FOREX PRO Weekly September 12-16, 2011

[Sive Morten]

Monthly
Our suspicions that we are shared with you during previous month finally have had some force and com to life. Particularly I was worried that market couldn’t continue move up forming the flag pattern and showing very shallow retracement down. Market freezing at same place for a long time made me thinks that something is wrong. 100% confirmation we’ve got by previous week stop grabber. Here I want to mark importance of high time frame analysis – it really could give you context for a whole week!
Ok, let’s take a look what we have now. First is solid plunge down – that’s obvious. Monthly trend still stands bullish, market not at oversold. There are two significant moments that I would like to discuss today. One of them is not so crucial currently - I suppose it will be important in medium term, probably in October. This is MACDP indicator (red line) that comes in play and moves very close to current price action. Currently market stands a bit far from it, but in October there will raise the real possibility of monthly trend shifting. We will keep a close eye on it definitely.
Second thing is extremely important for nearest 1-2 weeks. This is monthly Confluence support 1.3650-1.3760, or as it calls sometimes K-area. You may ask what a big deal with it? Answer is “monthly K-area”. Since this is monthly strong support it could be some kind of directional indicator for lower time frames, such as weekly or daily. Existing of support such kind of strength could lead to solid bouncing on daily time frame, even if on monthly chart it will remain invisible. Also do not forget that monthly levels are rather wide, they are not just 1.3650 pips-to pips but more as some area. And this gives us huge advance for week ahead. We know particularly where to search for Buy signals.

We will not speak about upward targets again, since they are not so important right now on monthly chart. Still, I just want to remind that probably we should treat 1.3550-1.36 area as crucial point for this time frame. If market will move below it then our long-term context will turn bearish. 1.4140 is no more the Fib support. Next fib support below K-area is major 1.3039 level.

Weekly
Trend here is bearish, so as price action. You can see the result of Stop grabber acting – our target has been successfully reached. So, the question is what to do next…
Here you can see why I speak about monthly K-area as of wide range. Just under 1.3650-1.3760 level stands minor 0.618 Fib support 1.3480 that we can’t see on monthly chart. But particularly this support will become a key to our analysis. Take a look at ABC-top pattern – market has totally disrespected 0.618 target and is moving right 1.0 Fib extension at 1.3439. This level creates at Agreement with 1.4380 Fib support. Also this level is very close to weekly oversold that is 1.34 for coming week. The conclusion is that despite the fact that this 1.34-1.3480 area stands below monthly K-area, it should be treated as single support range, since breakout of K-area just for 100 pips on monthly chart is nothing. Still weekly chart gives us information where particularly we should expect appearing of support, and where is the most probable starting point of retracement stands.
That’s being said, reaching of 1.34-1.35 area will not mean that monthly K-area does not influence the market anymore, this is just some kind of specification – where specifically around K-area we should expect support. The answer is – 1.3440-1.3480 area.

Daily
Daily trend is extremely bearish. We see that market stands at oversold right inside monthly K-area. It’s very difficult to make prediction at what particular moment the spring of oversold will become stronger and push market back. It could happen earlier or later. For as the major question is: will market reach Agreement area before pullback or it will show some small bouncing first? So we need twofold plan. Let’s see…
Our advantage here is that market has not reached the 1.0 target yet. So it has passed 0.618 extension, but not quite reach 1.0. This tells us that if even market will start some bouncing due oversold condition, this bouncing should not be too deep, like it was 2 days ago – see single white candle during this black down move? Market also has hit oversold, but shown quite shallow retracement. This could happen again. So, my preferable area to watch in that case is range between previous low and pivot point 1.3811-1.3855. If this retracement will take place – it will be temporary and shallow anyway, since market is tending to 1.0 target. This retracement probably could be used to enter short again.

If market will not show it and continue move right to 1.3440-1.3480 that will be our area to watch for buy signals and patterns and close short positions.

4-hour
Trend is bearish, no sign of retracement yet. Still here is additional important detail. Look at AB-CD pattern. Market has passed 1.0 extension already, but keep attention where 1.618 stands – right at the area of weekly Agreement. This gives us more confidence to search for Buy signals there.

Conclusion:
Although market shows really strong move down, it has reach significant support level. Area to watch for medium term reversal is 1.3440-1.3480. If suddenly market will show upward bouncing on daily time frame to 1.38-1.3850 area probably we may use to enter short.

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.

 

[Venelin]

Thank you Sive!

 

[rashidin5178]

But particularly this support will become a key to our analysis. Take a look at ABC-top pattern – market has totally disrespected 0.618 target and is moving right 1.0 Fib extension at 1.3439. This level creates at Agreement with 1.4380 Fib support

Hi Sive,

Thanks again and again for your kind efforts.

