The futures has rallied strongly in November, nevertheless most of the bars on the every day chart have been weak. This makes the rally additional vulnerable to be a bull leg in a shopping for and promoting range that started in September, and the start of a measured switch up. E-mini futures down almost certainly on subsequent 10% switch.
are turning down on the weekly chart. That’s almost certainly the start of a shopping for and promoting range that may ultimate many months.
is pulling once more from a parabolic wedge buy climax on the every day chart. Retailers should anticipate a minimal of a few weeks of sideways shopping for and promoting.
Goldweekly chart turning down from wedge purchase climax just under 2011 all-time excessive
The weekly chart has sold off since the August high. The reasons I am showing it is to remind traders that TV experts are often incorrect, and to explain some things that are going on in the E-mini and bond futures markets.
If you watched any financial show this summer, you repeatedly heard how gold was early in a bull trend and that it was going far above the 2011 all-time high. The soundbite was “interest rates to zero and gold to infinity!” All of the experts were linking the two.
Where have the experts gone now that gold is down almost 15% from the high? No one is talking about gold now, because they don’t want to remind everyone about how bullish they were in August when gold was testing the top of a buy climax and testing the 2011 all-time high.
What next?
The bears are hoping that the gold market is forming a double top with the 2011 high. They want a bear trend reversal. The rally since the August 2019 high has had 3 legs up. The bears hope that this is a wedge rally to a double top with the 2011 high. They know that this is a reliable reversal pattern.
A reversal down from a buy climax typically has at least a couple legs sideways to down. The current selloff is now in its 3rd leg down. But since the 3-month selloff is in a tight bear channel, it is probably a complex 1st leg down. If so, traders will expect the 1st rally to fail. They then would look for a 2nd leg down.
At that point, if there is a reliable setup, they might buy for a resumption back up to the 2011 high. More likely, the weekly chart will enter a trading range. This process will take 20 or more bars, which means 6 months or more.
This selloff is now in search of an initial bottom. A reasonable target would be around the June low, which is a little more than a 50% retracement of the rally that began in March.
A wedge reversal often retraces to the start of the wedge bull channel. That is the March low. That is also at the July 2016 high, which is the top of the 2013 to 2019 trading range.
The news is always extremely bullish just before a reversal down
It is important to understand that when a market is in a buy climax, the news is always extremely bullish. It has to be, otherwise the market would not be racing up.
But the mistake is to assume that the news is right. The experts on TV are constantly giving all of the reasons why the trend is early, and it will go much higher. They are very confident, and they arrogantly look down at the fools who are not already long. They wear nice suits and have impressive titles, but they are idiots.
The church of gold
This is especially true in the gold market, which is more of a religion than a commodity. When it is up, they say you must buy because it is going higher. When it is down, they tell you that you must buy because it will soon race back up to the high.
Ask them what would make them sell. They will tell you that there is never a reason to sell, and there is always a reason to buy.
