by Mars Capital Partners | Jan 3, 2017
As promised I’ve undertaken a strategic review of my outlook for 2017. I hope you get some value out of my planning for the year ahead – it took a week to write so I hope you enjoy it!
2017 is now upon us and we expect our themes of strong equities to continue. We are yet to see the market fully commit to this bull market as we continue to climb a wall of worry. Our forecast for 2016 was that we would see new ATH’s for global equities as the US took the lead on the global recovery. Our forecast 2017 is for higher equity prices as we continue this big picture wave V rally from the 2009 post-GFC lows – remember, this is an ENDING wave and we are currently in wave 5 of V as we expect this rally to end in 2017.
Our macro backdrop for 2017 includes rising global interest rates which will ultimately result in a tightening of financial conditions around the globe bringing about the end of the equity market rally. The world now has more net debt than prior to the GFC which has been sustained by low yields – the end result will be debt-deflation-destruction of capital so enjoy these healthy happy markets while you can as the party will likely end in 2017.
Our expectation is that global bond yields bottomed in 2016 and we should now see a multi-year rise in yields – not necessarily because the world is a better place and economic growth is expanding but rather credit risk and tightening financial conditions will lead to a failure of trust in the global monetary system.
Geopolitically, we will likely see the break-up of the European monetary experiment which will result in member nations like Greece and Italy depart the Euro as they reach to print their own money to help with balance sheet repair (like the US did) – this will be very bullish for the German led Euro currency – EW analysis confirms that this near term decline in the Euro and GBP should be a 5th and final wave down of major degree leading to big picture trend reversals in 2017. We are likely to see a rise in global isolationism led by Trump’s US-centric policies which will ultimately resolve in greater protectionism and decline in global trade – this will be a significant headwind for global equities in the latter half of the year.
Our strong US$ theme will be a major headwind for Precious Metals throughout 2017 as we look for much lower prices as gold ultimately targets $700-800 to the downside.
While the US equity markets have already achieved minimum conditions of wave 5 of V with new ATH’s, we expect this rally to continue to measured targets in the 2500 area for the SPX. At some point in 2017, we expect to be reversing our bullish bias and shift to strategic short positions when this rally ends. Trading a fast moving bear market is notoriously difficult as volatility expands but we will do our best to keep on the right side of the market. “IF” we are correct, the bear market should retrace the entire rally since 2009 but let’s not put the cart before the horse.
SPX Monthly
Our near term count suggests we are in wave (iv) of iii of 3 and the new year should kick off wave (v). This impulsive wave count may need to be revised on trade below 2214 – we remain resolutely bullish until proven otherwise.
SPX Daily
The ES_F shows the same impulsive rally pattern and remains in force as long as there is no overlap between wave (i) and (iv) below 2210.
ES_F H4
As we can see from the latest COT data, Traders have not yet bought into the nature of this rally and remain sceptical of the upside potential.
Our bigger picture upside targets for DJIA remains towards 22000 to complete wave 5 of V.
DJIA Weekly
The Nasdaq continues to look bullish to me despite last week’s low volume decline as long as it holds support in the 4810-50 area. I expect this decline was wave c of an expanded flat (as Tweeted last week). What we want to see is an impulsive rally higher from here.
NQ_F H4
Our bullish bias in the European indices as our favourite pick has been well rewarded. The most important feature on the Dax chart is the fact that we now have a confirmed corrective 3 waves down from the 2015 highs – we must then expect new ATH’s for the European indices. In the near term, we have a cluster of Fib resistance in the 11650 area but I expect we will eventually push higher as shown below.
DAX Daily
As highlighted a few weeks ago, the FTSE was poised to reverse higher and we are now challenging ATH’s once again. I see nothing bearish in this chart to alter our bullish bias.
FTSE Daily
The Nikkei 225 has stalled at the 0.786 Fib retracement as has the USDJPY. So far the decline is only in 3 waves so we need to give the bulls the benefit of the doubt as we look towards new cycle highs.
