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FOREX PRO WEEKLY January 16-20, 2012

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Jan 14, 2012.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Monthly
    Current market could be analyzed by different approaches – reasonable as a common sense point of view and irrational, since some things that happened during specific moments are forced to apply even some curious view on the market. Personally, I’m not tending to overestimate this view, but also I can’t exclude it totally because there is a sense with it. So, treat this only as topic that probably will be interesting to you. Let’s start from common approach and take a look at technical picture – it has not changed much from previous week
    Trend is strongly bearish, market is not at oversold. Our Agreement area of 0.618 major support and 0.618 Fib extension target is 1.2905-1.3039 was deeply penetrated by the market and today we probably can say, that it was totally disrespected. Market has passed even lower during previous week and January bar currently shows just solid bearish momentum – opens at high and now stands at low. Next support is 0.786 at 1.2527. But let’s think – what the probability to respect as 0.786 support as 0.88 one if market absolutely disrespect Agreement with major 0.618 level? What do you think? The answer is obvious, I suppose – not much odds exist that market will stop at any of these levels for considerable period of time, if it will stop at all.
    The one thing exists though. When market disrespects some solid level it has a tendency to retest it from other side. That’s very often happens with monthly/weekly disrespected Confluence areas. But now I have no idea how it could happen here, since we do not have yet any clues at all.
    Our long term targets looks like is 1.1657 that corresponds with dollar index quarterly one.
    Again, I want to say that although current price action looks extremely bearish, there is one bullish possibility still exists, at least pure theoretically – butterfly “Sell”, if market will turn to upward move before it will reach low at 1.1874. I say “theoretically” since now it is quite unclear why it can happen and by which reason – here I just want to show you all possible issues and appearing of Butterfly “Sell” is just one of them. Still, at least now I also hardly believe that it will happen, especially by keeping in mind dollar index action and overall picture of European turmoil.

    But what’s about second “not quite reasonable” view? All of you know, I suppose, that S&P has dropped credit rating of 9th EU countries yesterday. What is most important is that France and Austria were hurt by S&P among others. Second economy of EU has lost its AAA rating. That has happened at the moment when Italy has issued new bonds at acceptable yield, adopted budget deficit cuts and so on. At least currently EU leaders if we can say so, “catch to tail” of potential rope that could lead out of pit they have been hit by rating agencies and not at the first time, by the way. What is it? Among common views, that probably this is fair, since EU really has solid credit problems with budget deficits and this drop is really reasonable, I would like to offer you some idea that you can think about. I do not pretend on same absolute and 100% real stuff, treat it as just “thing about issue”. You may drop it at all, if you are totally disagree with it.
    Idea is based on currency wars. It touches not only EU/US, but US-China, US-Japan and others. But today we will speak about only EU/US currencies. First of all, try to think who owns rating agencies? All of them domicile in US. If you take a look how they appeared and at their history, you will see that all their work was directed at one main target – to get a rights treat their ratings as absolute scale of creditability and solvency of any entity. Also, they gained that their ratings were adopted by pension funds, exchanges and other less protected entities as an absolute scale or credit quality. That was by the way most important reason for liquidity sub-prime crisis in 2008.
    Now, the question is – does this problem appear now? So, say Italy or Greece does not have a problem with budget deficit in 2003, 2004, 2005 and so on? Why in 2006 Greece was able to issue debt, say at 3%, but now it can’t and its debt has appeared just in a blink of an eye. Surely not. From this “not quite common sense” approach it turns that these problems become public at the moment when it was needed by someone. And one of the reasons for that could be real weak of dollar. In our Forex Military School, there will be the chapter, where you will see that US GDP gradually drops from 2000s and never shows positive growth and S&P Index does not show any growth in 2011 if you will recalculate it in Gold. So, if leave EU as it is, most countries have much better credit quality compares to US, it could lead to significant growth of EUR/USD rate and that was so, when EUR has reached 1.50. But now, due outside impacts of rating agencies, escalating of the problems of EU, rushing and nightmare investors by different authorities, this action lets hold relative balance with USD and disguising real weakness of USD. Just think about it 15 trillion debt of US – it never could be pay out, that’s obvious. So, they need to postpone this moment as far as they can by any action. Partially they are forced by China and Japan who hold large reserves in USD and Treasuries and they do not need that USD loses its value. Significant drop of USD could lead to chain reaction if Japan and China start to spend and sell-off USD. This partially confirmed by Japan action – they start to spend their dollar reserves. Ministry of economy made a directive to invest some part of reserves in economy. That was not happened for a long time previously. I understand that these are just hints and suspicions and we do not have any 100% evidence. Still this issue is worthy to be thought.
    [​IMG]

