 Okay, Traders, welcome to this week's live market analysis session with me, Patrick Munnley. If you can hear me loud and clear and you can see the tip middle welcome screen, if you could type a Y in the chat box just so that I know you can hear and see the screen. Good stuff. Thanks very much. Okay. Let's get going. Before we do, as always, we want to adhere to risk disclaimer. We should all be aware that trading financial instruments carries an inherent amount of risk. Secondly, and most importantly with respect to today's conversation, the views and opinions expressed by me during today's session are solely mine and they are not indicative or representative of Tick Mill, UK Limited or Tick Mill, Europe Limited. Okay, so just before we jump into today's material, for those who are here for the first time, a quick overview of my background. I have been involved in the financial markets in the past 15 years. I haven't always been involved in financial markets. After I graduated from university, I joined a city consulting firm. For a couple of years of learning the ropes, I left with a few colleagues and we did a startup. That startup underwent some pretty rapid growth and after a 45-year period, I cashed in my mistake in the business and so had some capital and a bunch of time on my hands and I decided to explore my passion for markets due to the nature of the work I was involved in. I'd had a front-row seat to the dot-com boom and bust and see people make and lose a fortune in the markets quite literally overnight at times and so I started, I guess what you refer to as gambling, day trading, the S&P 500 market was trending north and I caught some lucky early breaks and started to make some solid and then quite some significant gains but as is often the case in this game, the beginner's luck runs out. It certainly did that for me. I gave back in quite short order all the gains I'd made and then I took a personal six-figure hit on my capital. This was a wake-up call for me and it was a point at which I needed to decide to approach trading as a business and could I actually make a sustainable income from trading? I sought out a mentor, worked with him for 18 months to nearly two years really and he really helped me not just up my technical game but also my mental game. It was a period during which I became far more self-aware and started to understand the distinct difference between my prior commercial career where I was extremely goal-orientated, always looking to close the next climb, do the next deal and in trading what I had to learn was that I had to become process-orientated so I had to forget about the goals and really focus on my trading plan, my process and executing that with excellence. So I during that period developed a trade plan, business plan, extensively back-tested and forward-tested it and then I came back to the markets at the beginning of 2008 with my own capital, traded that for a period of five years, annually profitable and attracted the attention of family and friends who wanted a piece of the action and so I set up a managed accounts business and the performance data you can see on the screen is that of the managed accounts service that I run and again consistently profitable on an annual basis but not necessarily consistently profitable on a monthly basis or even multi-month basis and this is something that's incredibly important and I try to teach all the guys that I work with is that you have to put your, if you're going to get involved in trading as a business, you have to remove the emotional investment in the outcomes of independent trades or even a series of trades. For me it's not that you know I don't care about the outcome of the next trade or the even the next 10 trades where my focus is on the next 100 trades because I know that if I adhere to my trading plan that my edge will demonstrate itself over an extended series of outcomes and so the most important figures for me really on this screen are down here in an average losing month I lose 2.32% an average winning month is 7.96% so you can extrapolate that out to the idea that I'm making two to three times what I lose in a winning trade and as long as I've got those metrics right then I know that my business will continue to be successful. So aside from my trading and my manager account service I also market resident market expert for TickMill I provide a daily market outlook and a chart of the day which is a setup that I'm watching and you can subscribe to that through their blog on the website and you can get those delivered to your inbox and my other passion project really is FX career swap who are the emerging trading development business really whereby we take retail trading talent we underpin what they what they know to date with a bespoke training program I also teach the 10 or now 11 strategies that I've consistently used over the past 12 years to be a profitable and consistently profitable trader and once you complete the process we then offer the opportunity to trade our funds at zero personal risk and on a profit share basis there's actually a trial at the moment you can get a free two week trial to that service I'll just post that in the chat for anyone who's interested you can follow up through there so that really gives you a flavor of where I'm coming from and so let's let's move into what I see or where I see potential opportunities