13.12.2011 - What's happening to Gold?

For longterm investors it's now decision time. Price went down to September-low today. Important mark is 1.600, which is the overall trend-line.

1) If you missed the train before, it's now a chance buy into Gold when price goes above 1.600. Otherwise stay out or short.

2) If you are a longterm oriented investor and did not sell at 1.800 because of growth factors, stick to your strategy. Sell at 1.550 and restock at 1.600.


Reason for this steep decline probably is the fact that central banks sold huge amounts of Gold in the last few days to manipulate people into panic-selling and win trust in paper-currencies. If that should be true, I do not know if our current economic system will see a collapse....

5.11.11 - DAX: Elliot Wave Analysis

As I already said, I'm expecting the DAX to fall to 4.600 in the following months. As an analyst you already have to be open for new opinions and ready to change your point of view.

That's expecially true if you're holding a position which runs losses: It's wrong to hope to price to come back. It's right to stay objective and verify if it makes sense to wait.However...

I did not find valuable information or analysis that the DAX will reach higher highs. The opposite is true: An Elliot Wave analysis on the chart leads me to the same conclusion: In August the DAX has started a corrective pattern. Next destination will be below Septembers low!

It is possible that the corrective pattern extends from a-b-c to a double or triple corrective pattern, which also could be interpreted as a new motive.

Now that the public seems to believe in a "return of the markets" it's a good advise not to follow. The crowd reacts, investors act. We act and prepare by entering short - about now at 6.000 points - without big of a leverage. We are talking about weeks or months of investment, price fluctiations should not be of concern. Price should not go beyond 6.400 anymore, so set your SL above that, 6.600 points.

Also stay true to Gold, as this will be the number one shore for investors during the upcoming correction.

01.11.2011 - DAX, is that it?

Everyone who was watching the markets during the last couple of weeks probably will be thrilled. It's more action than in every Hollywood movie.

DAX

By now you already should have made big profits, if you entered short on 6.400 following my blog. What we need now is an exit strategy! In my previous analysis I claimed that a sell-off to 4.600 points could be expected. The important thing is, that this has to go fast. Any major set backs and this opportunity will vanish.

Having a look at the price chart we can make out a major resistance around 5.800 points. As a matter of fact, a rebound is likely. But that's not a market where every rule of technical analysis applies. Resistance of EMA 100 and EMA 50 and trend-line resistance of price and RSI(14) have been crushed with ease. Ergo, if price keeps moving with fast pace, a rebound has to wait. 

Keep in mind: Panic is a stronger feeling than greed. Markets do not respect the rules when fear sets in, and that's more likely when price is falling.

Stay calm and drink some tea. If the 5.800 (5.740) should fall price is likely to go even further down. As long there is no sign of a rebound - not to speak a new uptrend - there is no need to sell your short position too early. One might regret getting out when price keeps declining. Should there be see a close at say 5.900, that's a chance to sell and take profits. As I said, the down move has to go quick and any major break is a sell signal. You have to decide for yourself: a conservative trader might take profits right now, where as a trader willing to take some "risk" - meaning less profit - should stick with the plan.

Out of office - 17.10 to 23.10

14.10.2011: EUR/USD - selling now!

The big picture of EUR/USD is not lying: We are facing a decline this year. The top has already been build.

The Euro-crisis is yet not over. Although ESFS volume was raised problems with Greece are not solved. What will happen if more and more states are lend money which they cannot pay back? 

On the one year scale we see that EUR/USD is currently trailing at a strong inner resistance. Also RSI(5) is indicating an overbought signal, which historically results in sell-offs.

After the steep rally of the last weeks this seems to be a perfect entry point for a short.

To "short" a market means that you profit from falling price. 

There are several ways to do this:

1) Shorting stocks

You lend a stock from your broker by leaving a certain margin. After that you sell the stock at the current market price. After a while, e.g. when the target has been reached, you buy it back, in order to get back your margin from the broker.  

Let's say you sold the stock for 100$ and bought it back for 70$ later. This would mean that you made a profit of 30$.

2) Shorting futures / options

Basically the same as with stocks. However, futures/options require a higher capital to trade than stocks, so to directly long/short those you should at least have 10k $. Also futures / options are not traded on the stock exchange but on special future exchanges.

3) Put option warrant

This is a documented option which is available for trade at the stock exchange. "Put" is equal to "short". Option warrants sell at a lower price than the underlying instrument, which allows individual leverage, depending on which warrant you choose.

4) Turbo-/ Knock-Out Certificate / Mini-Future 

All of these are the same thing. Certificates are similar to option warrants, but with the "advantage" that they are not influenced by volatility changes. The short variant of these documents have the prefix "bear", "put" or "short". For example "mini-short future" and "wave-put".

13.10.2011 - DAX, mystery solved!

It seems so irritating and absurd that the German index DAX reached 6.000 points yesterday even though Slovakia did not vote for but against ESFS.

As I said: it's not bad news that pull markets down, but uncertainty. Market price behaves in certain ways in certain situation. We don't have to think why, but when!

If we have a look at the 10-years DAX chart everything becomes crystal clear!

There is a mysterious regularity in chronology of events after a rapid price decline.

Sequence of events:
1) Price drops incredibly fast in a short period of time
2) RSI turns red -> reference point
3) Price rallies 30% to 50%
4) Price drops 30% to 50% below the reference point (RSI = red) - to the underlying trend


What's happening at the moment? Let's check it with the list above!
1) Price drops fast: check
2) RSI turns red: check
3) Price rallies 30% to 50%: check?

We do not know for sure when the rally is over. But you can layer the sequential pattern of end 2002 on top of the current price rally (see analysis chart). Doing this will result in an "aha" experience. What's more important is that we conclude that price will increase to approximately 6.400 points. However, we do not want to miss an opportunity to short this index. The 6.000 point mark could be a burden.

It should be crystal clear what to do with that index finally: Short on the next sign of weakness (6.000 - 6.400) and go long when it reaches the underlying trend (4.500).


Have a good trade and do not forget to stop by tomorrow, when it comes to a high quality analysis of Dow Jones Industrial Average.

12.10.2011 - Euro-Bund Future, Time To Short!

The European Bond Future moved as predicted in previous analysis'. It is now confirmed that the top has been reached and an investment can be considered.

We want to find an entry point and leverage for a short. One thing to note is that this future moves extremely slow. The whole downwards movement from 135 to 124 points - which would take half a year - would only result in 8,8% performance.

A leverage is needed to actually profit. Let's say SL (Stop-Loss) is at 139, which is above the top, and entry level is at 136, after a probable correction, and mid-target is 130  points. Then we would have a win/lose ratio of 2:1, meaning that our max. profit is double our max. loss. If price moves in our favor (down) we profit 4.6%, in the opposite direction we lose a maximum of 2.2%.

A win/lose ratio of 2:1 is fine, but the problem is that the relative performance of 4,6% over several months is extremely weak. Thus, we need a leverage. Consider losing a maximum of 50% percent of your  capital, resulting in 100% of profit, this results in a leverage of 50% / 2.2% = 22,72!

Conclusion: Wait for a good entry level at about 136 points and short with 20 - 25 leverage, depending on your maximum risk.