I think there is some typing error on Fib support - suppose to be 1.3480, right?

Thanks and Best Regards

 

[georgeta]

Hello Mr. Morten!
Uuf... It feels good to have a clear signal. Especially on higher time frames...
Two things bothers me from quite some time:

1. How do you chose your ABCs? Is there a rule or this skill develops in time? I was convinced that I have a preferable ABC on weekly, based on the initial thrust and retracement (chart attached).

2. How do you chose the time frame? I mean, for example, how do you say that the Confluence support is on Monthly. Why not on Weekly?

Thank you!

 

[holyghost168]

Thank you Sive for your guidance.

 

[Stag]

Quarterly view

Hi Sive, the quarterly assumption has been confirmed (see post in june here: https://www.forexpeacearmy.com/fore...-weekly-june-27-july-01-2011-a.html#post66468). Although this quarter is not over yet, the decline is also associated with significant volume indicating further down move is probable in the next quarter.

 

[Geert Anthonis]

Thank you once again

Hi Sive,

I got burned badly on Wednesday and Thursday. Opened up a short order a bit too early twice no less and lost almost all of my gains for the past two weeks. I still wonder about the first one though. This has happened so many times it can not be coincidence. The stop put at 200 pips got hit with not even one pip to spare. And as usually it happened the 15 minutes I was not at my computer. As I said this can not be coincidence. A few weeks ago I opened a buy position on gold at 1875 with a stop at 1849.98 (I know strange choice) and a limit at 1898. Five hours later the price was at 1911 still I was stopped out at 1850.25 while the lowest price my broker gave for that period was 1850.15. That was not even close to 1849.98. Anyway beside the point.

My question. How confident are you that there will be at least a small retracement to the 1.3790 - 1.3810 area in the coming 2 days? I ask because after Thursday I was very cautious and closed my short positions around 1.3968. That means I made a small profit on them but it did not make up for my big losses. Friday I was afraid to open new shorts instead just before the market closed I opened two small long positions with as target 1.3790 and 1.3805 respectively. My reasoning being that after such a sharp fall and hitting such a strong area of support on monthly time frame a bounce, or retracement should happen, IF no further bad new from the Euro zone emerges over the weekend. You seem to indicate as much in your Daily time frame analysis for this coming week.

One last question while I'm at it. We are September. You mentioned earlier that future contracts are now for December. Could you please indicated if and when this is happening and when the spreads between your future prices and our spot price is different. At the moment it really looks like you are using spot prices. Thank you very much.

 

[Fernando Monera]

Thanks for your work Sive I learn a lot from your analysis every day.

I have a question, when you say "1.4140 is no more the Fib support", how deep the penetration on a fib level must be to invalidate it as support/ressistance?

It is not a close, obviously, as there as there is some weeks left for the bar to close.

Thanks a lot

 

[Joh]

Thank you

Thank you ever so much for your amazing generous sharing of knowledge and teachings. You are simply awesome

 

[tadinda]

May I dare to answer.

Hello Mr. Morten!
Uuf... It feels good to have a clear signal. Especially on higher time frames...
Two things bothers me from quite some time:

1. How do you chose your ABCs? Is there a rule or this skill develops in time? I was convinced that I have a preferable ABC on weekly, based on the initial thrust and retracement (chart attached).

2. How do you chose the time frame? I mean, for example, how do you say that the Confluence support is on Monthly. Why not on Weekly?

Thank you!

Georgeta.

Name is Ernest I am from Malta and have been following Sive since the very beginning. Let me try to answer your questions.

1. I suggest first of all your read the e book which Sive is building for us all in this same site. He covers the aspect of Fib Expansions and provides some rules. Having said that I still find problems myself of how to find the right points. So what I do I try quite a number and see which ones provide some areas of agreement. Am not sure if this is a correct method but it helps me at least. However I do really believe this aspect and skill can be better developed over time. If I remember correctly even Sive in his e book says this.
2.Confluence areas are derived by drawing Fib retracements from different points to a common high or a common low (usually). The drawing of these are also covered in Sive's e book and are more then amply recorded in Joe Dinapolis Book.
You can draw these Fib retracements in any time frame and finds confluence areas for each time frame. What is important is that a Confluence area created in the Monthly, Weekly Time frames are also relevant to the Lower Time Frames. So a Monthly K area providing for example support does not apply only to the Monthly Time Frame but provides Support for all lower time frames. In fact Sive suggests many a time in these reports that the higher Time Frame areas are more significant then Lower Time Frame areas.

Georgetta hope I have answered some of your queries an please do not think I am trying to be a big head. Just want to help if I can. Sive can review this answer and clip me over the ears if I am in any way overstepping myself or correct if I am incorrect.