 Good afternoon and all good morning and welcome to the first of these analyst debate webinars between myself and my colleague in Toronto, Canada, Colin Szczewzynski. I think one of the reasons Colin and I decided to do one of these debates is I think first and foremost they work better when you can interact with the other person. It's also I think an easy way to invite debate between you the client and us the analysts and have a general discussion about conditions in the market, trading set ups and what have you. But before we really get cracking on this I just need to make you aware of this risk warning. A general disclaimer so that anything that you hear on this webinar is not trading advice. Really it's just a debate to sort of talk about ideas as to what's going on in the markets and you know potential trading set ups as to where we're going to go to next. So let's just quickly get rid of that and now we can crack on. So welcome everybody. As I say, my name is Michael Houston. Most of you probably know me already and Colin, my colleague is also on the line as well. Hi everyone, thank you all for joining us today. Okay so Colin, we're a little bit offline about what equity markets are doing and whether or not we thought that they were starting to top out. And it does seem to be some evidence that that might well be the case. However the economic data that we're seeing out of the US at the moment still continues to give conflicting signals. I mean that industrial production data that we saw earlier today was absolutely horrible and yet the weekly jobless claims were fairly good. So I think we're still in two minds with respect to what the Fed are going to do or continue to do and we've obviously got the Fed minutes next week as well. So what are your thoughts on the S&P and the Dow? I think at this point in time we're seeing that the S&P and the Dow are both totally exhausted. They've gone, they've been going consistently up since the fall of 2012. They haven't had any major correction in a serious way in a long, long time. It's all been propelled by two things really, the recovering economy in the US. But the bigger one has just been this steady inflow of QE money finding its way into the stock market. When you put that kind of money into an economy it's a lot faster to lend it and put it to work in the market than it is to lend it and put it to work in the regular main street economy. So we've had this huge run in the markets here and things are just looking tired. The Fed has started tapering the seasonal inflows of capital from people putting money into retirement accounts, the tax deadlines have all passed in the UK and the US and Canada and elsewhere. So that spring winter flood of money is starting to dry up and markets are just looking really tired here. We had a new all-time high for the Dow industrials. It was confirmed by the transports which should have been fantastic and the stock market should have been going up 100 points a day instead of down 100 points a day the last two days. So we're really looking at an exhausted market here. Good news is not pushing it much higher and it looks like it could be due for a bit of a seasonal correction here. Now you were talking to me earlier about the NASDAQ and obviously the Russell 2000 as well. And we've made new highs on the S&P and the Dow. But if you're looking sort of across markets those two indexes are actually already rolled over. They both have. The Russell 2000 has been trending lower for quite a bit of time and where it looks like we're seeing a head and shoulders top in the NASDAQ. Absolutely. So I want to talk about the NASDAQ first and what's most significant here is. Do you want me to give you control? Yes, please. I will give you control. There you go. Okay. And I will take control. Okay. So if we look here at the NASDAQ it had been in quite a long uptrend here. And we're seeing what's really a classic head and shoulders top. If we look here we've got a left shoulder back in January. The head of the pattern at the beginning of March. And this kind of, we really had more of a rolling right shoulder here where you've almost got to triple three times where you've hit the same resistance level. It's just not working. And this is in around, I'm sorry, I'm just going to get my cross hairs. The cross hairs at bottom, down the bottom. Ah, thank you very much. There we go. So I'm just going to bring my cross hairs open here so that this resistance level here around 3,600, 3,625, 3,630, it keeps bumping that and it's just not going through. So the left shoulder, right shoulder, a similar type of level, 3,630 here. And what are we getting back today? Again, NASDAQ's rolling back under 3,600 today. This is important because what you've got in the NASDAQ is a lot of high momentum, high value companies. You're seeing a definite over the course of this year, a definite contraction in valuations. People aren't paying up as much for high growth companies as they were willing to do last fall. So what are we seeing? We're seeing the pullbacks in Facebook, in Twitter, in Tesla. I'm just going to feel that control from you. Okay, go right ahead. Carry it, go on. I'm going to put this on the chart forums, ladies and gents, so that you can see it. Colin, you carry on. Okay, great. And so all of these momentum names and even things like Bitcoin, remember you hit $1,000 a few months ago, it's now down closer to $500. I mean, all these things that had gotten really, really frothy are starting to pull back and that's suggesting that it's indicative that the hot money that was going into the hot plays, there's not as much of that anymore and they're starting to fall under its own weight. And the markets themselves falling under their own weight and you're seeing it in the breadth as well that the mid caps, the small caps that are higher weighting within the Russell 2000 are starting to go down. And all you've got left is the narrowest of indices like the industrials and the transports which have, I think, 30 and 20 stocks respectively. And it's only the narrowest indices that we're making new highs and