in terms of the markets there's always firstly reminder of the seasonalities the seasonal factors that can be in play at the moment August traditionally has been a very poor month for risk assets we're not quite seeing that at the moment but we're going to look at some charts and some underlying positioning structure in the market that may still may still mean that we see a pullback in in risk assets first let's check in with the FX positioning update so most of you if you're active in the markets will be aware that long positioning in the euro is at record levels and traditionally when a financial instrument becomes so stretched in one direction we tend to not necessarily always but we tend to see a corrective phase develop and so that's being underpinned here by positioning data from credit error poll which shows that this change in terms of the eurozone fundamentals is attracting capital into the single currency but at the moment that that positioning looks a little stretched another element of positioning is this is the S&P 500 the chart here you can see S&P 500 and what you've got measured down here is gamma exposure now this without getting too technical gamma exposure is basically what market makers have when they buy and sell options from and to their clients they have a market risk and need to either be buying or selling the underlying equity or future if they want to avoid going broke this process is kind of tricky because options move differently in comparison to the underlying market depending upon how far away from their strike price they are or the delta and this sensitivity changes constantly when dealers are highly exposed to this the change in the gamma they either need to buy or sell futures with every point the market moves to adjust their hedge or delta hedging in order to stay neutral to its direction now what we note here is this big spike in gamma exposure the last time we saw a similar spike was just prior to the rollover pre-pandemic but you can see similarly when we've had spikes like this before we have seen at least a pullback I'm not I'm not suggesting that we're going to see another crash like we saw in March but certainly there's the potential for a pullback and that coincides with us we move into the charts now let me get this here this coincides with us retesting the prior highs and if we take this chart out of it you can see this period here was the dot-com bust and you can see we had an initial sell-off and a pullback to retest the prior highs and what we note here and this is a weekly chart is that we have momentum divergence as represented by this cycle so price is retesting prior highs but we can see momentum is telling us that there is weakness in the underlying market that it prices the amounts of inertia that's required to to take prices back to this highs is is failing and you can see the similar setup that we had in 2007-2008 where we got that initial pullback we retested broke new highs in price but you can see the momentum told us a different story and what we're seeing at the moment here now is is prices retesting these prior highs we could potentially move a little higher here to test what could be a broadening top pattern so you know we could be up at 3420 currently trade 3374 but we have retested the prior highs and what I want to pay attention to is this this divergence that we're seeing in terms of the momentum study and then if we factor that into the idea of the gamma exposure in the market at the moment we could see we could certainly have the potential or the necessary ingredients for a pullback here at least so we want to pay I'm paying close attention to this weekly chart with a couple of other weekly charts we're going to look at in a minute but if we get a close and you know obviously we've got the remainder of today and tomorrow but if we're going to close back through 3320 so that's 50 s and p points away at the moment but if that did happen then that would be a warning sign and certainly we could be back down looking at the 3000 level in quite short order would be my guess and then we have a 50% retracement back down at 2800 those would be the initial targets if this pattern plays out now if it doesn't play out and we get a close through the through the broadening top here at about 34 let's say 3430 then then really all bets are off at this stage to the downside and what we'd actually be looking for would be a test of 3718 to the upside as the as the measured move target versus this this decline here so I want to pay close attention to this close tomorrow and and see where we come out on the week if we get a bearish reversal but really to get to get interested in this as an opportunity you need to see last week what last week's lows taken out to get some momentum going to the downside let's let's take a look at the dollar index also on a weekly chart and and it's noteworthy that the dollar index is sitting right on its its trend line a 10-year trend line almost and and you can see that we've we've had some some buying partly driven last night by the Federal Reserve who released their minutes and and whilst they they are technically dovish the concerns with respect to the long lasting impacts on the economy from from the covid crisis really shook the markets a bit and and we saw some safe haven buying and some money or certainly some profit taking in the dollar at