Gold, the euro and the Dow have all rallied to significant technical levels. But where will they go next? John C Burford looks at the charts to find out.
With the euro summit announcement now out of the way but with the awkward details yet to emerge the vigorous rallies in all three of my markets have reached important milestones.
I thought I would briefly set out my trading ideas today with a fuller email tomorrow on one of them.
I never cease to be amazed at how often the Fibonacci levels (available on all spread betting platforms) act as support and resistance.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
And now, in all three markets, the rallies have carried to significant Fibonacci levels, more or less at the same time, thus illustrating how connected the markets are connected by waves of liquidity.
There was a time when gold moved opposite to stocks, but not today.
Here are the charts of gold, euro and the Dow as of this morning:
Gold:
(Click on the chart for a larger version)
The euro:
(Click on the chart for a larger version)
The Dow:
(Click on the chart for a larger version)
In yesterday's post. I showed that gold had hit the 50% retrace level. And this morning, the 2/3 level in the Dow and the 62% level in the euro have been hit.
Isn't that pretty?
Also, perhaps co-incidentally, the Dow and the euro have reached round-number levels (12,000 in the Dow and 1.40 in the euro) this morning.
What now?
Now, with expectations high that the euro crisis has been solved, sentiment has gone from being ultra-negative a month ago to very bullish today. Also, I have noted that bullish articles on stocks and the euro have mushroomed recently, so I am looking for tops.
As you know, I have been deeply suspicious of these rallies, as they have been built largely on hope. The real' economies continue to have problems and at some stage, there has to be a reckoning.
Either growth will take off, thus justifying stocks valuations, or the market will re-adjust to reality.
As a trader, I see very overbought charts, and am waiting for my tramline, Fibonacci, and Elliott wave methods to give me reliable trading opportunities and I still favour the short side!
If you're a new reader, or need a reminder about some of the methods I refer to in my trades, then do have a look at my introductory videos:
Don't miss my next trading insight. To receive all my spread betting blog posts by email, as soon as I've written them, justsign up here.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.
He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.
As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.
What is a trust – and should you use it to avoid inheritance tax?
What will be the consequences of Donald Trump’s "One Big Beautiful Bill"?