the broader indices they're rolling over is generally indicative of that we're at a turning point in the market. And I think also another clue that markets or investors are conflicted with respect to the direction of equity markets at the moment is the performance in the bond markets because the bond markets are going extremely well bid. And I'm going to show you my 10-year note chart here and I think that's very instructive because for quite some time we've been trading below the 200-day moving average and yields have actually been going up now. We've broken away and we've aggressively broken away and that suggests to me that we're probably going to see 2.4 or even 2.3 on the 10-year. Now if that is the case and we see higher bond prices then we're going to see a significant move lower I think in Dolly N. We saw overnight that those GDP numbers for Japan were very, very good and you would ordinarily think that well, yeah, Arbonomics is working happy days and that should then give the Nikaya boost but it's had the exact opposite effect. Why is that? Well, I think the GDP boost was largely as a result of a lot of people or a lot of consumers basically front running the retail sales tax hike. So they brought forward an awful lot of their consumer spending and I think the fact that the GDP number is so good it means that the bank of Japan won't do any more easing and that is going to be yen positive dollar negative. So I think that's why you're also seeing the breakout towards the upside in U.S. Treasury prices and as a result you're seeing yields come lower as well. But I think there's also a broader question there. It's the fear of deflation in not only in Europe but also across the globe and I think that's what's also driving yields lower not only in the U.S. but also the U.K. and pretty much Europe as well. And what's your take on that Colin? Yeah, I think you're absolutely right. That's why we're seeing the ECB certainly talking about more stimulus going forward. I think it's as much driven by the fear of deflation as the sluggish economy and trying to get things moving there. I mean the Europe has had a sluggish economy for quite some time but the ECB has basically been letting it kind of work itself out and only now they're starting to talk about getting more aggressive and others so I think it's the deflation worry and that's why I think we're seeing the money starting to flow back more recently again out of the high and frothy stock markets back into some of the more defensive markets that had come down lately. So you're seeing U.S. bonds starting to pick up. We've seen gold is having up and down days but it at least looks like it's kind of stabilizing and certainly interest coming back into the yen as well. And also Canada is starting to look a little bit better supported despite some of the what I should say choppy nature of the jobs data that we've seen out of North America. I think one of the things I've noticed about the Canadian jobs data is how different it has been from U.S. jobs data and we've got a nice little breakout here on the EuroCAD. I don't know whether you guys have been watching this but this is something that I posted I think a couple of days ago and actually talked about on my weekly video this head and shoulders reversal that we've broken out of and basically this is a very simple technique that I use for measuring a target for the head and shoulders reversal. So what I'll do is first and foremost I'll identify it. One of the ways I can do that is using pattern recognition and when I use pattern recognition on Euro Canada what I was able to do or what it was able to do was it was able to identify that pattern for me so I was able to see it right there once it scanned the chart. What I was then able to do is by using my Fibonacci projection Fibonacci price projections option here I basically select this high here and I basically project down to the base and then project lower from the breakout point and that gives me my targets. So my target for this head and shoulders breakout now is around about $145.50. So as long as we can push below this series of lows in February which I will just now get rid of this. There we go. This series of lows in February which is around about $149.00 If we look at the chart forums again, there it is. Okay so this was something I updated on the 13th on the Monday so we need to break below $149.00 to confirm a move towards the 200-day moving average and this trend line support which if I now zoom it out all the way back to 2012 basically comes in round about the same level. So that's a really nice head and shoulders that's sort of been borne out by this move lower in the Euro and certainly this morning's GDP numbers out of the Euro area Germany notwithstanding would seem to suggest we're going to get something from the ECB. The only really debate really surrounds us as to what we're going to see. I don't think we'll see any QE but I certainly think we'll see a movement on rates. What's your view on that? I think you're right. Can I take control back again for a second Michael? You can indeed. Let me just assign that back to you. One thing that's important and that Michael's highlighted here and I think it's important for us to note as traders is that whenever you're looking at a pattern or at a chart the more things that come together to suggest that something could happen the greater the level of confidence. So in this case for example when you're looking at projecting a price where you have a Fibonacci and a trend line coming in closer together or what I call clustering when you start to see a number of things pointing to a certain area markets can be psychologically drawn to that point so it's quite significant. The other thing I wanted to highlight here was of course we've got the shorter term, we've got the price pattern. The other thing that we have in here is on top of having a head and shoulders top and some shorter term trend line breaks if we look down here at the stochastics we also see that we have a pretty significant and been going on for quite some time a negative divergence. So