this stage again we have to see where we close this week but I mean at the moment we've got the potential for a pinball reversal here off of a 10-year trend line now I'm as most of you who have been here before or or follow my work I'm pretty bearish the dollar certainly into these these elections but that said I certainly see the scope for a correction here potentially and and if we can hold this trend line on a closing basis then that will certainly set the stage for what could be a corrective move similarly in the euro we're sitting at that the euros trend line versus the the GFC highs 2008 highs and and again we got to close just through it last week and we've punched through it into a week here but let's see let's see what happens on the close this week because if we got to close back through 118 then certainly that could that could encourage some profit taking and when we look at the daily charts at the moment I'll show you the areas where I would be looking for for that to develop similarly with sterling we're sitting in an interim three-year trend line resistance with sterling and and again we punch through into a week here but it's all about the close and so we'll want to see where we close guys if you've got questions if you can if you make a note of them and I'll open up the Q&A at the end of the session it's just easy for me to run through the charts first of all and that you know what I'm looking at and then I'll cover off any questions at the end so yeah sterling similar story here and we want to pay attention to to the close again on the weekly chart Ozzy also had a major trend line and again we punched through it intro week but we're starting to see some supply up here as as represented by the tails on these candles I mean if the Ozzy close is back through 71 45 let's see 71 30 then and certainly we can see some profit taking in the Ozzy and I'm not suggesting that we're we're going to crater here but certainly we could be back looking at the 68 handle before then making another run at this this trend line so and similar story in the Kiwi as well I was looking so the Kiwi took out its trend line a couple of closes but then ran into supply here at this 67 handle and we're now looking at a potential outside reversal week here to the downside after after taking out the prior week's highs now pulling back and if we get it closed back below 65 that'll be a bearish bearish development for Kiwi and I see us certainly retesting 62 in the coming weeks for attention to the back end of of August here early September before then we can be looking and thinking maybe about an inverse head and shoulders setup in the Kiwi for a move much higher into into the autumn so those are some of the the weekly charts that I want to wanted to draw your attention to now let's go to the intro day charts so this is the dollar index the broader dollar index this is the pattern I'm looking for you can see here we've got a nice interim cycle subdivided into five waves testing the descending trend line support again we've got that initial test we now got some nice momentum divergence and we've got a bullish outside reversal yesterday we didn't quite test the trend line but certainly this 92 area looks like it's got looks like it's got the attention of the buyers now we could roll over again and we could get that 91 70 test here but at the moment versus yesterday's close it looks looks pretty bullish here and now and if it does play out then I'm looking for a correction to develop here to ultimately get us back into the descending trend line resistance at 95 we're certainly then I've been looking for bearish reversal patterns to set short positions and I'd have a target at least down to this 90 level into October November time the elections in the US but a similar story in the equal ways of dollar index slightly more defined trend line here so we need to to see this break above above this 120 90 area to to encourage a corrected view here the obviously with this dollar index this is the Dow Jones dollar index it's equally weighted versus the Aussie the end sterling in the euro whereas the broader dollar index is it's not equally wasting its state six major currencies so keeping an eye on these these closes now in terms of the dollar index swissie obviously has a similar setup got this big bullish outside reversal from the descending trend line support nice subdivided interim wave pattern here and if we can if we can punch through the overnight highs 91 60 and I think we get a run up to 93 50 before before we potentially roll over again and take a look at at the 89 level of support dollar yen if we can hold yesterday's lows in dollar yen I think we now get a move up to test this 108 area which I've talked about before in terms of a symmetry swing so when I talk about symmetry swings what I'm saying is that this move here we could see replicated here just tighten that up and what we've got now versus this low is we'd have the additional confluence of this equality objective here so putting this up into 108 for the for the dollar yen so we'll see if we can take any in terms of trading this take out the overnight highs then you get a nice stop tempits below the overnight lows and you you have a run at this 108 euro dollar back into its descending ascending trend line resistance for the key key reversal pattern yesterday so a bit of follow-through already