NKD Weekly
NKD Daily
As posted last week, the ASX200 continues to extend higher towards the 0.786 retracement. This wave count is particularly unclear but you can’t fight a market with higher highs and higher lows. With the global bullish bias, I will only get short the ASX200 when the market tells me to. In the meantime I have no interest trading this as it is the most unclear pattern.
ASX200 (SPI) Daily
To the US bond market and the counter-trend rally continues as expected in this 4th wave. We remain very bearish bonds in the bigger picture and will continue to look for levels to get short again.
TLT Weekly
ZN Daily
The near term count in the 30yr met our initial upside objective of 150’15 highlighted last week. There are no signs of a reversal as yet. I do expect the downtrend to continue but 4th waves are difficult to trade so we will keep an eye out for short trade setups. No good R/R opportunities here at the moment.
ZB Daily
Traders are shorting into the hole here… which is why I am not in a hurry to join them.
Bunds continue to climb as we approach the 0.618 retracement of last year’s decline. As the decline was not clearly impulsive we must allow for the possibility of new cycle highs for the bund. A clear break of the 6 year trend channel would be the best indication of a change in trend. I am watching this closely for a good short setup as we remain bearish on the bigger picture.
Bund Weekly
To the FX markets and my main focus is on the US$ – Our DXI measured targets were met in December. The easy money has been made and now things get far more tricky and we will need to rely on the near term counts to determine where to from here. We are at an important juncture – There are enough waves in place to complete wave 5 of III for the DXI – however, our expectations are for a much stronger US$ with US centric policies being undertaken by the Trump administration. How we get there has important implications for precious metals and US Treasuries.
DXI Monthly
The Daily chart shows the potential for a completed 5th wave count and a deeper potential correction. We have had no clear signs of a reversal so we have no position here until we get a clearer picture of the near term structure.
DXI Daily
The Euro is in a similar position having met our minimum downside objective of new cycle lows. While our expectations are for prices below parity, it is more a question of “how” we get there.
EURUSD Monthly
The near term count highlights the potentials I am watching. Either wave 2 of (3) completed last week and we accelerate lower (black count) OR we see a more complex correction for red wave 2. Either way, we remain bearish from a big picture perspective until our downside targets are met with a completed structure.
EURUSD Daily
Traders pared back shorts into year end as expected but we may see a resumption of the short trade early in the new year.
The Pound looks to have found near term support at the 0.618 retracement after completing 5 waves down from December’s highs. We would expect the Pound to outperform the Euro near term. Ultimately we are looking for new cycle lows once wave 4 is complete from a bigger picture perspective.
GBPUSD H4
2017 should see an end to the decline in GBP as we complete wave 5 of C towards 1.10 – while the big picture decline is not yet over, we expect to get very bullish the Pound later in the year.
GBPUSD Weekly
The USDJPY holds the key for Precious Metals given its high historical correlation. We remain bullish this pair from a bigger picture perspective with upside targets closer to 150. The question is whether we continue to climb impulsively and directly to new cycle highs OR we get a more complex wave B?
USDJPY Monthly
Importantly, the near term wave structure is corrective so we are likely to push higher towards 120 at a minimum.
USDJPY Daily
Traders are getting aggressively short the Yen here as we expect when the near term trend is ending.
The Aussie$ continues to hold near term support but we remain bearish as we look for prices back below the 2015 lows towards 0.65
AUDUSD Weekly
AUDUSD Daily
USDCAD continues to frustrate and I am now looking towards 1.38 to initiate long term shorts – alternatively, a break of the lower trend line will probably get me short. I am very bearish this pair from a bigger picture perspective.
USDCAD Daily
To the commodity markets and the path of precious metals will likely be determined by the Yen. Our bigger picture outlook for gold is bearish but the question is whether we need another C wave higher towards 1485 first? The rally from 1045 to 1380 could be ALL of wave red B or just A of B – this will depend greatly on whether the US$ corrects first.