you've got lower highs in the stochastics and it's been similar in the RSI and meanwhile you had higher highs in the pair and that negative divergence tells you that there's a shift in momentum going on so you've got the negative divergence telling you momentum is changing from upward to downward you've got a massive head and shoulder top which is a big reversal pattern and you start breaking the neckline there so you've got a lot of things are starting to come together to suggest that this trend is changing. Yeah I mean that's absolutely right and that's one of the things that I also look at I also look across asset classes so when you're looking at say the euro it's important to not just look at the euro-dollar but it's also important to look at the crosses as well so if I could just still control back Colin. Absolutely. And just turn that off. What we can do now is let's shut that off and let's look at euro-ozzy because I think euro-ozzy will probably give you a similar sort of shake-up with respect to a top-forming pattern. That looks like it's already even completed. I think that's probably completed and reached out and now we're looking to test that support line from those lows in the middle of 2013 last year. So we've broken below the 200-day moving average and now we're testing this key support line here. Okay so we've looked at that now let's look at euro-dollar because I think there's potential for a bit of a support level coming in round about the 200-day moving average which is round about here and we've held above that low that I identified earlier which is round about 136.40, 136.50. If we also look at the 200-day moving average that comes in at round 136.20. So if you take these two pies here I've drawn it through that peak there we didn't close above there and we closed significantly below there. That was obviously Mr. Draghi as you can see from a very long shadow on the top of the candle there and then draw a line through these lows here then there is a potential double-top formation forming there. So what's giving me pause about this particular one is the fact that the oscillator is very very oversold and we also remain above support of 136.40 and we also remain above the 200-day moving average. So you've got two support zones starting to come into play and if you are short then you really need to be careful about being overly short particularly given the fact that we are at two month lows on euro-dollar. Ask yourself how much of this euro-down move is priced in. Yes we look at Euro-Canada and we can see Euro-Canada has broken out and Euro-Canada could go lower but it could be a Canada move not a Euro move and therefore you could get a bounce in Euro-dollar and Euro-Canada could still go down. So I think it's important to look at that because you have to look at the potential interest rate policies of both central banks as well as obviously the linkages between the two or the different crosses. It's a different story for euro-stirling. We can see that here because we pretty much know that the Bank of England and the European Central Bank are on completely divergent monetary policies so let's tidy this chart up a bit because it's looking a little bit tatty at the moment. We're in a downtrend. I'm going to make sure that I can anchor my trend line onto the top of these highs there and then I can basically draw that through there. So we're trading in a nice little down channel there. We've had a very, very strong rebound yesterday but we've pretty much come all the way back. Now that's not to say that we haven't found a short-term base down here and we can't squeeze back up again. I certainly think there's potential for us to come all the way back to around about 82.20 given the fact that it was quite a big support area through these levels here and when I'm looking at a chart for support and resistance levels this is something that I look at in a significant amount of detail. I look at the peaks and the troughs and I look for what Colin has mentioned earlier, clustering, a clustering of support and resistance levels which essentially tells you where the congestion points are with respect to highs and lows. So if I can basically extend that to the left like that you can see that we also found a little bit of a high and a little bit of a low support there and there and there. So if you've got any positions or short positions in euro sterling then I would certainly look at putting the stop-loss either above 82 or above this trend line resistance which is coming down from the march highs. Is there anything that you'd like to have a look at Colin or talk about? Could you go back to your oise for a second, Michael? I can indeed, yeah. So you want me to see control? Yes, please. I wanted to mention something in terms of trading and confidence. So we had this big run here. Oh, sorry, I'll just wait a second. That's all right, there you go. Coming back. Giving you control back. Thank you very much. So we had again another head and shoulders top pattern in the euro oise and what I wanted to note here for traders to consider is that when you see a pattern forming there's three different times that you can put on a trade. You could either go in ahead of time and say, okay, well this looks like a head and shoulders top. To me, here's a left shoulder back in December. Here's a head back in January and then I'm sitting here in March and gee, this looks like a right shoulder forming to me. Maybe it's time to go short. The second time where somebody might consider putting on a trade is on the breakdown. This neckline here, which you broke quite decisively right at the end of March. And the third time is on the retest. So you saw that it came down here. You had a bit of follow through. Then you came back and this is about 140, 149, 00. And you came down and you retested this 150. You've retested, which is also interesting because it's a nice big round number, another part of clustering. So you've got 150 here. You've come back, you've retested it and look at this. Now you're down and now you're into new lows again and your downtrend is actually