In this issue: Dow, VIX, Bovespa, Gold, Oil, US Dollar Index, AUDUSD, EURAUD and AUDNZD currencies
The Dow’s parabolic move higher has continued with gusto throughout November. So what’s next? Well, I think Santa is coming to the party with a Christmas rally that will be the last hurrah for this bull market that began in 2009.
Let’s begin the analysis with the weekly chart.
DOW WEEKLY CHART
The Bollinger Bands show price clinging to the upper band as expected for a parabolic move higher. This move up still looks to have more price and time left in it.
There has hardly been any pullback of significance in the last month which is testament to the current strength of the bulls. I thought a minor 23.6% Fibonacci correction may occur but the bears couldn’t even manage that.
So we have a 5 point broadening top in play as denoted by the numbers 1,2,3,4 and 5. We are now just awaiting the final wave 5 high to form.
This is also a “three strikes and you’re out” topping pattern which consists of three consecutive higher highs.
As outlined in the November newsletter, I expect this final high to be much higher than the point 3 high as that high was only marginally higher than the first high at point 1. That appears to be holding true here.
There also appears the potential for the coming top to be accompanied by a triple bearish divergence in both the Relative Strength Indicator (RSI) and the Moving Average Convergence Divergence (MACD) indicator. This is denoted by the numbers 1, 2 and 3 on the respective lower indicators. This is commonly found at tops and generally leads to a significant decline.
Let’s move on to the monthly chart.
DOW MONTHLY CHART
There has been a lot of talk recently about the big megaphone top that has formed. I have drawn this megaphone pattern on the chart which shows the upper trend line across the 2000 and 2007 highs and the lower trend line along the 2002 and 2009 lows.
This megaphone pattern is very obvious and when something is that obvious then caution needs to be heeded. In fact, instead of turning down, price has busted out above the top of this pattern. This is causing confusion with some now calling the next leg higher in an even greater bull market. So just what is going on?
It is my opinion that the current move higher above the upper trend line is a mega fake out of the megaphone pattern. This can be seen in the green highlighted circle.
So how high can we expect this fake out move to trade?
I have drawn an Andrew’s Pitchfork denoted by the three green parallel lines. We can see price now has the top pitchfork trend line in its sights. This currently stands above 18100. Price may do a little “up and over” by trading a bit above the trend line before reversing back down. In the November newsletter I forecast around 18500 but I suspect even that may be underestimating the power of this final surge.
And when might we expect this fake out move to end?
They say things happen in three’s. The old hip hop crew from New York, De La Soul, even had a song about the number 3 titled “The Magic Number”. So how does this relate to this fake out move?
These final moves often end after three higher candles. Just look at the move into the 2007 high which consisted of three higher candles. I think this is happening here but on a more extreme scale.
We can see October provided the first candle and November the second. December should be the third higher candle and I am favouring the high to come in the second half of December. Let’s see.
Another possibility is four higher candles but with the fourth candle being a bearish reversal. We can see this pattern comprised the move into the 2000 top. If this pattern plays out it would mean a top in the first half of January 2015 before price reverses and closes the month in the red.
The RSI is in overbought territory and may show a bearish divergence on the coming high.
The Stochastic indicator looks to be trading itself into a corner and considering where it is there looks to be only one escape route – to the south!
Let’s now do some big picture analysis using the yearly chart.
DOW YEARLY CHART
I have added the Andrew’s Pitchfork as shown in the monthly analysis. Price is butting up against the upper trend line and I expect this to provide solid resistance.
In previous analysis, I have shown the No Mercy cycle which is based on the 7 year cycle. The next No Mercy cycle year is next year in 2015 and I expect a stock market shellacking in line with this bearish cycle.
They say the market goes up by stairs and down in elevators and hence I am looking for the next move down to be fast and furious. I am looking for a move down into 2016 that wipes out many previous years gains.
