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Markets sold off on Thursday but Friday’s candles were a sign of indecision or a battle between buyers and sellers.  Buyers absorbed sell side orders and going into the close mounted a small rally which resulted in a pattern showing indecision or even a potential reversal.

Still too early to be looking at shorting stocks, and there is evidence that we may get a rally for a retest of the high or even a new high in the market.

Bitcoin

BTCUSD

Bitcoin has been consolidating for over a month, yet the series of minor higher lows forming a triangle pattern is more often than not leads to a continuation of the prevailing trend which is bullish.

Once again we find ourselves smack in the middle of the range between 8650 and 10,000, which continue to be broader levels of importance.

Keeping it simple here, a break of 10k we are looking for a swing now into the 12k region which should come rather swiftly as the longer a market consolidates the more decisive the move is.

On the opposing side a break of 8650 we would be looking for 7350 to trade and again this should be a rather decisive move.

Based on structure, time and the broad consolidation, we are looking for longs and issued a swing trade that has yet to trigger.  Nothing to do here but wait.

Ethereum

ETHUSD

Been warming up to Ethereum and the reason is simple, great structure on the chart.  Inside candle to go long and taking out 250 should result in a quick move to 280.

Like Bitcoin, Ethereum is simply in a consolidation range where taking out 225 may result in a move back to 200 and potentially the 170-185 area where I would be interested in buying.

Similar to Bitcoin there is an inside candle to go long which is an alternate trade idea to Bitcoin.

S&P Futures

ES!

Stocks gave back 2 weeks of gains quickly on Thursday, but Friday’s close was not at all bearish.  The Doji after an extreme swing is a sign of market uncertainty, but the fact the market found buyers into the close is somewhat positive for bulls.

The 2965 level is prior resistance, now support and as long as this level holds on Monday we are looking for a swing an attempt to retest the high or even potentially make a new high around 3325.

These types of moves often attract bears which jump in too early, and we saw selling pressure absorbed throughout most of the day and give way to a slight rally into the close.

In short we remain bullish and are looking for a retest of the previous higher, look for resistance around 3100, but if this level is cleared early in the week, 3325 likely to trade.

On the short side a break of 2965 is likely to result in a swing lower toward the 2750-2850 support zone.  Taking out 2965 would lean towards a broader pullback where we are looking at the levels under 2600 to add more risk.

In the near term we still are looking for longs, but we anticipate over the next month or so a broader pullback which may possibly retest the lows, but given the move in stocks, unlikely at this point.

Oil Futures

CL1!

More supportive evidence for a market rally is Oil.  Nice pullback and bullish pinbar to go long here.  This is a CFD trade we are looking at this week for a push into the low to mid 40’s.

Commodity future traders are generally more sophisticated and currently they are pricing in economic growth even with all the news being spread in the media.

Ideally we would like to see a deeper pullback to go long, and in this position a bullish trade is aggressive, but price action and order flow are pointing to the more sophisticated trader putting their money in a recovery.

Oil is additional evidence for our long stock thesis.

Copper Futures

XCUUSD

More evidence that the rally may continue comes in the form of Copper Futures.  Again the retail trader is not trading copper, this is a more sophisticated trading instrument.

Copper is clearly showing bullish tailwinds and though we had a selloff, the inside candle here is a sign of strength.  After extreme moves there is some profit taking, often by speculators, but on the selloff buyers stepped back in pushing price back above 2.6000

This is another bet on an economic recovery, not a deepened recession, so once again we ignore the news and follow the flow of money.  Money is not flowing into copper futures if there was not speculation of economic growth.

These two also provide  some insight as to where larger players are looking for potential growth and this may be front running a potential infrastructure bill.

Time to take a look at a few industrial stocks like a John Deere (DE) or Caterpillar (CAT) on any pullback, along with some refiner stocks like Marathon Petroleum Company (MPC).

Dollar Index

DXY

Another sign of a recovery is the US Dollar showing continued weakness in light of the rally on Thursday and Friday.  Potential for a push back into the 98.0 area, but we are looking for Dollar shorts and a continued swing lower into the 94.50 low.

This very much correlates with the recent swing in Stocks, and is additional evidence for a market bounce.

Gold

XAUUSD

Gold has been consolidating for nearly two months now, and this is often where people get frustrated and give up, right before a swing higher.

Clearly Gold is in a bullish trend and the current consolidation is likely to lead to higher prices.  Looking at past consolidations, they lasted 2-3 months and we are entering the third month of this one.

Couple key levels, 1680 for a potential push back into the mid to upper 1500’s and 1740 for a swing into the mid 1800’s or our overall target of 1850.0, but the run is likely not over there.

Over the broader term, 12-18 months, looking for Gold to push into the 2350 area or potentially higher.  Any pullback into the low 1600’s would be a buying opportunity for the broader term.

Looking to add to our Gold position this week once again.  Keep in mind Gold bull markets are slow and over a  period of years not months.

Summary

Little more cautious this week as the market showed some indecisiveness late in the week, but we still remain relatively bullish.

Of course the cash open Monday will be our barometer for the week.   Few stocks on our radar for trades, looking at a potential trade in Ethereum and several Forex pairs.

Do not forget to tune into our youtube channel tomorrow at 4:05 for our live podcast or tune into the 1490 WWPR to listen to the show.

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