by Sam Seiden, Online Trading Academy
I was in Sydney, Australia recently, what a great city. I happened to be giving a lecture at an expo and after I completed my presentation a gentleman came up to me and said, “Great talk, where are the markets going?” My first thought when he asked was “this is a great topic for an article.” Next, I did my best to answer his question. In today’s piece, we will forecast equity index and gold price direction. To do this, we will stick to larger time frames and focus on two things. First, identifying fresh supply and demand levels and second, where those levels are located with regard to the larger time frame supply and demand curve.
The chart above is a weekly chart of the S&P. Notice the recent strong rally from the clear demand zone below. Given that price just touched the level and turned higher, we would expect another bounce from that level if and when price returns to it. The fact that price just touched the level suggests there is still a strong demand and supply imbalance at that level. All we would have to reassess when price revisits this level is the profit zone.
The chart above is a daily chart of the S&P. Sitting above the 1550 demand zone and inside the weekly candles from prior weekly chart above is a fresh demand zone on this daily chart (not seen on the weekly). This fresh demand zone (yellow shaded area) should produce a healthy rally if and when price revisits it. This is the nearest fresh larger time frame demand zone below current price at the moment. The circled area near the top of the chart represents what appears to be a fresh demand zone. However, it is too high on the supply/demand curve to get excited about. While I would expect a bounce from that level, the profit zone above will likely not be ideal as you will see from the next chart we go over.
Here we have a weekly chart of the QQQ. This chart shows us some fresh larger time frame supply above current price. While the market is not very close to this level yet, we should keep this on our radar as it does score out well with our Odds Enhancers. The level comes in at just over $80.00. At the time I am writing this article, the QQQ is trading around $74.50. Could the QQQ turn before then? Sure, there are smaller time frame supply levels as well that are not seen on this chart. However, I wanted to share this key supply level as it is likely to come into play in the future. If and when price does reach this level, look for strong corporate earnings, broker upgrades, and very bullish sentiment. These will make the likelihood of a reversal strong.
Above is a weekly chart of Gold Futures. As OTA students are aware, we have been bearish on Gold for a while and the chart is telling us there is no reason to change that outlook, the chart simply tells us so. With two fresh supply levels above and fresh demand significantly lower, odds are that after a bit of a rally, Gold prices are likely headed lower, in the direction of that demand level below. For those who use Gold as a correlating market to help you trade other markets, this chart should really help you in that quest.
Whether you are a short term trader for income, a long term trader for wealth, or both, knowing where prices are likely to turn and go in the larger time frames is key. This is something we pay close attention to at Online Trading Academy in everything we do. For those who like to invest in stocks for the long term, it is strongly recommended that you time your entries into stocks with fresh supply and demand levels in the S&P and NASDAQ, the charts above. Trying to trade a stock in the opposite direction of the S&P and NASDAQ is not ideal. We will revisit these levels in a future article, stay turned.
Hope this was helpful, have a great day.