In fact, I am looking for price to come down and test the lower pitchfork trend line. Price may even trade a bit lower in a false break of the pitchfork.
I have added Fibonacci retracement levels of the move up from 2009 low to recent high. Now I still expect a bit more upside but that should not overly affect this analysis. The retracement levels should only increase slightly.
Interestingly, the 76.4% level is just below the lower pitchfork trend line and around this level is my preferred target for low. I will also be watching closely the price action around the 61.8% level as that is certainly another possibility.
Also, one of Gann’s favourite levels to look for lows was 50% of the high price. Now we don’t yet know what the high price will be but if it is a bit above 18000 then this level would be just above the 9000 level. That also happens to be right around the 76.4% Fibonacci level. Hmmm.
But what if the stock market just keeps charging higher?
Well, anything and everything is possible in the market but it is my opinion that a correction is due. But that’s just me speculating and if there is no major correction then I am just plain wrong. Possible but not probable!
The MACD indicator shows the averages starting to diverge quite a lot and looks in need of some reversion to the mean. A big move down would do the trick there!
Can price plunge below the 2009 low as the mega-bears are predicting?
Of course it can. I have drawn a green highlighted circle which shows where price exploded higher in a parabolic move back in 1995. Price often returns to these exact levels further down the track. This level stands below the 4000 level.
I fully expect price to eventually trade down below the 4000 mark however I don’t expect it on the next move down. Once the next move down gets underway the mega-bears will be out in force calling for complete annihilation in world stock markets. That is, if the world doesn’t end first! This mega-bear scenario is still too obvious and too easy. I doubt it.
So how do I expect price to trade going forward?
Let’s move on to the logarithmic yearly chart to find out.
DOW LOGARITHMIC YEARLY CHART
Some people use the logarithmic chart to make themselves look and feel like an expert. I use it because just looking at it makes me feel all warm and fuzzy inside. The nice curvy lines of the Fibonacci Fan especially ramp up that fuzzy feeling.
That aside, the logarithmic chart does put things in perspective and allows us to view in greater detail the price action of a time long since past.
I have added some Elliott Wave (EW) annotations in an attempt to give some structure to the picture. Now I am no EW expert and I only ever apply my bastardised version of it. I once saw a real EW expert go through all the possibilities and concluded that price could not go down as that would break several rules. Guess what? Yep, price went down. Nuff said.
I have labelled the 1929 high as the end of wave 1 and the 1932 low as the end of wave 2. This chart really does put that bear market in perspective! What a spanking!!
I know many EW technicians are viewing the coming high as wave 3. My take is the 2000 high was the wave 3 high and what has been transpiring since is an ABCDE correction. I am viewing the coming high as wave d while the coming plunge will be wave e.
But how can the price action since the 2000 high be corrective when new all time highs are being made?
Well, just as some impulsive waves truncate, some corrective waves hit new highs or lows. Also, I know the 2007 high was lower than the 2000 high when adjusted for inflation. Anyway, whatever the EW count is, this is how I expect price to trade going forward.
After the wave e and wave 4 low which I am expecting in 2016 at around 50% of the high price, I am looking for price to then trade back up and make new all time highs. This will be the end of wave 5. It is after this final wave 5 high that I am looking for price to get absolutely smashed ala the mega-bears predictions.
I have added a Fibonacci Fan using the 1932 low as the start point and the 2000 high as the end point. Price has shown some nice symmetry with this fan with the wave a low touching the 38.2% fan angle and the wave c low touching the 50% fan angle. Perhaps the wave e low will touch the 38.2% fan angle again which would imply a 50% drop or thereabouts. Let’s see.
Once the wave 5 high is in place in the years to come, I expect price to plunge all the way back to the 76.4% fan angle which will be somewhere just under the 4000 level. That would then consolidate the area where price initially exploded higher in a parabolic move back in 1995.