Do you think that is useful advice? If you bought gold for $2,100 in 2011 and watched it lose 40% of its value in 6 years, do you think that was the best choice for your money? Gold
Now, why does a market reverse down from a strong bull trend? You cannot have a buy climax unless everyone is bullish. FOMO… Fear Of Missing Out. Smart traders buy early and look for an extreme buy climax to take profits. They buy low and sell high. Also, smart bears start to short when there is an extreme rally, and they sell more higher. The last buyers are the momentum traders. And don’t forget the dumb money traders who missed the move. They believe all of the hype and are desperate to buy at any price. The momentum traders are buying because the market is going up. Once it stops going up, they quickly exit. Their panic selling once they sense that the bulls are starting to take profits accelerates the reversal down. They are not investors, who are willing to use wide stops or no stop at all. Investors will buy more during a collapse because they are in it for the long haul. They are confident that gold will be higher 10 or 20 years from now, and will use selloffs to buy until they have the desired amount in their portfolio. The dumb money traders, who follow the gold gurus on TV, buy at the top and hold until after the crash. They then exit with a big loss. They do not understand the risk of buying during a buy climax. Very importantly, they do not have a plan to exit. They do not think about whether they are momentum buyers or investors. Remember, a momentum buyer exits quickly when the rally slows down. Investors buy more after a big selloff. Dumb money does not have a plan. They expect the gold tree to grow to the sky, like the guy on TV says. When gold sells off, they are faced with a reality that is very different. They suddenly decide that they are not willing to sit through a 6-year bear trend that erases 40% if their money. And the TV guy is nowhere to be found to help them manage their bad trade. Because of that linkage between interest rates and gold, I want to summarize that I have been saying about the bond market since the March buy climax. I have talked about the bond market for years, saying that it is near the end of a 30-year bull trend and that it will fall for at least a decade. Remember, the bond market moves opposite to interest rates. As bonds fall, interest rates rise. I said that interest rates could not hit zero in the U.S., and that they will work higher over the next decade. The bond futures market could briefly go above the March high, but at this point, it is more likely that it will not. If they rally over the next several months, the rally should fail around or below the old high. They could stay sideways for several more years, but they will be higher 5 years from now, and higher still 5 years after that. So much for “interest rates to zero and gold to infinity.” The index every day chart has rallied 5-fold given that March low. Pundits portray bitcoin as a different for gold as a storehouse of value. The data often describes it as “digital gold,” implying that individuals are selling gold and using the cash to buy bitcoin. Whereas that’s true to some extent, it’s inconceivable to grasp how important it’s. I imagine not very. The three-month selloff in gold occurred as bitcoin went up 500%. Is that this as set off and influence? No, because of there are quite a few causes to non-public gold which is likely to be unrelated to bitcoin, and loads of causes to non-public bitcoin that don’t have something to do with gold. However, they’ve had a strong inverse correlation over the earlier a variety of months, and the TV financial info often says that a variety of the cash going into bitcoin is coming out of gold. What subsequent? Everytime you check out the every day chart of bitcoin over the earlier 2 years, you may see that there are quite a few standard chart patterns. It’s essential to anticipate that with all markets which have a variety of contributors. It’s as a result of a chart is solely a map of rational human conduct. That conduct is coded in our genes. Until we evolve into one different species, the conduct will keep the similar. It doesn’t matter in case you’re shopping for and promoting stocks, baseball taking part in playing cards, or bitcoin. In case you’re taking away the labels, the charts would look the similar. As sturdy as a result of the 5-week rally has been, there are three legs up in a good bull channel. The rally is subsequently a parabolic wedge buy climax. Buy climaxes typically entice profit-takers. If a bull takes earnings, he isn’t going to buy as soon as extra 1 bar later. He’s concerned that the profit-taking may probably be sturdy ample to end in a deep selloff or maybe a bear growth. The bulls nonetheless want to buy, nevertheless they prefer to attend until after they see the bears try to fail a minimal of twice, to create a growth reversal down. Subsequently, a purchase order climax typically ends in a minimal of a pair legs sideways to down. If the bears fail to create a growth reversal down, then the bulls will buy as soon as extra. They anticipate the bears to fail and give up, and for various bulls to buy as soon as extra as properly. They’re seeking a resumption of the bull growth. However when the bears create an infinite pullback