I have argued a couple of times, that the damage to US equities was a lot bigger and a lot different than back in October/2014. Of course we can not exclude 100 % that mkt finally attempts another V-Shaped recovery, but I really have serious doubts about it. And my main doubt is not that a large number of people have been talking about the next V-Shape recovery and why it is such a great idea to buy the correction again, but the main problem is clearly just the technical picture.
Weekly: - Price broke all important Ichimoku lines in last 2 weeks, but most importantly last week it has attempted to break the Kumo too. Whatever the reason was behind the pull back (reasons are not important at all!), Price finally showed impressive recovery in terms of points and %. However if we check what this correction was enough for in terms of Ichimoku (or western type averages), well, it is less impressive. - The weekly Ichimoku setup is neutral, with serious bearish bias: Price belo Tenkan and Kijun, is located in the Kumo, weak bearish Tenkan/Kijun cross happens above Kumo, Chikou Span is below past candles. If you compare this setup with the Oct/2014 picture, then no need to explain further what is the difference and problem here. Further bearish confirmation would be: weekly candle close below Kumo, lower low below 1815 and by then Chikou Span/pas Kumo bearish cross. - The upside seems to be limited, as there is quite a thick Kumo ahead (and above) price, which means you can consider this mkt as bullish again only if it trades back above 2095!!! Until then, it is simply neutral, or below the Kumo it is bearish!!!
Daily: - Interpretation of Ichimoku gets a bit harder as volatility jumped and forward Kumo adjusted quickly. Right now I'd say we are back to neutral ard 1980 "equilibrium" level, where we have Kijun and future Senkou B lines as major averages. However as previous supp/res level is a lot higher still, the bias remains bearish. It is obvious, that only above 2050-2090 we could call this mkt bullish again. - Heikin Ashi has an important message: consolidation ard the level of Kijun Sen, where short term bullish momentum started to drop. As the bias is bearish, we have to look for sell signals. - It is difficult to determin proper sell levels, but I think below 1960 selling would start to accelerate again. Maybe we should wait for few more days to see how consolidation goes, see if it makes a higher high or not. Anyway, I still have confidence that we have to think about re-enterring shorts, as sooner or later we'll see a next bearish leg down. (Actually I already did some on friday on the spike).
So the trade is short. This mkt is not bullish at all. The question is how much and when to sell. Don't let your accounts to be killed by increasing volatility, too tight stops, too big positions, or in fact with the combination of these.
The most important message to you again: Adjust your traded position size! ATR(20), which I use as volatility measure to calculate and always adjust position sizing (1 trade unit size as I call) has doubled in last two weeks! This means that with same capital on risk and same X ATR initial stop loss, I can trade appr. half of the size now, compared to what I had few weeks ago.
Comments
mikeoakster
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To complement your weekly analysis, I just add the bearish kumo twist to the "Further bearish confirmation would be" orientation.
Kumowizard
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I agree, but that has not yet happened. Senkou A is still slightly above Senkou B... let's say they stay flat. It means that the 17,5 weeks average price equals to the 52 weeks average price.
By the way if this weekly close will take place within the Kumo, and prints an inside bar Heikin Ashi weekly candle, then there will be chance for further consolidation. Bears will lose control and Bulls will try to push it back above 2000-2020. Be cautious, use trailing stops!
We never know what market will really do.
mikeoakster
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Totally agree, that's why I use trailing stops instead of take profit orders.
I am paying special attention to monthly Kijun - during last Monday decline, as wave 3 surpassed the 2,618% projection, I realized the 4,236% projection was in confluence with monthly Kijun, so I entered long, with all my body shaking... :-)
If an Heiken Ashi candle closes below that Kijun, and the following candle makes a lower low, target becomes the monthly cloud... and then one should look for EW and S&R confluences, as usual...
So, overall, at the moment, we are still in a bull market, even if the weekly cloud doesn't hold price and chikou, and even if we get a bearish kumo twist, cause all that would mean (for now) a confirmation of a deeper wave 4.
If then the monthly cloud doesn't hold... we will be entering in the scenario I've posted... and then "ladies and gents, please fasten your seat belt"...
Kumowizard
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Thank you for your comments, really useful and clear thoughts from you!
Yes this is quite an advantage of Ichimoku that you can find fibonacci built into it as well :-). That's one reason which proves it can be a system on its own, no need to add more indicators really.
Also very smart to look for confluences via multi time frame analysis! And it is not a problem to go counter long, until you know your risk, and you know your chances.
Well, it depends from the point of view... it is not really a Bull mkt any more... I rather say it is neutral mkt with lot of tension between bulls and bears. It will be decided once we move out of the Kumo on the weekly chart.
Kumowizard
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Down, Down... but for some reason this 1920 is like a magic key level for bulls. I don't really understand why is anybody protecting it.
Kumowizard
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Anyway, I still keep shorts. I may trail down my ultimate stop to ard 1980, which is Daily Kijun Sen + buffer, and also an important reversal level on 4H. If we ever traded up that high again, bears would lose and bulls would regain control.
IvanLabrie
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Waiting for NFP. Then down.
IvanLabrie
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My stop is at 1968.2, so yes, ballpark. Let's keep close watch. (shorted 1984.39)
LearningForex
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are you looking at it to break 1900 today? my tgt is 1920..
Kumowizard
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If you look at 4H time frame well yes, short term 1920-1925 was a reasonable tgt. Probably you reached it already :-). If that breaks now or later, then we will see massive selling again, probably testing previous lows in coming days around 1800.