An Impending Trend Shift?

With the exception of equities we have been seeing a pronounced shift in market behavior across the futures as well as in Forex. Once again it drives home the point that one’s approach has to constantly be gauged and if necessary modified in response to shifting market phases. Or in other words – none of your trading strategies/approaches work all the time – the trick is to apply the proper market strategy to each discrete market phase.

Gold for instance has been stuck in a pretty uneventful sideways churn for most of the year. Hunting for an trend trades on the precious metals side would have been a total waste of time which is why we barely touched it all year. Just look at the P&F chart above – note that the part covering 2014 is a quarter of the size of that of 2013. Reason being – P&F charts do not track time – they only focus on price, which is why I appreciate them. If there’s no movement then no boxes are added to the chart.

That may however soon change. Gold just painted a low pole reversal warning and that means the bears are officially on notice. And as coincidence would have it we do have a promising setup on the roster today:

We have a nice hammer formation there on the daily panel – right underneath the 25-day SMA. I would take a breach of today’s highs with a stop below yesterday’s lows (today’s a bit low for my taste). Pretty simple setup but be aware that it’ll most likely try to shake you off. When it comes to precious metals every campaign has to be earned.

The EUR has been among the trending charts this quarter – but until August it had barely painted any boxes on our P&F chart. Then Draghi announced a whole new battalion of printing presses in response to lackluster GDP growth in the EU and the rest is history. I have been enjoying the sell off quite a bit as you can imagine but the downside ride may be over soon as we are but a bagel throw away from producing a low pole reversal as well.

Are We Due For A Trend Shift?

Now if both the EUR and gold turn then it may also mean that equities are due for a much needed correction. Seasonally however that would be an incredibly inopportune time for the bears. Not that the Santa Rally is chiseled in stone but it’s rare to see any significant corrections this late in the season. Not to second guess what may happen next (which is usually out of touch with reality at any rate) I have decided to simply keep my trailing stops where they are and let the chips fall where they may.

That’s all I have for today folks – nothing exciting to report on the setup front. And quite frankly – given the recent gyrations across board I am a bit cautious and when my Spidey sense tingles it’s usually good medicine to remain extra selective when picking entries. See you guys tomorrow.

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Cheers,