down, retailers will conclude that the pullback has superior proper right into a bear growth. There is no such thing as a such factor as a sign of that in the interim. Additional often, an unlimited switch up and the reversal down is a Big Up, Big Down pattern. That generates Big Confusion, and confusion is a trademark of a shopping for and promoting range. This selloff might be going the start of a shopping for and promoting range that should ultimate a minimal of a month. The bulls will see the range as a bull flag. The bears will seek for some sort of double excessive, together with the 2017/November 2020 double excessive. Subsequently, retailers anticipate bitcoin to go sideways for at least the next month. Emini SP500 Futures Candlestick Chart The month-to-month S&P500 E-mini futures chart has an unlimited bull bar to this point in November. There may be one shopping for and promoting day left throughout the month. The bulls want November to close above the September extreme at a model new all-time month-to-month extreme. That may enhance the opportunity of higher prices in December. However, the bears want November to close once more beneath the October extreme. That may reduce the opportunity of a strong December. October was a Extreme 1 bull flag buy signal bar. When the E-mini rallied above the October extreme, it triggered the month-to-month buy signal. The bulls want a resumption of the 5-month bull growth. Nevertheless the October buy signal bar was a bear candlestick. That’s an unreliable buy signal bar. With it being the 2nd consecutive bear bar, it’s far more unreliable. There’ll additional attainable be additional sellers than patrons above the October extreme, although there isn’t any sign of them however. The rally may ultimate a pair months, nevertheless retailers should anticipate a reversal down inside a month or two. The reversal down in September led to a 2-month pause throughout the bull growth. Since November is a gigantic bull bar after a 5-month buy climax, it almost certainly will doubtless be an exhaustive buy climax. If that’s the case, retailers will anticipate a minimal of a pair legs sideways to down as quickly as this climactic breakout ends. It ought to complete in December. Consequently, retailers should anticipate the E-mini to be principally sideways for the primary half of 2021. That may enhance the number of bars throughout the shopping for and promoting range than began in August. Monday is the last word day of November. The E-mini has been in a strong bull growth given that March low. If Tuesday gaps as a lot as a model new all-time extreme, there’ll doubtless be a unusual gap as a lot as a model new all-time extreme on the month-to-month chart. Whereas the opening may probably be huge on the every day chart, it can probably be small on the month-to-month chart. Small gaps typically shut sooner than the bar closes. If it stayed open by means of December, it may attainable shut in January or February. What regarding the uniformly bullish consultants on TV? In case you’ve been shopping for and promoting for a few years, you may want noticed a pattern. There may be an annual ritual. In November and December, the financial networks trot out an infinite assortment of consultants predicting that the next 12 months will doubtless be up 10 to 20%. You don’t get on TV till you is likely to be wanting to say bullish points regarding the coming 12 months. In the event that they didn’t put you on ultimate 12 months, you need to make an far more outrageously bullish prediction this 12 months to make sure you may be on TV. Since most years are up, it’s a protected issue to predict an up 12 months. However, not all years are up. I’ll current the yearly chart on the end of the 12 months. It’s at current an unlimited exterior up bar. Nevertheless that’s not bullish when it comes late in a bull growth. The current bull growth is now 10 years outdated. The rally is now late. Additional often, an unlimited bar late in a bull growth attracts profit-takers. Subsequently, every the month-to-month and yearly charts seem to be they’re predicting an absence of a rally for the next 6 – 12 months. Would possibly the charts or my finding out of the charts be improper and the TV consultants correct? Fully. Nevertheless the month-to-month and yearly charts seem to be they may end in a sideways market for lots of months. Emini Weekly SP500 Futures Candlestick Chart The weekly S&P500 E-mini futures chart has a pattern that’s very like the one on the month-to-month chart. There’s a Extreme 1 buy signal bar, and it was the 2nd consecutive bear bar. Retailers typically anticipate additional sellers than patrons above a weak Extreme 1 bull flag buy signal bar. The market can sometimes rally for a pair bars (weeks), nevertheless it then typically reverses down a 2nd time. The 2nd reversal is commonly additional superior and lasts longer. Whereas the pullback in September led to 2 sideways bars, if there’s a pullback all through the next few weeks, retailers will anticipate a minimal of a pair small legs sideways to down. They’ll seek for a shopping for and promoting range lasting a minimal of a month. Can the E-mini explode to the upside and begin a strong rally to the tip of the 12 months? The bulls have a 30% chance. However, with this week closing on the extreme and highly