I'm sure you're at the moment and what I'm looking for is basically a move down to this once 116 area again you can see the interim cycle completed we've also got that divergence psych indicator starting to tick into negative territory we've got the longer term cycle from the RSI stochastic starting to negatively diverge and similarly negatively diverging and the shorter time frame so once we hold these 190 50 highs I'm looking for a 116 test in the euro euro yen see the potential for a pullback in the euro yen hit is test it which will be a third test of this ascending trend line I think this will be a great opportunity on the long side so if we can see a pullback develop here into this 124 low 124 area watch for bullish reversal patterns from this trend line and you can have a target then up at this 129 which is the equality objective versus this pullback here so taking us up into that 129 so keep an eye on any pullback in the euro yen to this 124 area and watch for bullish reversal patterns as an opportunity to do something on the long side sterling so again with sterling similar scenario here we can see we've we've broke new highs and this nicely subdivides into a let's see if I've got this here so we've got one two three four and then a five here into this high which actually will be completing the lot that the primary cycle third wave so we get a pullback here in sterling versus the 132 60 high here and I've been looking for a test of this ascending trend line support probably to the 128 if we if we replicate this type of price action here it takes us back into the 128 but again once we get into that trend line then what I want to be watching for are bullish reversal patterns you can look on the intraday charts you know hourly four hour I don't suggest anything lower than that but I mean my preferred time trading time frame is obviously the daily chart so bullish reversal pattern here and then I think we can get that run up to test the the 135 136 which is the the major trend line for for the dot for sterling let's just go back to the weekly chart I'll show you what I'm talking about so if we scroll zoom out here so you can see that we've got this trend line coming in now 135 in sterling so if we get a pullback on the daily it gives us a move down into this 128 support area then you've got a gray trade setup because you can you can be looking long from that area to target that trend line at the 135 area let's take a look at the Aussie Aussie putting in a ending diagonal pattern here and like I said I'm looking for this to to break down I'm shortly Aussie at the moment and what I'm looking for is a breakdown to ultimately retest into this 68 area which again highlighted on the week the weekly chart here let's go here so if we can get a pullback into that that well I mean we could actually be a bit deeper I was looking at 68 68 20 to 66 80 will be the ideal area because then what we basically be setting up would be this type of inverse head and shoulder scenario and and that would set some pretty big equality objectives in terms of the in terms of the Aussie to be trading meaningfully higher so again it's tactically short at the moment but but ultimately I'm looking for we'll be looking for higher prices in the Aussie so that's the Aussie pattern there and again this these are all accompanied you can see the momentum divergence that we're getting at the moment the psych indicator is rolling over here back to potentially break the trend line support that it's developed since the since prior to the March lows and so if that breaks down then I see prices breaking down and like I say initially looking for 68 but as I just mentioned we could see move into this 66 area as well Kiwi similar story here so obviously we've got that in terms of the Kiwi the weekly chart what we really want to pay attention to is if we close at current or lower prices that's a bearish bearish pattern in terms of the weekly chart especially with these long tails in terms of supply so Kiwi through 65 should easily open up a move back down into the 61 50 62 sorry 62 30 area where we broke out from so keep an eye on that weekly closing the Kiwi you can see it's already taken out the trend line support in terms of momentum we have significant momentum divergence we also know going back from a seasonal perspective that the Kiwi August is actually the worst month of the year from a seasonality perspective for the Kiwi so that is that what else am I looking at Swiss Yen looking similar to the Euro Yen really just watching this trend line this these third tests of trend lines tend to produce a reaction and certainly if we could get a move back down to test this 115 50 area and a bullish reversal pattern then I'd be looking to be long the Swiss Yen and and see if we could take it up into the projected trend line resistance certainly into 119 so keep an eye on this Swiss Yen that's a developing opportunity S&P we've already talked about you can see on the daily time frame here we did get a reaction last night but see if we can get some follow through and again I'm not I'm not necessarily predicting the end of the world here with this but in terms of initial targets certainly we could see 3100 would be a symmetry swing objective versus this high last but not least let's check in with the metals here gold obviously been on the tear I talked in previous sessions with