This is my attempted learning experience in calling directions and targets in gold and the stock markets. I had some success today.
In last night's post, I forecast trouble for the Dow and S&P 500 coming imminently.
Well, I switched on today (in the afternoon - dear me, I am lazy) and there has been a decent fall in both indices, with both reaching or almost reaching their initial targets. The following chart shows the potential downside targets:
The first target zone on the Dow has already been reached at the red circle on the upsloping parallel. There is a second potential target at the lower parallel, which is drawn from the June low.
For the S&P, I drew in a red downtrend pitchfork and the price has nearly reached its lower parallel (top red circle). There is also a possibility of a target on a slightly lower upsloping parallel (middle circle), which soon meets the new downtrend channel. There is also a lower target on the bottom parallel (bottom red circle) which comes from the June low.
There is a possibility of a bounce from the first target in each case, which is close to where we are as I took the screen shot a few minutes ago.
A breakdown from the red downsloping trend channel in the S&P would be pretty bearish.
I could have drawn a similar downtrend channel on the Dow chart but the target for that would be somewhere near the one I have drawn anyway.
I have done this now. Interestingly the uptrend parallels and downtrend parallels meet at the point where the price has stopped. I think such a location marks a good target for a move:
It will be interesting to see if prices bounce from the bases of the red downtrends now. Perhaps there could be a modest bounce to the red centre lines and a further fall to the lower targets shown in the first chart?
Interestingly, both the Japanese Nikkei 225 and the US dollar / Japanese Yen exchange rate (USD/JPY) have similar head and shoulders that have broken down and are being back-tested at the neckline. The Nikkei and USD/JPY charts are practically identical: see some charts in an earlier post. USD/JPY goes down (Japanese Yen strengthens) and Nikkei goes down. I would love to have a figure for the correlation but it looks like it might be 95%!
As mentioned before, the ratio between the Nikkei (measured in JPY) and the 2x bearish Yen ETF (YCS) has been close to constant for the last 3 years. Type $NIKK:YCS into www.stockcharts.com gallery view and see!
By the way, gold is doing nothing interesting today, nor silver. They have had a nice run up and maybe they need a rest.