As for where the wave 5 move may end, I suspect we may be in for a catastrophic plunge such as we witnessed from 1929 to 1932. If the market were to experience a similar 90% drop to its final low around 4000 then working back from there the high would be around 38000.
As for when the wave 5 move may end, assuming we get a low in 2016-17 I’d be looking for another 5-6 year bull market that peaks around 2022-23. Then the mega-bears wait will finally be over!
I like this mega-bear scenario much more than price plunging to 4000 now. For starters, there are still too many people calling this calamitous event at the moment. These things happen when people least expect it and if and when price trades up to 38000, I can guarantee you there won’t be many people calling for a move back to 4000. Bingo!
Just as you would have been called crazy in 1929 calling for the Dow to hit 40 when it was trading at 380, so too will you be called off your rocker calling for 4000 when the Dow is trading at 38000.
By the way, did anyone notice some nice Gann symmetry in those numbers in the “once in a hundred years” bear market?!!
For the moment, let’s wait for the coming top to be put in which looks set to show a bearish divergence in the RSI with the wave 3 high in 2000. Then we can investigate in more detail potential ending points for the move down into low.
Let’s quickly look at both the big and small picture of the Volatility Index (VIX). Firstly, the big picture yearly chart.
VIX YEARLY CHART
The Relative Strength Indicator (RS) is showing a pattern of higher highs and higher lows indicating strength is building in price while the Stochastic indicator is oversold so a move up would not surprise here.
I have added some simple Elliott Wave annotations which show the spike high in 2008 at 96.40 to be the end of wave 1. The wave 2 low is probably in place at this year’s low of 10.28. If there is lower to go then price should not go below the 2006 low of 8.60 which is denoted by the horizontal line.
Once the higher wave 2 low is in place, if it isn’t already, then a big wave 3 move up should occur that busts into all time highs. This should happen alongside the coming plunge in the stock market.
After that expected stock market plunge, I am looking for a move to new all time highs which would see the VIX come back down in a wave 4 corrective move.
Then the VIX should zoom back up to new all time wave 5 highs in the years following as the stock market begins the mega-bear plunge as laid out in the Dow analysis.
This wave 5 high would also set up a “three strikes and you’re out” topping formation with three consecutive spike highs. It all sounds too easy!
If my analysis is correct, then the end game is still around a decade ahead of us. Plenty of time left to worry about that.
Let’s bring it back in tight with the daily chart.
VIX DAILY CHART
I have drawn a green highlighted circle which denotes a gap that I’ve been expecting to be filled. Done.
Price is now edging ever lower as it searches for its next major low. Rallies are weak in line with the strong downtrend.
There looks to be a “three strikes and you’re out” low formation setting up. That consists of three consecutive lower lows. The second low looks to have just formed. Then after a rally we could expect price to come back down for the third and probably final low.
There appear to be bullish divergences setting up on the lower indicators being the RSI, Stochastic and Moving Average Convergence Divergence (MACD). A triple bullish divergence would be especially nice. Let’s see.
There is a gap to the upside which can be seen in the yellow highlighted circle. Once the final low is in place a big move up should occur that sees this gap filled.
Summing up, the VIX bulls are pawing the ground while the bears lick their lips as they devour the last remnants of their meal.
The Bovespa is the Brazilian stock index and is based out of Sao Paulo. Let’s take a top down approach to the technicals beginning with the yearly chart.
BOVESPA YEARLY CHART
We can see price made an all time high at 73920 in 2008 and has not traded above there since although it went close in 2010. Since then price has been retreating.
The Relative Strength Indicator (RSI) is still in positive territory but seemingly trending down. This actually looks pretty good considering price has not hit new yearly highs in around six years.
The Stochastic indicator still has a bearish bias so there looks to be further downside in store.
As for where the final pullback low might be, I have added Fibonacci retracement levels of the move up from the 1998 low to 2008 high. A move back to the 61.8% level at 31066 would mean the 2008 low holds. This can be seen in the green highlighted circle. However, I suspect that low will give way as price makes its way towards the 76.4% level at 20941 which can be seen in the yellow highlighted circle.
