03 May

Looking ahead

Apologies for the lack of update yesterday. It was a holiday here in Spain, and I decided to take advantage of a break from the screen and soak up some sunshine.

We have an interesting week ahead of us, mainly because you have holidays in many places. Denmark for example will be off Thursday and Friday. Japan is off Wednesday and Thursday, and Germany and France and Swiss have a bank holiday Thursday.

3 maj 2016 2

RED FLAG EVENTS THIS WEEK

 

The all-important event – well take your pick – but I will be looking ahead to the Non-Farm Payroll out of the US on Friday. I will discuss this later in the week. For now – let’s look ahead to today:

Sometimes you get an indication of what is going to happen in Europe by looking at Asia. Today it is quite a mixed bag:

3 maj 2016

The DAX charts below show the DAX without volume and then with volume. Why are there two charts? I wanted to demonstrate to you that volume can be a great additional tool to your analysis, BUT it doesn’t have to be included if you can interpret the price action instead.

Chart number one, below, shows the DAX on a 30min chart for the last 6 days. It does take a wise man to see the DAX is trending lower, and you should be selling rallies, as long as we trade below 10,150.

3rd May 2016 3

DAX is trending lower, and has failed to hold on to 10,400

The second chart looks at the volume pattern for the last 6 days. There is something in particular that I want you to be aware of, which happened during the timeframe I am zooming in on.

3rd May 2016 4

DAX with volume figures – notice the volume increases on the sell-offs, and remain flat on the rallies.

If you zoom in on the middle part of the chart (see below), you will see a favourite pattern of mine. I call it the Trap Door. Notice how the DAX makes a great recovery, and price goes above the morning high. Notice also how volume doesn’t confirm this, because it is running at a lower high. This in itself is only cause for concern – not an all-out sell signal, but then notice the market selling off BELOW that last price spike bar. This is a Trap Door sell, and it means I will remain bearish as long as DAX is trading below 10,300.

dax fake volume

DAX Fake Move = Trap Door

3rd May 2016 5

Dow lost and regained 17800 very quickly

The next chart is the Dow – above. I betted heavily on the Dow falling last week and I won big. Now I have to contend with the fact that the Dow has regained what it lost, and it did it the day after. So it changes the playing field today. So far the DAX is relatively flat, but I am watching for signs of strength or weakness in the early going. It is the beginning of a new month, and the way the Dow traded yesterday will have me alert to abandoning my bearish stance. So far I will still hold on to my bearish view. One rally will not have me change my mind.

Have a nice day.

Tom Hougaard
Tom Hougaard

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