    Weekly
    Taking into consideration monthly and weekly price action, as a disrespect of solid support area, I dare to suggest that we have dealing with punchy market pressure that does not feel any barriers at all. May some of you have seen such price action, when daily range is not wide and relatively calm, but market moves and moves in one direction without significant retracement. If we take a look at price action then we see that market never reaches monthly resistance area and during previous swing down hardy touched pivot and very often moves below pivot support 1 as it was at previous week also. This shows significant bear power and recent disrespect of solid support just confirms it. Hence positional traders could use any retracement on weekly time frame to increase short positions. Next target is 1.1960. Don’t be worry that upward move could trap you on a wrong way. Fortunately recent swing down is sufficient for B&B “Sell” direction pattern. You will have a lot of space to move your stop to breakeven, since any first retracement will be sold out by new participants stepped-in.
    [​IMG]

    Daily
    Here you can see why it is so important to have acceptable patterns that could point on reversal. If we have not applied them, probably we can lose the money on daily time frame. We see that applying of second confirmation was crucial to judge about reversal, because trend has turned bullish couple of days ago. Has it led to reversal? Definitely not.
    At the first look this chart looks poor – no fib-work, trend lines at other stuff, but it contains all necessary information that will set the tone may be for whole next week. First of all, we might say that we have a stop grabber if we would have some lows below current market. Still we do not have it – this could be treated mostly as trend shifting failure. That is solid bearish sign.
    Second, market almost all times hardly touch pivot and accelerates down, that is also bearish.
    And finally, we have a pattern – broadening bottom or widen triangle, as you wish. Depending on how market will act there can lead to upward move or downward. Very often broadening patterns become reversal ones. One suspicion of that is a way how it has developed. As you remember, it has started from Double Bottom on 4 hour chart that has failed and market couldn’t passed through K-resistance area at 4-our chart. The way of development does not suggest some upward breakout. That’s why, to my mind we have to search opportunities to sell first, while keeping an eye on either logical it develops or not second.
    Pay attention that trend breakeven point for Monday stands right at weekly pivot – 1.2728. That’s important.
    [​IMG]

    4-hour
    Trend is bearish by nice angle of crossing by MACD, we see the miserable failure of Double Bottom, that probably could be treated as DiNapoli directional pattern – “classical pattern failure”, since market has reversed right from K-resistance and Agreement. Since daily trend is also bearish, retracement should be shallow, our major direction is down and this triangle can help us. If market will not reach upper border of triangle and reverse down after some retracement - this will be the classical sign of weakness. Preferably if it will happen at 1.2725 area – nearest Fib resistance and pivot point level. If market will pass through it, then probably is better to take some pause and get a confirmation that market will not show upward breakout of this pattern.
    [​IMG]

    1-hour
    This chart just confirms our thoughts on 4-hour time frame. Hourly chart shows Confluence resistance and Agreement right around pivot point of 1.2725-1.2728. Another Agreement stands around 1.2770-1.2786. But my major hope is linked to first area. By the way – this could be a B&B “Sell”, just add 3x3 DMA on chart and you will see perfect context for it… So due to price action of B&B this potential enter short from that area relatively safe, if you will be hasty enough to place stop at breakeven – just for some case.
    [​IMG]

    Conclusion:
    Long-term bias holds bearish. Market disrespected solid support area that we’ve discussed previously. Taking into consideration that this disrespect has happened absolutely calm without any volatility around it, we can suggest that bear power is really strong but a bit disguised by not too steep move down.
    Weekly price action gives nice context for directional trades as B&B or DRPO. So, any retracement to significant Fib level (B&B) could be used for enter short without scare been trapped in wrong direction, mostly because this will be first retracement that usually sold-off by new participants.
    Daily and intraday charts show a lot of bearish signs. Although broadening patterns could lead to reversals, still as technically as fundamentally it will hardly happen. Probably we have to be focused on sell opportunity around 1.2725 area. If market will proceed higher – it will be better to take pause and wait a bit just to see further developments. Deeper upward retracement could happen if market will take out the high of broadening bottom pattern – 1.2884

    The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
     
  2. asif faryad

    asif faryad Sergeant

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    Thank you Sive as always for a beautiful summary.