Gold Monthly
From a near term perspective, the rally in gold is not clearly impulsive from recent lows so we must respect the potentially more immediately bearish count here given our bigger picture outlook.
Gold Daily
Gold bulls are slowly capitulating…
The near term rally in Silver remains corrective so we expect new lows near term as it stair steps lower towards our initial targets.
Silver Daily
Silver Traders remain overly bullish given the decline in PM’s. I think they are wrong.
Crude Oil remains bearish from a bigger picture perspective as we are counting the 2016 rally as wave 4 with wave 5 down to come to retest the cycle lows. Expect strong resistance in the $59-62 area.
CL Weekly
The near term structure is unclear and may be forming an Ending Diagonal wave C towards our target area.
CL Daily
Traders appear to be max bullish which always has me looking the other way.
Dr Copper is trying to form a near term low before it pushes higher in wave 5 of C. The rally off the wave 4 low is not clearly impulsive so we should allow for a brief retest and undercut before it pushes higher near term.
HG Daily
Traders appear too bullish Dr Copper for my liking so I am not buying this yet.
Nat Gas had a nasty gap down today but I remain bullish while we hold the wave 2 low.
Nat Gas Daily
That’s all for now folks. Have a great week 🙂
by Mofar2016 | Sep 12, 2016
Dear Traders,
After 3 years of publishing my research in the public domain for free, I have decided to move my work behind a paywall. I would like to thank everyone that has followed and supported me over the years. My new website should be up and running within the next 2 weeks…
- The MCP Market Update will now only be available via subscription
- A Private Twitter feed has been established for subscribers
- The format and timing of my updates will remain the same
- My website domain will remain marscapitalpartners.com
- I will not be spamming or spruiking to my followers on @Trader_Mars
I hope you will join my subscriber community as we navigate these markets in the future. If not, then thank you for all your support as it has been greatly appreciated. This will be my final public MCP Market Update.
Yours sincerely,
Dario Mofardin
To the Market Update…
A number of commodity and FX markets are coiled within triangles (like TLT was) and set for fast moves.
Suppressed volatility inevitably leads to expanded volatility and that’s what we saw last Friday. Importantly, we were on the right side of the trade as clearly outlined last week. Forewarned is forearmed 😉
The ES is now 80 pts lower than where it was a couple of days ago. Now that our initial downside target of 2120 has been met, the question now is whether this decline was all of wave (c) down of 2 and a strong rally is about to kick-off or is the red bearish alternate count raising its head? The bulls need to stand up now! The bear case that I highlighted in my August 15th update could lead to a strong decline back below 1800. We are at a critical juncture here…
SPX Daily
From a near term perspective, support for the SPX comes in at 2116-20 and then 2092-2100. Below that and the wheels may fall off. Ideally, the market gaps down on Monday and reverses higher impulsively to hammer out a low.
SPX H1
The ES has already seen some Sunday night follow-through selling below the 0.382 retracement and likely now targets 2086-93
ES H4
What concerns me about the bull case are the number of broadening formation top failures in other indices like the NDX / NQ – Last week’s high is now critical resistance for the bears.
NQ Daily
This DIA chart I posted some time back was illustrative of my “topping” concerns for the near term bull case and highlighted the green trend channel rejection and gap below the 50 day sma and small blue H&S break on Friday.
DIA Daily
The SPI (ASX200) is fast approaching its 200 day sma and green channel support – Bulls need to stand up here.
SPI Daily
We have been bearish the bond markets since the end of July and yields “finally” spiked higher across the board late last week. Unfortunately, the structure of the market made it difficult for me to really participate (but at least we weren’t long bonds). The TLT broke out and down from its triangle and closed at near term trend support. Remain bearish until proven otherwise.
TLT Daily
To the FX markets and the US$ has only rallied in 3 waves of equality from the lows, calling into question our near term bullish thesis. There is now risk of a breakdown back towards 94.00 on trade below 94.80 – Trade back above 95.60 would be bullish. I am neutral here. I have drawn the red and blue lines in the sand on the chart below.