accelerating. So what happens, obviously, clearly, is that your measured move from your pattern would stay the same. So the difference between whether you go ahead of the breakout on the breakout or on the retest is your return potential to the same point is lower. I mean, obviously, say your target is down here around these lows around, say, 142. So if you went short at 155 or at 150 or waited in maybe 149, 50, so your return potential to the target is a little bit lower, but your confidence is higher. You're in a right shoulder. You don't know if it's going to be completed or not. You're on the breakout. Well, you've seen a breakout, but you've given up that it's improved your confidence because you've had the breakdown, but it's decreased your return potential a little bit. And then on the retest, in this particular case, we got one, the risk of waiting for retest is that you don't always get a retest, and sometimes the trade gets away on you. But certainly in the markets, there's always another trade coming, but that's an interesting... It's a tradeoff there that's worthwhile for people to consider when you're looking at patterns. I think that's absolutely right. I think you hit the nail on the head there, Colin. You know, I think it's easy to sometimes jump in because you're worried about missing the move, but I think it's always better to be cautious and make the mistake of jumping in too early and then finding that you can't run the stop as much as you'd like and actually getting stopped out prematurely. I always work on the basis, let the market come to you because there'll always be another trading opportunity. And they're like London buses. We have an old joke here in the UK. You don't see a London bus for about 20 or 30 minutes and suddenly three of them come along at the same time. It never fails, it's the same here. You know, trading is a bit like that. Sometimes the best position to have is no position at all and then suddenly you'll see three great trading opportunities and then you'll spoil for choice. So I think it's always important to remember that just because you can't see a trading opportunity right now doesn't necessarily mean that you're not going to see some trading opportunities in the near future. Okay Colin, was there anything else that you wanted to look at? Shall we look at gold? Sure, let's take a look at gold. That's always a nice old favourite. That's been extremely choppy today. I'm going to look at that daily chart there but before I do that, let's just pull this to one side and we'll also do an ordinary chart. Just do an ordinary chart like that and then we'll do slightly shorter term. There we go. As we can see from that, we've been a bit choppy over the last four hours but for me, this longer term gold chart tells me that at the moment we're in a massive consolidation mode. If we look at these very, very long shadows on the daily candles, we can see here that there's certainly an awful lot of what I would call pent-up demand down there because a long shadow on a candle tells me that the markets are very, very worried about being overly short. On the top side, we've also got the 50-day moving average acting as a significant resistance level. So let's go and basically stick this in here and here and now there's a potential trading opportunity. They're on the top side. We've got resistance just below 13.10. We've also got the 50-day moving average so we've got a very, very small window there and we can see that on the left-hand side, 13.11, around 13.15. We need this to break out, I think, probably within the next day or so. Don't we, Colin? Because I think if it moves into the apex here, it'll generally peter out. The thing with triangles, and I like triangles, is you're really looking to trade the break because they're impulsive moves. What we don't want to have happen is for this move to just basically peter out into the apex. Now the apex is all the way over in June. So I think if we're going to break out in gold, we either break to the upside and the way to then project the target for gold is again use the Fibonacci projections option here, the Fibonacci price. You basically take the move here, which is the horizontal move and that's the base of your triangle and you then project up like that or you project down the other way. So if this breaks out to the top side, then our target, our minimum price objective, is $1364, $1,364. In a simple measuring technique, you basically take the base of the triangle and you project it upwards from the breakout point. If it breaks to the downside, you do the exact opposite. So let's do this the other way around. Let's project it downwards. So rather than going from the bottom to the top, let's go from the top to the bottom. We'll do that and then we'll do that there. So if it breaks to the downside, then we're looking at $1226 as the minimum price objective and that's essentially how you play triangles, but a triangle needs to break out between 50% and 75% of where its apex is. So really this triangle needs to break out within the next day or so, otherwise what we're going to continue to do is essentially trade sideways. There's certainly a significant amount of support on the gold price around about this $1270, $1265 area. I'd like to think that we're getting ready for a move higher or lower. The oscillator or the slow stochastic would appear to indicate that we're fairly neutral and it's probably more likely that we're just going to trade into the apex and continue with the current range. But it's certainly worth something keeping an eye on and if we do close above the 50-day moving average, I would like to think we could have some potential to move higher because I think if anyone's looking at that chart and they're short of gold, they probably put their stop-loss above the previous size of this month in May, which are around about $1,320. Yes, indeed. I think what we're seeing here in gold is we're definitely in a range-bound market which also is important for when you are trading and looking to set stop-losses is that you need to consider that rather than looking at this chart