    I wish you and your loved ones a great weekend!

    :)

    Asif
     
  3. Denny W

    Denny W Private, 1st Class

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    Thank you Sive, your analysis is wonderful as always and make me get nice profit.
     
  4. kakadubm

    kakadubm Private

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    Hi Sive

    I completely agree with your notes on the S&P agency. S&P agency working only problems. I was surprised that the lower ranking of Austria, because I know very well what is happening in this country. It is not fair.

    But I am convinced that the U.S. will be bankrupt and USD In the next ten years.

    The EU will survive with or without Greece.

    In Europe, the biggest problem the bureaucrats. - They are at the root of today's crisis !
    As Marc Faber said in an interview: EU bureaucrats do not do anything just eat sleep and play golf.
     
  5. Dermolikesprofit

    Dermolikesprofit Sergeant

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    Thank you Sive, and a special thank you to Felix, for getting you to give your weekly analysis and you daily videos. I have learnt so much from you, and your forex military school!

    BTY I could not agree more with your theory, to me a newbie, it seems any time the EU has made some gains or some positive news some so called rating agency steps in to give an announcment that takes back any gains made, just thinking about it now, a few weeks ago when EU banks were provided with E500b liquidity the S&P then announced it was putting the whole of EU on a credit downgrade watch, this week past when Italy and Spain had sucessful bond auctions......., 9 countrys get downgraded by S&P.
    Goes to show someone is always in control of world markets.
     
  6. rashidin5178

    rashidin5178 Sergeant

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    Hi Sive,
    As always thanks a lot for your wonderful jobs, Sir. I just want to touch a bit about 1.2725 level. Definitely this level is strong resistance on H1 but...IF and ONLY IF there is no significant new low. Let say on the early next week we'll get new significant low level, then I think 1.2725 maybe not valid anymore since we should find another confluence/agreement level. Guys, I think most of us understand about this condition. But for those who are new to Dinapoli's method and this forum, bear in mind that it is not a matter of level, but how it has derived by Sive at each his analysis. This is the main objective of this forum...to educate all of us, guys.
    Have a good weekend, Sir.
    Thanks and Best Regards.
     
    #6 rashidin5178, Jan 14, 2012
    Last edited: Jan 14, 2012
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Thanks, friends,
    By the way, Asif what is nice view on your picture?
    Looks tremendous...

    Hi Kakadubm, I suppose not only in EU, but in all countries bureaucrats have the same properties...

    Hi Rashidin, yes, you're absolutely right, they will drift lower, depending on will it be new low or not.
     
  8. asif faryad

    asif faryad Sergeant

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    Hi Sive,

    Well thanks to your on going mentoring you have changed my life!!! As i am in Cyprus. and this is a secluded spot i found on top of a mountain near a place called Lefke. I had just closed my 2 small positions on a short :)) As i call this my new working office!!
    Its has given me the confidence that if you follow your plan with good risk management you can have a great life stlye!!!

    I sincerly hope as some of the regulars Triantus comes to my mind first and the others we call ourselves THE MORTEN TRADERS Can maybe at some point get together,You are most welcome and would be our HONURY ROYAL VIP GUEST...

    Thank you doesn't seem enough as for me personally i am getting consistent and the odd mistake i make is not a huge blow due to good risk management.
    I will post a few more photos as i am going to a nice place next week,as i was due back to London today but have postponed till maybe next month...

    Best and warm regards Sive :)))))
     
  9. georgeta

    georgeta Sergeant

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    I like the idea of getting together for a nice holiday. Maybe Cyprus is the perfect destination for this summer. So what do you say Morten Traders?
     
  10. samuelken

    samuelken Private

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    thanks, Sive.
    your analysis is always helpful especially to newbies like me.
    Onyenweanyi gbaa gi ume!
    have a nice weekend
     

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