 50 level which indicates a bullish short-term momentum bias behind price. An RSI reading above 50 is considered bullish while an RSI reading below 50 is considered bearish, with the 50 level being the midpoint of the total RSI range(0-100). The purple RSI signal line is rising which indicates bullish momentum in the intermediate-term and is now crossing above the 50 level as well.
The Price Percent Oscillator(PPO) shows the green PPO line and purple signal line both trending above the 0 level which indicate bullish momentum behind price. A PPO reading above 0 indicates bullish price momentum while a reading below 0 indicates bearish momentum. The green line trending above the purple line indicates a bullish momentum trend which is what we are seeing now, but both lines have leveled off indicating a loss of upward momentum in the short-term. In general during an uptrend in price, you want to see the green line trending above the purple line, and for both lines to be rising above the 0 level.
The Average Directional Movement Indicator(ADX) shows the green directional line above the purple directional line which indicates a positive trend behind price. The histogram behind the directional lines has been on a steady decline ever since the green line crossed above the purple line which indicates weak, or declining, trend strength. In general during an uptrend in price, you want to see the green line rising above a declining purple line, with a rising histogram in the background which would indicate strength in the uptrend.
Volume during and after the selloff has been higher than that seen during the move to the all-time high made in February, but volume has been declining ever since the selloff low as price has moved higher. Declining volume as price moves higher is bearish and indicates that less traders are willing to buy which is needed in order to sustain the move higher in price.
Overall, the move higher in the S&P500 has been in contradiction to the underlying fundamentals in the economy which are overwhelmingly bearish with a record 33 million people having filed for unemployment benefits over the past 7 weeks and global trade essentially coming to a halt. 30% of companies in the S&P500 index have given up on providing forward guidance as the virus has led to a collapse in revenue and earnings as they were forced to shut down operations. Many companies have also suspended share buybacks and dividend payments which was a driving force in share prices over the past 10 years on the march to new all-time highs including the peak seen in February. Traders and investors appear to be betting on the Federal Reserve backstopping markets via unlimited money printing which for now is succeeding in propping up stock prices. We’ll need to see how consumers react to the re-opening of the economy and whether or not they will be as strong as they were leading up to the pandemic as consumerism makes up 70% of GDP. With 33 million people out of work the obvious trend would be a decline in spending, but the obvious hasn’t been too relevant with central bank intervention in markets as true price discovery has been destroyed.
Going forward, if price were to make a new high above the 61.8% Fibonacci level and take out the high made on April 29th(red arrow) it would negate the current rising wedge pattern and likely lead to a continuation in price to the upside. It would also lead to a redrawing of the lower wedge line to just below candle C and the 50% Fibonacci level where the last low was made prior to the potential move higher, and then we would watch for a possible rejection at the upper wedge line again. Should price reject at the 61.8% Fib level again and move below the 50% Fib level it would put the lower target of $2,423.94 in play which is roughly -17% lower than where price closed on Friday.
Current view on the SP500 is neutral. A push above the 61.8% Fib level would be bullish, while a cross below the 50% Fib level would be bearish.
Silver Trendline TestSilver(Sl1!) closed at $15.59 from an opening price of $14.92 for a gain of $0.67(+4.49%) today. Price also closed just above the orange downtrend resistance line which is bullish seeing as how this line has been acting as resistance since early April. Going forward, we need to see price hold above the orange resistance line and make an eventual push above the horizontal red line at $16.30 which is a strong price level stretching back to July 2019 where price peaked and then eventually rose above, and then found support at again in late 2019. This level briefly acted as support in February 2020, but then failed in March with a rejection at that level coming in again in April. A move above $16.30 would be significant and likely mark the beginning of a new push back up toward $19. The stop-loss level for long trades rests at $14.50 which is near the low made in mid-April, as long as price remains above that level the short-term trend will remain bullish.
The Relative Strength Index(RSI) show the green RSI line rising up off of the 50 level which is the midpoint of the total RSI range. An RSI reading above 50 indicates bullish price momentum while a reading below 50 indicates bearish price momentum. The purple RSI signal line is also rising, but remains below the 50 level with a cross above looking to come soon. The signal line indicates intermediate-term momentum so that line rising above the 50 level would be another bullish indication that price is gaining upward momentum.
The Price Percent Oscillator(PPO) show the green PPO line and purple signal line overlapping at the 0 level. In general, you want to see the green line rising above the purple line and for both lines to be trending up and above the 0 level. Both lines trending up above the 0 level indicates bullish price momentum.
The Average Directional Movement Index(ADX) show the green direction line trending above the purple direction line which indicates a positive trend in price. The histogram behind the ADX lines is trending flat which indicates no strength in the trend yet. In general during an uptrend, you want to see the green line rising above the purple line and for the histogram bars to be rising as a sign that the trend is increasing in strength.
Volume is relatively low, but beginning to show a slight uptick. Should price continue higher we would want to see volume rise in order to sustain the movement in price to the upside.