Let’s move on to the monthly chart.
BOVESPA MONTHLY CHART
I have added some different Fibonacci retracement levels using the range from the 2002 low to 2008 high. My preference is for the 2008 low to be taken out as price pulls back to the 76.4% level at 23536. This sets up the potential for a false break low as this is not far below the 2008 low. I prefer this Fibonacci setup to that outlined in the yearly analysis. Let’s see.
I suspect an ABC corrective move is in play from the 2008 high. Wave A and B are already in place with wave C now in progress. Once the wave C low is in place I will be looking for a new uptrend to commence that takes price to all time highs. All in good time.
I have added the Parabolic Stop and Reverse (PSAR) indicator which pertains to the dots and we can see price busted these dots to the downside a couple of months ago. So there is now a bearish bias in force but as often happens after an initial bust of PSAR support, price then trades back up to test the dots which are now on the upside. This PSAR resistance is now at 61634 and I doubt price will trade above there. Why?
I have added Bollinger Bands which show the recent high in September trading well above the upper band. This can be seen in the green highlighted circle. Highs are often made when price trades well above the upper band and I expect this time to be no different.
Also, there is a clear pattern of lower highs and lower lows since the wave B high in 2010. Apart from the recent high, the previous swing high was in September 2012 at 63428 and is denoted by the horizontal line. Breaking this level is the first step needed to get the bullish case back on track.
The recent high was accompanied by an overbought RSI reading while the Stochastic indicator is showing a recent bearish crossover.
Let’s finish off the analysis by looking at the weekly chart.
BOVESPA WEEKLY CHART
Price has been trending up since the middle of the year and it looks like this trading has been part of an ABC corrective pattern. This looks to be complete with the wave C high in September at 62305.
The PSAR indicator shows price recently busting the dots to the upside so more upside looks likely.
The Bollinger Bands show price moving away from the lower band and now milling around the middle band. Perhaps price tests the recent high and finds resistance at the upper band.
And if price turns back down after failing to break to new highs then new lows should be seen.
The Stochastic indicator still has a bullish bias while the Moving Average Convergence Divergence (MACD) indicator is showing a recent bullish crossover so the weeks ahead look positive for price.
The Brazilian stock carnival has been quite subdued in recent times and I’m not expecting the samba to heat up any time soon. But the sun will shine again. Fique tranquilo!
I have covered gold in detail in a recent article titled Gold & Silver Go BOOM so I will only cover it briefly here.
GOLD DAILY CHART
Gold has retreated right at the end of the month but I still believe the low is in. If it isn’t then I would only think price goes marginally lower before embarking on a big rally into the end of the year.
The lower indicators are all looking a little bearish. The Relative Strength Indicator (RSI) is back to oversold territory while both the Stochastic and Moving Average Convergence Divergence (MACD) indicators have recently made bearish crossovers. So, a bit more downside looks in store.
I believe this is the first correction in this rally. If am wrong and price makes a new low then it would likely be accompanied by bullish divergences in the lower indicators.
The Parabolic Stop and Reverse (PSAR) indicator shows price recently busted the dots to the downside which represented support. So a bearish bias is in force here.
I have added Fibonacci retracement levels of the recent move up. I suspect price is headed to the 61.8% level at US$1160 and perhaps a whisker below. The next level of support would be the 76.4% level at US$1149 and breaking below there would probably mean a new low is on the cards.
The Bollinger Bands show price hitting the upper band before turning back down. Price now looks to have the lower band in its sights which is currently just under the 61.8% Fibonacci level.
My long term outlook still requires a big rally now before the final drop to lows in mid 2015. Nothing has happened to make me doubt this scenario.