respect to the the positioning data that highlighted a very stretched position in terms of ETF positioning retail customers very long gold ETFs and we've got to pull back to retest the prior breakpoint at that 1910 area it did produce a reaction and certainly you could you know a tradable reaction but now what I what we're looking at versus this reversal yesterday we take out these lows at 1923 we have a confluence target now a confluence target this is the symmetry swing so versus the last meaningful correction here gives us 1823 and then we have an equality objective versus this leg down and an equal leg from from that swing high we'll put us into the 1800 area and that would be an opportunity then to to develop new long positions as we certainly have to retest prior highs and potentially break out if we're going to see the dollar index roll over once again after a potential correction here similar story in silver we've got the same pattern basically and we have this confluent target now 2220 to 2240 anything once we get back up down into this area watch for bullish reversal patterns to do something on the long side as as we should see these metals break out if the dollar is going to roll over into the into the fall here this year and into I'm obviously with the US elections looming okay so those are those are the charts that that I'm watching at the moment and positions like I say I'm short the euro the sterling and the and the Aussie and we'll see how this plays out see see if we get this weekly close really pay attention to these candles tomorrow because it could be meaningful certainly in the dollar index sitting at that that trend line and potentially going to put in a pinball reversal here which which could set up a the pullback certainly back into those prior lows that 9450 area potentially 95 or we could take back into this prior support area as high as 96 so I mean there are some upside there's some upside potential there but ultimately I'm looking for a lower dollar over time okay so that's those are the charts I wanted to talk about and the setups I'm watching does anyone have any questions is the indicator used moving average it's the indicators I use a proprietary indicators uh grand gish they um there we go um they are volumetized average price indicators here hi to here do you have a microphone hello to here hi to here how you doing yes I'm doing well mr patrick yes well done for the technical class uh I have noticed a lot so I've noticed you have been using only uh technical analysis plotting supports our resistance and just referring back to some few aspects of the fundamentals so is there any correlation you have been maybe referring to as a reference for the pierce you have been explaining from this wcd uh stalling and the rest of the pierce I I was lost maybe if you just say the level we'll just have to go to which maybe probably to this support level maybe it will bounce back to another level high for grabs of profit so I my question here is um is there any reference to correlation you have been maybe yeah I mean yeah obviously because I'm looking at the dollar majors I mean I I come I'm the most the most important to me are really uh are the dollar index because the dollar drives most of the uh most common exchange trades I mean you have to have a view on the dollar and understand where the dollar's going to effectively trade all the dollar majors so I mean if I if I'm anticipating there's gonna be a correction in the dollar index then I'm anticipating that the dollar majors are going to correct lower does that make sense yes okay so we are friends and with uh maybe economy of the usd that's right all right all right thank you Patrick you're welcome to hear thanks for the question welcome uh lewis why not bullish wedge um for me lewis uh let's just go over the other um the the issue for me here in terms of the wedge lewis is the momentum divergence when the momentum starts to fail that uh that more often than not will inform where we're going to see price correct if we're going to see price correct like I say I'm not anticipating that we're going to you know we're going to see some major crash here but I certainly see a tactical trading opportunity to to trade the Aussie on the short side and then look for potential to do something on the long side down the line but in the near term the um the technical setup at the moment suggests that we're running out of steam here on the top side at the moment uh we've had a good run and um and we're now at the in what technically would refer to as an ending diagonal pattern and that's additionally confirmed by the fact we're seeing this momentum divergence and certainly if we get a close through this trend line support here on using the psych indicator that would encourage that view further does that make sense to us okay do we have any other questions if you don't have a question would be helpful if you just type an n in the chat box and then I'll know that we uh we're we're done here for today okay good stuff I'm going to wrap this one up here and um and like I say pay attention to these weekly closes uh certainly in the dollar index euro sterling Aussie and and the Kiwi all look very interesting heading into uh into tomorrow evening okay I'm going to wrap this one up here guys and then we will reconvene same time next thursday have a great weekend everybody thanks