Jan 31, 2019 --- Blog
The near-term technical strength that we discussed yesterday has quickly evaporated over the past 12 hours following a failure by the bulls to push price above 3475 $ which shows just how impotent they remain, although the market is once again finding support around the 3400 $ level so its clear that the bulls are still willing to play defense for the time being. That said, the way the short-term charts are developing is looks likely that lower prices are in the cards heading into the upcoming weekend, at least down to [members-only content], if not below [members-only content] $ where we are still waiting with dry powder to get active on the long side once again.
We want to return to the 4-hour chart again today given it remains the best view of the short-term setup where we can see that the first new candle of the day ended up being a shooting start reversal that eventually led to a [members-only content] signal that broke back below the now slightly bearish EMA's, all suggesting that the downward bias is back. Also note that all of the SMA's remain in steady downtrends, new dynamic resistance has begun to build at [members-only content] (in addition to even stronger levels above there), market structure is still bearish overall, and the Ichimoku Cloud continues to expand to the downside out in front of the market, so a test of the near-term OTE long zone in the [members-only content] area seems likely over the next few days. Granted, SCMR is currently painting a [members-only content] signal while the top of the demand area continues to provide support, which is good news for the bulls, although given the number of false signals we've seen in similar conditions over the past several days we'll stay patient for even lower levels before getting active.
Moving on to momentum and volume, notice that Willy is still trending higher with room to run, RSI is treading water in no man's land, the Stochastic has rolled over and has a lot of recharging to do, MACD is heading back towards its zeroline, and PPO is firmly neutral for the time being, all pointing to a generally consolidative market but with a slight downward bias over the short-term. Additionally, exchange volumes continue to lean bearish and remain anemic overall and the volume profile setup leaves much to be desired both above and below the market, thus confirming the conclusions above, although the A/D line does remain surprisingly resilient which is a key reason why we are still willing to get long at lower levels.
We'll also return to the daily chart one last time this week where we can see that price is still consolidating inside of the OTE long zone and longer-term demand area which isn't a bad thing for the bulls, although the fact that SCMR is [members-only content] following yesterday's [members-only content] in conjunction with bearish candle formations over the past few days are keeping the bias to the downside moving forward. Also note that the EMA's continue to fall and are acting as near-term resistance, all of the SMA's are still moving steadily lower, short-term market structure remains broken, multiple levels of dynamic resistance continue to actively build overhead, and the Ichimoku Cloud is still growing more bearish out in front of the market, so it appears as though the path of least resistance is still to the downside even though [members-only content] is likely through the daily close tomorrow. Granted, the longer price stays in this historically significant area without moving down to new lows the greater the odds of an Adam & Even bottom become, although until we see a shorter-term reversal with some supporting evidence we'll continue to lean to the downside moving forward.
As far as medium-term momentum and volume are concerned, notice that Willy is continuing to move slowly lower into oversold territory, RSI is also moving down closer to its 20-line, the Stochastic is about to fully recharge once again, MACD remains pinned at its zeroline, and PPO is flashing another buy signal, all of which are fairly bullish but not enough so to spark a sustainable reversal yet. This is being confirmed by the lackluster exchange volumes which continue to lean bearish and the A/D line which remains under a fair amount of pressure, so despite a still improving volume profile setup we'll stay on the sidelines for lower levels.
Price action over the past several hours has been unconvincing in both directions which is a sign of the need for additional consolidation over the near-term, although the current technical setup combined with still generally bearish sentiment has us staying in the bear camp despite some still intact and newly emerging green shoots (such as the aforementioned potential for a longer-term A&E). Therefore, as previously mentioned, we are staying neutral and on the sidelines until the bears crack [members-only content] $ when we'll really see what the bulls are made of in terms of defending the 3122 $ cycle low.
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