effective momentum up three weeks up to now, subsequent week should go above this week’s extreme. Emini Day-after-day SP500 Futures Candlestick Chart The every day S&P500 E-mini futures chart had a quick switch as a lot because the November 9 extreme, nevertheless then went sideways. I’ve talked regarding the bars in that rally and in November a few events. In November, about 75% of the bars closed each spherical their open or in the midst of the bar. These are weak bars. However, the month is forming an unlimited bull bar on the month-to-month chart. One factor is improper proper right here. Bull tendencies typically have a variety of bull bars closing near their highs. Look once more on the summer time season rally for instance. If the November rally isn’t consistent with a bull growth, it’s more likely to be an unlimited bull leg in a shopping for and promoting range. As a traditional rule, if one factor doesn’t look the way in which through which you assume it should, the chart is likely to be forming a shopping for and promoting range. If I’m correct and this rally to a model new all-time extreme is solely a strong bull leg in a shopping for and promoting range that began after the September three excessive, the place is the top of the range? It’s almost certainly not rather a lot elevated. As I wrote above, December may probably be one different bull bar on the month-to-month chart, nevertheless retailers should anticipate a shopping for and promoting range on the month-to-month chart by early subsequent 12 months. The underside of the range will almost certainly be throughout the September low. That’s about 12% down from the current November extreme. Let’s say about 10% down. Since I imagine the November rally is part of a shopping for and promoting range, and by no means part of a worthwhile breakout of the 400-point tall, 4-month shopping for and promoting range, then I’m saying that the next 10% switch throughout the E-mini will almost certainly be down and by no means up. We merely don’t know when the switch down will begin. I think about it will possibly start in December or early January, and that it’ll come sooner than the E-mini rallies 10%. Moreover, if the E-mini will get down to shut the September low, it can probably fall beneath. It’s as a result of retailers would conclude that the E-mini had entered a shopping for and promoting range, and legs in shopping for and promoting ranges tend to interrupt previous assist and resistance sooner than reversing. Subsequently, if there’s a selloff, it can probably be additional like 15 to 20% as a substitute of merely 10%. What would set off the selloff? Will in all probability be technical. The every day chart seems to be like prefer it’s in a shopping for and promoting range. It’s now on the excessive and subsequently it should return to the underside. There may be info every day. Whatever the info is on the day the selloff begins will doubtless be what TV reporters will definitively declare as the reason for the selloff. That’s because of they think about that they’re the center of the world. To them, the whole thing is alleged to the data, which suggests to them. They cannot take into consideration that one factor else unrelated to the data, like technical parts, is more likely to be the true set off. The data may probably be the catalyst, nevertheless the price movement is already telling us {{that a}} selloff might be going. There are unhealthy bull flags on the weekly and month-to-month charts and too many bars on the every day chart with weak closes. Moreover, have in mind what I wrote ultimate week. There may be an elevated chance of a shock after January 5. What’s the shock? Who, is conscious of? That’s what makes it a shock! The momentum up throughout the rally from three weeks up to now was sturdy ample to make a model new extreme attainable this week. As I mentioned above, November has been a very sturdy bar on the month-to-month chart. Retailers shouldn’t be shocked by a spot as a lot as a model new all-time extreme on Tuesday when December begins. That may end in an acceleration up for a variety of days and even a pair weeks. Nevertheless it may almost certainly be an exhaustive buy climax and the tip of the rally from the March low. There may be at current solely a 30% chance that the breakout above the September extreme will end in a 400-point measured switch up.Buy climaxes lead to profit-taking
Gold
Interest rates bottoming after 30-year bear trend
Bitcoin every day chart is popping down from parabolic wedge buy climax and check out of all-time extreme
Bitcoin has reliable chart patterns
Parabolic wedge buy climax
E-mini futures
Month-to-month E-mini chart has huge bull bar in November, nevertheless October was a bear bar and subsequently weak buy signal bar
Potential gap up on Month-to-month chart on Tuesday
Everyone on TV is bullish
Weekly S&P500 E-mini futures chart weak breakout above Extreme 1 bull flag buy signal bar
Day-after-day S&P500 E-mini futures chart in sturdy rally, nevertheless subsequent 10% switch will almost certainly be down
The next 10% switch throughout the E-mini will almost certainly be down, not up
Data reporters are narcissists and incorrectly assume the whole thing is introduced on by the data
What about subsequent week?
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