DXI H1
The calm before the storm as open interest plunges…
The equivalent 3 wave (corrective) structures can be seen on the Euro chart below.
EURUSD H1
Trade immediately back above 1.1285 opens the door towards 1.150 as the triangle expands. Critical juncture here…
EURUSD Daily
The USDCHF continues to compress within its triangle – Compressed volatility leads to expanded volatility. I am now less confidant on which way it will break so I will likely go with the break and not pre-empt.
USDCHF Daily
To the commodity markets and they have been sold off despite a neutral US$. The constant 3 wave structures in Crude Oil suggest we are in the middle of a corrective movement which is likely another triangle (more compression). I still think it breaks down but I will not pre-empt here .
CL Daily
The internal corrective structure can best be seen on the H4 chart below – 3 waves up and down repeatedly (all corrective).
CL H4
The decline in Gold was in 3 corrective waves and will continue to look more bullish while 1305 holds to the downside (low conviction given how over-owned it is).
Gold Daily
Excessive optimism continues in the precious metals complex. Everyone is on the same side of the boat…
That’s all for now folks. Have a great week 🙂
by Mars Capital Partners | Jul 25, 2016
There’s not much to add since my last update as equity markets have continued to rally to new ATH’s as expected while the US$ remains strong and commodities take a much deserved breather. The most important chart to me at the moment is the US bond market. The reversal lower from ATH’s in price appears impulsive, setting the stage for a potential major BEARISH reversal in bond markets.
To the SPX and so far, the rally from the late June lows is in 3 waves and needs a small degree 4th and 5th wave higher to complete an initial impulsive rally. Therefore prices must maintain this breakout above 2120 to keep bullish momentum. The theme from my last update was higher now or higher later and this has not changed. The red expanded flat count is only relevant if we were to reverse down hard from these levels which is not my base case. Higher highs and higher lows is the very definition of a bull market trend.
SPX H2
ES H4
It appears that investors / hedge funds are finally getting bullish on this rally for the first time in a long time…
Bigger picture, we remain in a bull market until proven otherwise – the rally in IWM above the wave B high “locks-in” 3 waves down (corrective) and confirms the bullish case looking for new ATH’s.
IWM Weekly
The European equity markets continue to hold key support and have begun to rally impulsively. I see no reason to be bearish any equity markets while the February lows continue to hold. There is significant upside potential for the European equity indices as the entire decline from the 2015 highs is in 3 waves (corrective).
Dax Weekly
While the Dax is approaching near term trend resistance, I expect it to break to the upside in line with global equity markets
Dax Daily
The most important charts right now may be the US bond markets. The TLT broke above the long term Ending Diagonal trendline and reversed lower (throwover). This is a classic EW topping pattern.
TLT Weekly
Importantly, the decline from the recent ATH’s in bond prices appears impulsive and could signify a major trend change in the US bond market. I will be looking for a 3 wave counter-trend rally towards the 0.382-0.618 retracement area to aggressively short US bonds. I am looking for a MAJOR trend change. The impulsive decline can be clearly seen on the TY and US bond futures…
US 10yr Bond Futures H1
US 30yr Bond Futures H1
It also appears that investors remain long Treasuries in their search for yield
To the FX markets and I remain bullish the US$. Near term, the 200 sma is likely key support for an acceleration higher in a 3rd wave. Close below the 200 sma will likely mean we back and fill before the bull trend can reassert itself. That is my near term line in the sand. Either way, I am still looking for 102+
DXI Daily
The structure of the Euro allows for 1 more push higher towards 1.12 before the bottom falls out. The alternative is that we just accelerate lower from here on a break below 1.09 – My bigger picture targets for the Euro are way lower… my concern is that investors are starting to pile into the short Euro trade
EURUSD Daily
The Aussie$ has remained difficult to trade but remains destined for lower prices towards 0.70 – the recent decline from last week’s 0.7676 highs appears impulsive so I will be happy shorting against this level on any near term counter-trend rally. I remain bearish the Aussie$.