and thinking, you know, gee, can gold take a run back up at $13.90? It's adjusting the expectations that if we do get a break here, well, maybe we'll get a retest of $13.30 and because gold is kind of range-bound, that's what we need to be prepared to settle for and in which case then what's your downside. So say if you're here and you're measuring and if you were looking at a current price on gold sitting right on $1,300, your initial resistance is up here around $13.15 and then up here around $13.30. So where are we within our trading range? Well, we've got a low here around $12.70 and our high is around $13.30. So if we're just going to be within our range here on $13.00, it's a $50.50 proposition. It's $30.00 up. It's $30.00 down within this range. So then we ask ourselves, well, what would make things a little bit more interesting? So let's just... I'm just going to drop these lines on here so we can see the channel. So there it is there. Now what makes this a little bit attractive? Well, one thing we do have this nice trend here of higher lows, but it's offset by the trend of lower highs. If you get a breakout, then you're likely you've got a pretty good chance at the top of the triangle. If you don't get a breakout and you stay here underneath that $13.00, your first support around this trend line is about $12.80 and then you've got more around $12.70. So it's a matter of... in this particular case when you're playing this kind of market, it's shortening your time horizons and shortening your objectives. Is there a smaller trade within this that might work as well for people to consider? There's always opportunities. It's just that sometimes the opportunities are bigger than others. Alright, cheers. Thanks Colin. So we've looked at gold, so we think there's probably potential for a little bit more upside potentially in that, but overall I think we're both agreed it's probably going to continue to trade in the range that it's been trading in for about the past five or six weeks. Let's have a quick look at sterling because we haven't really had a look at that yet and we've got the Bank of England minutes next week. Can I say one more thing on gold, Michael? Sure, yeah absolutely. Do you want to control that? No, I just wanted to say... if you're at 1,300 it's a 50-50 proposition, but if you figure that this trading range is going to continue for some time, if you drop back to 1,280 and you're in a 1,270 to 1,330 trading channel, your odds change dramatically. If say you go back to 1,280, you've got $10 downside to 1,270, you've got $50 upside to 1,330. The trade then starts to look a lot more interesting from the long side. Similarly, if you took a run at 1,320, 1,330 it may look more interesting from the short side. Anyway, sorry Michael, please continue. No, that's fine, that's no problem. So let's look at cable and we can see from this cable chart that despite the fact that the Euro dollar is starting to look a little bit heavy and equity markets are looking fairly heavy, cable continues to look fairly resilient. It's finding support. We did break below this trend line support from the March lows earlier this week. We are now trading below that, but we are finding a significant area of support around about the 50 day or just above the 50 day moving average, which is around about 1,6720. In my morning comment this morning, and actually in my morning comment for about the past couple of days, I have identified 1,6720 as a bit of a level and that's available on the blog. I tweeted out around about 6.30 in the morning of the major currency pairs, sterling Euro dollar, yen and cable. I talk about the major support and resistance levels to give an indication of direction and certainly against the dollar, the pound has held up much the better of say the example to Euro. But we are approaching a very, very key support level. So unlike Euro dollar, which is broken below this trend line support, the pound hasn't and we've got trend line support from the November lows currently coming in around about current levels of 1,6710, 1,6720. So that's certainly worth keeping an eye on. Certainly on the daily charts, even though the direction of travel does appear to suggest that we could well be looking to head lower. But I think a lot will depend on next week's minutes because I think that we're going to see some descent between policymakers about when to raise interest rates. Certainly I think the unemployment rate that we saw, the unemployment data that we saw out this week speaks to a direction of travel, 6.8%. Average earnings was slightly disappointing and I think that's really what drove the pound down on Wednesday. And I think more than anything, we've got CPI next week. I think more than anything, the Bank of England is not targeting CPI anymore. It's targeting average earnings growth and I think they won't be too bothered if CPI falls back to 1.4, 1.3, 1.2. I think they will be concerned if average earnings starts to push too far away from CPI. So if we go above 2%, we go to 2.5 and we go to 3%, I think you'll see concerns rising that maybe interest rates may come sooner rather than later. But for the moment, the odds are, given what we're seeing at the moment and given what Carney said yesterday, we'll probably see it after the election next year, which is probably entirely what the coalition government really want to happen. I don't think they want to see a rate rise before the election. Okay, what I'm going to do now, guys, is I'm going to wrap up the recording for this week. Wind it up. You're more than welcome. We're going to carry on talking if you want us to. If there's anything that you want us to cover, any market that you want us to cover, use the chat feature right now. We're going to carry on, but we're going to stop recording simply because the file size is too big and then it becomes too big to upload to YouTube after we've done it. So for the purposes of the recording, thank you very much for your attendance until the same time or a similar time next month. We'll definitely do this again. Thank you all very much for joining us today.