The Swiss gold vote looks set to be opposed so this may see the gold price drop initially on the open in December but as it's expected price should then turn back up. That's how I see it anyway.
The price of oil has capitulated going into the end of November after the OPEC sheiks said they weren’t going to cut supply in the face of declining prices. These capitulation moves are often found at major low points and I suspect just that with the oil price.
Let’s examine the situation using the daily and monthly charts.
OIL DAILY CHART
I was expecting price to rally before trading down below US$70 to put in a major low in 2015. But here we are and it is my opinion that the final pullback low is imminent.
I’m used to being patient as I wait for my longer term targets to be hit. Sometimes when I expect a target low is about to be hit price reverses higher and I am forced to wait as price goes through the motions. In this case I was expecting a rally before my target was hit but instead oil is gunning for it now. Perhaps this is an early Christmas present from Santa as a reward for being patient in other instruments I follow!
The Bollinger Bands show price being turned back at the middle band and testing the low before the OPEC news hit.
The Relative Strength Indicator (RSI) is very oversold as is the Stochastic indicator which looks like this could be the “last hurrah” move.
To get a better idea of where the final low might be, let’s move on to the monthly chart.
OIL MONTHLY CHART
The RSI is at an oversold level as was last seen at the 2009 low. I generally like to see bullish divergences at lows but sometimes lows are accompanied by extreme readings or outliers and this seems to be the case with oil. Most major tops and bottoms on this chart have not been accompanied by bullish divergences. Just look at the 2008 high, 2009 low and 2011 high as evidence of that.
I have drawn an Andrew’s Pitchfork and I am looking for price to find support around the lower pitchfork trend line. Interestingly, this trend line looks about to intersect with the May 2010 low support level which stands at US$64.24.
Originally, I was looking for the final pullback low to pull up just short of the May 2010 low level. It still might, however considering price is down here now I suspect price may dip a touch below that level and set up of false break low. This can be seen in the green highlighted circle.
I have added a Fibonacci Fan which seems to show some symmetry with price. The most recent two highs were rejected at the 61.8% angle. I am looking for price to now find support at the 23.6% angle which can also be seen in the green highlighted circle.
Also, I have added Fibonacci retracement levels of the move up from the 2009 low to 2011 high. The 61.8% level stands at US$64.07 and is right around the May 2010 low level. Now the 61.8% level is one of the most popular Fibonacci levels so it is obvious to many technicians. I often find price dips a bit below this level which is the market’s way of attempting to fake out these technicians. I suspect this will apply here.
I doubt price will go below the July 2009 low which stands at US$58.32. The 76.4% Fibonacci level is US$52.08 but I just don't see price trading that low.
So essentially I am now looking for the final pullback low to be set in early December around the US$62 level.
Once this low is in place I expect a rally and then a higher low to be set in the first half of 2015. After that I’ll be looking for a big move up above the 2011 high which stands at US$114.83.
So, there still looks to be some further downside in store and I'm certianly not getting in front of this southbound freight train yet. I will put out some daily chart analysis for subscribers when I like the pattern for low. This is a big play long opportunity that I will be looking to get involved in.
US DOLLAR INDEX ANALYSIS
The US dollar has surged in recent months breaking some obvious resistance levels. This has brought out many calls for an even bigger move up. While this is possible, I suspect a big fake out move is in play. Let’s investigate.
Firstly, let’s begin with the yearly chart of the US dollar index to help put things in perspective.
US DOLLAR YEARLY CHART
This chart goes back 30 years and is evidence of a massive bear market in play with a pattern of lower lows and lower highs.
I have added some simple Elliott Wave annotations to provide some structure. The all time high was around 165 and I am viewing the 1992 low as the end of wave 1 and the 2001 high as the end of wave 2.
This implies we are in the midst of the destructive wave 3 which should see much more devastation in the value of the US dollar. Americans wanting to visit foreign countries may want to do so pronto before their currency makes it too expensive for them.