Overall, silver is looking good here today with the strong move in gold. The gold-to-silver ratio remains near all-time highs at 112:1, meaning it takes 112 ounces of silver to equal ounce of gold in price. Historically, a ratio of 80:1 is considered high and a good time to enter silver trades. The historical average over the past 5,000 years is a ratio of 15:1, so we’re either looking at gold price being extremely overvalued, or silver being extremely undervalued. It’s my opinion that both are still very undervalued with silver being the more extreme of the two. As gold continues to gain in price I expect silver begin to close that ratio and outperform gold as silver usually does during periods of bullish trends in the precious metals space.
Gold Testing Upper Pennant LineGold(GC1!) closed at $1,725.8 today from an opening price of $1,686 for a $39.8(+2.36%) gain while tagging, and coming to a stop at, the upper line of the pennant formation in the process. The pennant is a bullish price formation with the expected outcome being a break above the upper line of the pennant formation and a push back up toward $1,800.
The Relative Strength Index(RSI) shows the green RSI line trading just above the 50 level and indicates bullish short-term momentum behind price. An RSI reading above 50 indicates bullish short-term momentum while a reading below 50 indicates bearish short-term momentum. The purple RSI signal line is also above the 50 level which indicates bullish intermediate-term momentum behind price. Right now the green RSI line and purple signal line are overlapping with the green RSI line looking like it wants to push back above the purple signal line. The green RSI line rising and trending above the purple signal line would indicate healthy bullish momentum.
The Price Percent Oscillator(PPO) shows both the green PPO line and purple signal line above the 0 level which indicates intermediate-term bullish momentum behind price. A reading above 0 indicates bullish momentum while a reading below 0 indicates bearish momentum. When the green PPO line is above the purple signal line it indicates bullish price momentum in the short-term, the green PPO line trending below the purple signal line indicates bearish price momentum in the short-term. Right now we’re seeing a leveling off after a short-term bearish pullback in momentum, what we need to see next is for the green line to cross back above the purple line as a signal that bullish momentum has returned in the short-term.
The Average Directional Index(ADX) show the green trend line above the purple trendline which indicates that the short-term trend direction is bullish. The histogram behind the green and purple directional lines is declining though which indicates that the upward trend direction has lost strength. In general during an uptrend, you want to see the green line rising above the purple line with a rising histogram.
Volume has been low since late March, but is beginning to pick back up. The volume bar colors are: bright green = price and volume are higher than they were 10 days prior. Dark green = price is higher than 10 days prior but volume is lower than 10 days prior. Bright purple = price is lower than 10 days prior but volume is higher. Dark purple = price and volume are both lower than 10 days prior. The coloring is to help identify both volume and price trend.
The overall view on gold remains bullish this year with the expectation that gold will test and make a new all-time high above $1,923 which was set in September 2011. In the short-term we want to see price hold above the stop-loss level in order to maintain bullish bias, as well as continue to trade above the short-term stop-loss level, with an eventual push above the upper line of the pennant formation which will likely lead to a new upside breakout in price.
Gold Bullish PennantGold(GC1!) closed at $1,713.3 today for a $12.4(+0.73%) gain. Price has formed a pennant formation which given the fact that it has formed after a move to the upside makes it a bullish price formation. The expected move here is a push above the upper line of the pennant and re-test of the $1,800 level. A move below the lower line of the pennant would indicate a failed bullish pennant, with the current stop-loss for long trades resting just below there near $1,660 shown in blue.
The Relative Strength Index(RSI) shows the green RSI line trading just above the 50 level and indicates bullish short-term momentum behind price. An RSI reading above 50 indicates bullish short-term momentum while a reading below 50 indicates bearish short-term momentum. The purple RSI signal line is also above the 50 level which indicates bullish intermediate-term momentum behind price. Right now the green RSI line and purple signal line are overlapping with the green RSI line looking like it wants to push back above the purple signal line. The green RSI line rising and trending above the purple signal line would indicate healthy bullish momentum.
The Price Percent Oscillator(PPO) shows both the green PPO line and purple signal line above the 0 level which indicates intermediate-term bullish momentum behind price. A reading above 0 indicates bullish momentum while a reading below 0 indicates bearish momentum. While both lines are above the 0 level, they are declining with the green PPO line below the purple signal line and indicates a loss of upward momentum in the short-term.
The Average Directional Index(ADX) show the green trend line above the purple trendline which indicates that the short-term trend direction is bullish. The histogram behind the green and purple directional lines is declining though which indicates that the upward trend direction has lost strength. In general during an uptrend, you want to see the green line rising above the purple line with a rising histogram.
Volume has been low since late March, should price break out to a new local high above the pennant pattern we would want to see volume increase in order to sustain a move higher.
The overall view on gold remains bullish this year with the expectation that gold will test and make a new all-time high above $1,923 which was set in September 2011. In the short-term we want to see price hold above the stop-loss level in order to maintain bullish bias, as well as continue to trade above the short-term stop-loss level.
ES bearish divergence on Stochastics ES topped out near the 62% retracement of the big drop, which also formed a bearish divergence on Stochastics. The break below the 10-day moving average has now closed below it 2 times in a row. Below 2717.25, the late April low, would boost the chance of a return back to the March lows. A trend signal on ADX would signal strong momentum. 90-day RSI failing to get above it's midpoint at 50.
BRK reverses after 62% retracementAlso, break of 10-day moving average. Is BRK leading the market back to the March lows? New trend on ADX while 90day RSI holds below 50. Key support is the April low, 174.19.