AUDUSD Daily
AUDUSD H1
The near term chart of the GBP is interesting as we look for lower prices to get long. The rally off the 1.2790 Brexit lows appears impulsive and the decline corrective. I will be looking to go long the GBP around the 1.2950 target area and measured support against the Brexit lows targeting back above 1.35.
GBPUSD H1
Max GBP bearishness also appeals to me…
Interestingly, like the ES and SPX, the USDJPY has only rallied in 3 waves so far from the post panic Brexit lows. We require a new high above 107.50 to “lock-in” 5 waves up and a potentially significant change in trend. So far, wave (iii) is 1.618x wave (i) as I look for wave (iv) support in the 105 area. This is a very important juncture for this pair and the Nikkei 225.
USDJPY H4
The AUDJPY shows the same structure…
AUDJPY H4
While the 5 wave rally in GBPJPY appears complete and I’m looking at 136 as a good area to get long for wave (iii)…
GBPJPY H4
The long AUDNZD trade I highlighted previously also looks interesting given the strong impulsive rally from the 0.786 measured support.
AUDNZD Daily
To the commodity markets and it appears that Crude Oil is/has formed a Leading Diagonal from recent highs. Near term, I am looking to get long a bullish intraday reversal targeting $48-50 which may also set up a nice longer term short IF I’m right. I’ll just trade it 1 wave at a time…
Crude Oil H4
The precious metals have pulled back from recent highs but I don’t have a good tradable setup right now. They appear to be in no-man’s-land. I have no strong views on Gold or Silver here??? Given the continued extreme bullish sentiment, I would be cautious initiating longs until we see a decent pullback despite the fact I remain very bullish long term.
All I know is that PM’s are extended and Gold has been rejected at the 0.382 retracement of the entire decline (natural resistance) – Gold will be very bullish back above 1380
Gold Daily
Silver appears more constructive for the bulls but it is unclear whether the rally was a completed Expanding Leading Diagonal (Very Rare – red count) OR if we need another push higher towards 22 to complete wave 5 of (3)? No new trades for me here as the COT data shows extreme bullishness and there are too many folks on this trade for my liking.
Silver Daily
The Silver bullishness is EXTREME by historical standards…
That’s all for now folks. Have a great week 🙂
by Mofar2016 | Feb 15, 2016
Last week’s market update highlighted the need for a final 5th wave to marginal new lows across the broad equity market indices. With downside targets met and enough waves in place for a completed structure we are now long against last week’s lows. What we need to see now is an impulsive rally from the lows. So far so good.
Now that we appear to have a completed pattern to the downside, the next big question is whether or not the correction is complete and we head to new ATH’s for a large degree 5th and FINAL wave “or” the cyclical equity market rally is already complete and this decline was the first wave of a larger bear market correction.
My job isn’t to make predictions, it IS to make money. My live tweets of an #ES_F wave (iii) low of 1807, then wave (iv) high of 1940 and wave (v) retest of 1800 all nailed key turns. There’s not much more I can do.
Last week’s lows are critical for the near term bull case. I will remain long while those lows hold and let this rally structure play out. If we see an impulsive rally and subsequent corrective decline, Mr Market will tell us whether we are still in a bull market or not.
Below I have highlighted the bull and bear cases for the #ES_F. My primary count across all markets presume the “lows are in” and we head to new ATH’s (blue count) in a risk-on environment. The key feature of the following charts is that we have 3 waves down from the highs contained within CORRECTIVE channels.
ES_F Daily
The following equity index charts all show the same structure of 3 intermediate waves down from the highs and are supportive of my bullish outlook…
DJIA Daily
TF_F Daily (Russell 2000)
While the DAX fell just short of my measured downside targets (8300-8600), the structure now has enough waves in place to be complete to the downside. So far the decline from ATH’s is in 3 clear waves contained within a corrective channel. Risk is not dead yet.