The previous major low was set in 2008 and six years later price has still not been able to take out the high price of the same year. This is an indication of weakness and is consistent with price action in a bear trend.
I have added Fibonacci retracement levels of the move down from the 2001 high to 2008 low and so far price has only been able to rally back to just under the 38.2% level. Price turning back down here will be further evidence of the strength of the bear trend.
I have added the Parabolic Stop and Reverse (PSAR) indicator which pertains to the dots. This is currently resistance with the dots overhead at 90.37. I expect this to hold this move up however there is a chance that price busts these dots in a little fake out move. How will we know whether it is a fake out move or not?
I have drawn a horizontal line denoting the previous major swing high set in 2005 at 92.53. Price breaking out above there will most likely mean that a more substantial move higher is playing out. While certainly possible I doubt that scenario.
The Stochastic indicator is trending up but already has a lower low in place and a potential lower high forming now will add credibility to the big bear trend.
The Bollinger Bands show price is hovering around the middle band which is a common place for price to turn back down. Price breaking above the previous major swing high would most likely see price head to the upper band.
Let’s move on to the monthly chart.
US DOLLAR MONTHLY CHART
I have drawn a black down-trending line across the highs of November 2005 and March 2009. Price has recently broken out above this trend line which has seen calls for an even bigger move up reach fever pitch. However, this trend line has been very obvious so I think it is suspect.
In fact, I believe the move above this trend line is a fake out move that will shortly see price turn back down and resume the overall downtrend. This can be seen in the green highlighted circle.
So where is this move higher likely to end?
I have drawn an Andrew’s Pitchfork with the upper pitchfork trend line originating from the March 2009 high at 89.71. I suspect price will top out around this level and essentially make a bearish double top with the trend.
Also, the 200 period moving average is just above the top pitchfork trend line and this should also act as resistance.
The Relative Strength Indicator (RSI) is in overbought territory so a pullback at the least could be expected shortly.
Also, the Moving Average Convergence Divergence (MACD) indicator shows the averages have diverged quite a lot so some regression to the mean in the form of a move down looks in order.
US DOLLAR WEEKLY CHART
I have added moving averages with time periods of 50 (blue), 100 (red) and 200 (black) and we can see they have been criss-crossing each other since early 2009. This is evidence of the massive consolidation that has been taking place in recent years.
The longer the consolidation takes, the bigger the next move will be. It appears as if we are now in the end game of this consolidation and price has moved to the upside.
Now keep in mind it is the market’s intention to try and deceive us at every turn and I believe we are smack bang in the middle of another great market deception.
Just imagine you are playing rugby and your opponent is running straight for you with ball in hand. At the last moment, as you are about to go in for the tackle, your opponent feigns to go right but steps off the right leg back on to the left leg and darts away down the left side.
This is what I think is happening with the US dollar index right now. Price is feigning to go up but this is the fake out move before it turns back down and darts away with the bulls left holding the bag and the bears in desperate pursuit as they try to get set.
I have added a Momentum indicator which shows this fake out move that I believe is in play. I have drawn both down-trending and up-trending lines which show the consolidation phase was running out of puff and nearing its end.
The first move above whichever trend line would be the fake out move before the market’s real intentions are revealed. If price busted the lower trend line first then a substantial move up could be expected. However, the first move has been to bust above the upper trend line so it is my opinion that the market’s real intention is to be a big move down. This is shown in the green highlighted circle.
And as always, time will be the judge.
The Australian dollar (AUDUSD) has made marginal new lows in the last week and I suspect this is the final wave 5 forming before a big rally takes place. Let’s look at the daily chart.
AUDUSD DAILY CHART
I have added Elliott Wave annotations denoted by E1, E2, E3, E4 and E5. It looks as if the final wave 5 is still in the process of forming. I still believe that once formed price will stage a very impressive rally up to above 96c.
This low also looks to be setting up the common bottoming pattern being three consecutive lows.
