Thu, Dec 09, 2021 @ 07:42 GMT

A$, 7% Decline Near ?

Nearer term a$ outlook:

In the Feb 9th email, once again affirmed that long held view of gains toward the bearish trendline/ceiling of a potential triangle/pennant since Apr 2016 (currently at .7745/60), and before potentially completing a more important top (at least a few months). In the bigger picture, seen part of the very long discussed, extended period of wide ranging from that Apr high at .7835. Seen as a large correction but with scope for at least another few months of wide ranging first (see longer term below). Currently the market is turning lower from a slight new high at .7730, with lots of near term negatives increasing the likelihood of that more important topping. Note the quick reversal lower from the slight new high at .7730 (sign of underlying weakness), slowing upside momentum and deteriorating technicals (see bearish divergence/sell mode on the daily macd). At this point, there is still no confirmation of that more important top "pattern-wise" (5 waves down for example), but further upside would likely be limited/part of a larger topping on approach of that key bearish trendline from Apr (see "ideal" scenario in red on daily chart below). A final word…this is the "ideal" scenario but with no confirmation of even a shorter term peak so far, the confidence in a more significant top is not yet very high (larger tops generally begin with smaller ones). Nearby support is seen at the bullish trendline from Jan (currently at .7625/40). Bottom line : finally nearing that long discussed "ideal" area to form a more important top (at least a few months) at the bear trendline Apr (currently at .7745/60) but scope for a period of topping.

Strategy/position:

For now with a potentially important top nearing, would sell here (currently at .7700) and initially using a wide stop on a close above .7795 to allow for that further period of topping. Though there is still no confirmation of even a short term top so far (and therefore not yet overly confident of a more important top), the limited risk and large potential still makes for a good overall opportunity (good risk/reward, the main driver to positioning).

Long term outlook:

No change in that very long held view of an extended period of wide ranging from the Apr 2016 high at .7835, seen as a huge correction and with eventual new highs after. Note that the 5 wave rally from the Jan 2016 low at .6825 to that Apr high (longer term upside is not "complete") and messy/sloppy trade since that April peak (characteristic of a correction) add to the view of a large correction. However, may be forming a large triangle/pennant over that time, leaving open scope for another few months of wide ranging before finally resolving higher (see in red on weekly chart/2nd chart below). As discussed above, there is still no confirmation of even a shorter term top "pattern-wise" (so the confidence in this more major top is not yet very high) but the view in gold of an important topping (correlated market, see email from yesterday) does increase the likelihood. Bottom line : big picture correction since Apr with potential for large triangle, raises potential for more important topping in this area (bearish trendline from Apr peak).

Strategy/position:

With scope for more wide swings since the April peak (about 7-8%) would stay with that approach of fading the extremes. So would also switch that longer term bias to bearish here (currently at .7700) and using the same exit as the shorter term above.

Current:

Nearer term : short Feb 16th at .7700, scope for another week or 2 of topping.
Last : short Feb 2nd at .7590, stopped Feb 9th at .7625.

Longer term: bear bias Feb 16th at .7700, potential important topping near ceiling of triangle from Apr.
Last : same as shorter term above.

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