FDAX Daily
The following chart is more illustrative of the potential that the “top is in” bearish case with 5 waves complete into the highs and an impulsive decline. Specifically the #NDX / #NQ_F shows a clear 5 waves down from the cycle highs. This is the chart that concerns me most about the potential for a significant decline after a wave (2) bounce higher towards 4300-4400 (previous 4th wave and Fib retracement). Either way, we should continue to expect higher prices in the near term.
NQ_F Daily
The heavy net-short positioning of #ES_F traders in the COT report also provides further fuel for a strong short covering squeeze at a minimum…
The US30 yr Treasury spiked higher above 170 before reversing hard with a daily shooting star. Remember this is an Ending wave! Shorts are strongly now favored here in line with my risk-on thesis.
#ZB_F Daily
To the FX markets and the biggest mover was the Yen with some wild post-BOJ swings which triggered the H&S I spoke of last week. The bullish equities case requires the USDJPY to rally from here. I have updated my count with an expanded diagonal (very rare) wave C of (4) for the bullish case which falls short of the H&S downside targets. This count requires the USDJPY to recapture and close above the H&S neckline at 116. Should the 116 resistance hold the market to the upside and new lows are subsequently made, I would have to concede that the H&S is indeed in force putting more pressure on risk assets.
USDJPY Daily
The Euro found strong resistance on the backtest of the red trendline as suggested last week. I remain bearish the Euro but the pattern is tricky so my conviction is low at this point.
EURUSD 8hr
The commodity chart of note is #CL_F. My downside target of $26.00 was achieved last week (LOD $26.05). While I’m not a big fan of the 3 wave structure into the lows, we must respect the fact that downside targets have been reached and Crude has been declining for a LONG time. A close back above $30 would certainly help the bullish case and align with equities. I am bullish #CL_F especially if we can make a marginal new low not confirmed by equities.
CL_F 8hr
Gold has rallied straight to Fib 23.6% resistance in a large short covering rally. We should expect some pullback here while traders digest the near term risk-on environment.
Gold Weekly
The recent Gold COT report highlights the short squeeze in real time.
That’s all for now folks 🙂
by Mofar2016 | Nov 2, 2015
Global equity markets rallied strongly throughout October despite and perhaps because of slowing global growth and timely central bank easing bias. Earlier this year, we had been looking for a large 4th wave correction following the completion of the recent 3 year rally in global equity indices. This rally terminated in a large drawn out ending diagonal which we warned of in real time. Since then, we saw a steep corrective 13% decline in the SPX and associated indices which stopped at prior 4th wave support. The question now is whether we are headed straight to new ATH’s in wave (5) OR is this rally a (B) wave of a larger and more complicated wave (4). So far, the rally is in 3 waves and I am trading the idea that this is a wave (B) of a complex correction. I am looking for equities to decline from here in wave (C). The first piece of evidence is that we have an outside-day bearish reversal on Friday and what we need now is an impulsive decline from Friday’s highs to follow through to the downside.
To the SPX and my near term count shows sufficient sub-waves in place to complete 5 waves up from the 1872 lows including an “extended” wave (v). The RSI and MACD confirm the nature of the extended 5th with non-confirmation highs. My expectation is for an impulsive decline to lead off the change in trend for wave (C).
SPX 60m
The bigger picture chart below highlights the potential wave c target “if” the structure of the decline is a 3-3-5 Flat correction. That is my base case until proven otherwise.
SPX Weekly
To the FX markets and the Euro has completed a clear 3 wave decline from its 1.17 highs. The 5-3-5 decline where (A) = (C) sets up a push higher back above 1.17 for the Euro which very few pundits are expecting. The ultra bearish case is that is highlighted by the blue count which presumes a (1), (2), 1, 2 nested decline. A strong close below last week’s Fed induced lows would suggest this more bearish option is in play. This is not my base case and a lower probability outcome. I will remain biased to the long side while last week’s lows hold.
EURUSD 240m
