Lessons from the Pros


2015, A Look Ahead

Happy New Year! I hope that all of you had an excellent holiday season and are healthy and ready to face the markets for whatever they may hold for 2015. This is the time of year where market prognosticators offer their insights as to where they believe the markets to be headed for the upcoming year.

Free WorkshopLast year, I thought that the markets would turn bearish. While there were several deep retracements in the equity indexes, they remained bullish and set new highs even as the economy grew at a slower pace than expected.

Looking at the weekly chart of the S&P 500 Index, there is no sign of the bull market stopping. The 40 week SMA and 80 week SMA strategies that I use as trend confirmation are still holding.

inx 40 week

Additionally, the daily chart of the index is still making higher highs and higher lows, this is the definition of a bullish trend.

inx daily 2014 yr end

The question then turns to, where will the bull trend end? In all honesty, no one really knows. I can use some technical tools like Fibonacci Projections to predict turning points for price, but without any strong overhead supply we will not know if these turning points are simply a correction or the start of a new bear market. You must be patient and wait for the markets to tell you which.

In a previous projection from a major move, the index foretold of a turning point. This was only a correction of the bull move as the markets marched higher after a 50% retracement.

inx projection

As of the writing of this article, the markets have reached a projection level and are starting to stall. We may start the year with a slight correction but not necessarily a deep one.

inx fib proj

The US Dollar has remained strong due to foreign investors pouring money into what appears to be the strongest economy in the world currently. The worries of Europe falling into recession and slowdowns in other parts of the globe are evidence of this. There has been no strong supply above the dollar on the weekly chart for some time.

dxy supply

That should continue to put pressure on dollar based commodities such as oil and gold.  Oil has been on a sharp drop and has finally reached a demand zone I tweeted about last month (@Traderbdub).

crude weeklyt supply

Gold has consolidated just above a demand zone near $1100. This is not a very strong zone, however, and with the dollar strength there is a high probability that we will see prices continue to drop until the next level is reached near $1000 an ounce.

gold 2014

So, to start the New Year it looks as though the trends will continue as they have been. Trade the trend and stay with it until you reach supply, demand, or the market tells you to exit. Knowledge will hold the difference between success and failure in the markets. Make sure that you possess the correct knowledge.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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