Scandex Market Update – March 26

DOW NOW COMPARED WITH 1929 DAILY

I continue to track 1929 as a template for the current market.  It’s possible that the rally is complete and that we’re going for the ‘re-test’ (in reality a lower low) now.  I’ve anchored the analog using closing prices (see below), which line up better than high/low bars.  If this plays out, then a final low is due April 3rd (next Friday) near 14,900.  That would entail a flush under the 2015 and 2016 lows before all is said and done (see weekly chart 2 charts down).

I do not know what’s going to happen next but I view the 1929 scenario as a possibility based primarily on the similarities with price action now and in 1929.  But, I also look at it from a historical perspective.  Last night, I was reading Schultz’s ‘Panics and Crashes’.  The following is an excerpt about 1929 that could have been written today.

Prior to 1929 government force-fed the economy for so many years after a normal reaction was due, that when the reaction did come only disaster could follow. 

Hmmm….

DOW NOW COMPARED WITH 1929 DAILY (CLOSES)

DOW NOW COMPARED WITH 1929 WEEKLY

S&P FUTURES (ES) HOURLY

An hourly volume reversal triggered today.  This is the first bearish one since 3/3 (circled and highlighted).  Today’s high is just under VWAP from the March high.  Despite my 1929 thoughts, I’m open to something else (always am).  If we show support at 2360 or 2321, then a constructive outcome is possible.  Bottom line, we got a bearish signal today fairly close to an important level (VWAP), which is good enough to ‘think lower’ again.

USDOLLAR DAILY

USDOLLAR focus remains on 12640 or so before I’d think about USD longs.  Sentiment is reversing from extreme levels and USD seasonality is now bearish so the case can be made that a much more important top is in place.  I don’t have any long term reversal signals to support that thought but might by the end of the week.

3/22 – USDOLLAR reversed sharply on Friday.  Near term (see below), a line off of highs since 3/10 runs through the high on Friday.  A short term head and shoulders top could be forming as well.  Let’s see what price action looks like when U.S. trading gets underway on Monday.  If price is rolling over, then I’ll be looking for USD shorts generally back towards 12640.

EURUSD WEEKLY

Was thinking 1.0500/30 before the big low but EURUSD is holding up after dumping below the line off of the August and November 2018 lows.  This line was support in Sep 2019 and in February.  So, that drop and recovery qualifies as a failed break and/or bear trap.  Also, there is divergence with RSI at the low on the weekly (EURUSD was divergent with RSI for much of 2018 and 2019…there are some great signals in years past however).  Bottom line, I’m open to the idea of a massive low being in place and will alert when/if near term action warrants an entry.

3/24 – EURUSD traded into proposed resistance and pulled back today.  All else being equal, I’d look to short near 1.0830 and target the noted 1.0530 but USD sentiment is reversing from extreme levels and don’t forget that USDOLLAR has responded to decent resistance.  I think there are better places to play the short side of the Euro…notably EURAUD.

GBPUSD HOURLY

I like GBPUSD higher.  Today’s low was on VWAP from the low (see below).  Proposed support is now 1.1759 (low hour close from today).  Near term upside levels are 1.2093 and 1.2304 (38.2% and 50% retraces from March high and parallels).

3/24 – GBPUSD low is still 1.1414.  Remember, that level is huge on a long term basis.  Near term structure isn’t as clean as AUDUSD but it’s not terrible.  Watch for support in the 1.1547-1.1606 zone (high volume level and daily reversal support).  Near term upside levels for resistance are 1.2003 and the upper parallel, currently near 1.2150.

BRITISH POUND FUTURES

USDJPY HOURLY

USDJPY high so far is 111.72…good enough.  The trigger for a short is a break below the short term trendline, which is about 110.75.  Immediate focus would be 108.50s.

3/23 – Focus for USDJPY resistance remains 111.80.  A break through, although unexpected, would be significant.  Be sure to follow Twitter for updates to the near term picture (volume reversals for example and entry).

USDJPY DAILY

AUDUSD HOURLY

No change to the AUDUSD outlook other than noting that the lower parallel is now near .5880 for support.  Near term upside focus is now .6212/36 (3/12 low and 61.8% retrace from March high).

3/24 – There is now a well-defined bullish structure to work with in AUDUSD.  The lower parallel of the Schiff fork is proposed support now near .5820 (also a high volume level).  Near term upside focus is the upper parallel, which is .6175/85 tomorrow.  Spot and front month futures (June) are currently trading at the same price, which makes it easy to use the VWAP levels from futures to trade spot.  VWAP from the March high is .6004 and a level to know for near term resistance.  VWAP from the low is .5818…right in line with noted support (futures chart is below).

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