This final low looks like it might be accompanied by triple bullish divergences in the Relative Strength Indicator (RSI), Stochastic and Moving Average Convergence Divergence (MACD) indicator. Nice.
There is still no sign of reversal on this marginal break to new lows but it surely can’t be too far off. So it appears as there may be a touch lower to go before the belated rally takes place.
The EURAUD has not played out as expected and while no major resistance has been broken I suspect it will be shortly. Let’s take a look at the daily chart.
EURAUD DAILY CHART
We can see price has been bouncing off the support and resistance levels. This has been a bonanza for range traders. The limits of this range were set in October with a high at 1.4705 and a low at 1.4222.
This indecision by price is evidenced by the Bollinger Bands which show price toing and froing between the upper and lower bands.
The Stochastic and Moving Average Convergence Divergence (MACD) indicators are both showing a bullish bias. Both indicators are also showing a pattern of higher highs and higher lows which is more evidence that price may go a bit higher.
Something of interest on this chart is the existence of a double top against the trend as it is above the previous swing high and triple bottom against the trend as it is below the previous swing low. Both formations are not common trend ending patterns and hence should be busted at some stage.
In this situation I suspect whichever pattern is busted first will be the fake out move. Considering I expect price to eventually trade down to a minimum price of 1.27 I favour the double top being busted first. Then, once a top is in place, price can reverse back down and bust the triple bottom.
I expect price to make up its mind shortly on which direction will be next. I suspect an ABC correction may be playing out with wave A and B already in place. That would likely see wave C bust above the resistance level.
And once we have the next high in place then perhaps we will finally witness the big move south that I am expecting.
The AUDNZD has been tracking pretty much as laid out in the October newsletter. I am very bullish about the longer term prospects of this currency pair so let’s see where things stand currently.
AUDNZD DAILY CHART
We can see the October 2014 high clipped the resistance line I have drawn. Price couldn’t go on with the job and that has led to a sharp move down.
I have drawn an Andrew’s Pitchfork denoted by the three green parallel lines. The lower pitchfork trend line provided support the first couple of times price went down there. The recent high could not get back above the middle trend line and has subsequently come back down and clearly broken below the lower trend line on its third attempt.
Also, I have drawn a horizontal line labelled Support which is where a double bottom formed. This support was a bit obvious and has now been busted accordingly.
I have added Fibonacci retracement levels of the move up from July 2014 low to the recent October high. I am looking for a deep retracement back to the 76.4% level at 1.0781 or the 88.6% level at 1.0698. Personally, I am leaning to the latter option.
I have drawn a black uptrend line along the January 2014 and July 2014 lows. This trend line is a bit too obvious so I expect price to pull up a bit before it or bust a bit below it. I favour the latter.
Both the Relative Strength Indicator (RSI) and Moving Average Convergence Divergence (MACD) indicator are looking very weak and we may see a rally here to unwind some of this bearishness before the downtrend continues.
Let’s now look at the big picture with the yearly chart with a touch of Voodoo magic.
AUDNZD YEARLY CHART
We can see a massive triple bottom in place denoted by the numbers 1, 2 and 3. Double and triple bottoms are a trader’s dream. And this is the yearly chart no less!
I expect a big and powerful move up which can be seen in the Voodoo 2015 candle. This is how I think next year’s candle will eventually look - a big and impulsive continuation candle.
The RSI dipped into oversold territory a couple of years ago and now looks as if it may start moving back up again.
Eventually, I favour price taking out the 2011 top which stands at 1.3789. I expect it to only be a false break top perhaps in the year 2017. And considering triple bottoms generally don’t end trends, price should top out and then come back down to bust the triple bottom. As Gann noted, price is generally successful on its fourth attempt at busting support or resistance.
So there appears to be some excellent bullish trading potential now and in the coming years in the AUDNZD. At least the Aussies may beat the Kiwis in something!