Overbought: Market price congestion and pure ugly due to Simple MA cluster zones. These zones are statistically insignificant so direction is highly questionable. Fractals may hint at direction but is never the surest bet because I don't know the MA used for its calculation. The dead point down of the Blue 5 day MA tells me I'm in overbought territory and prices are heading lower. Short bit I use my hourly for entry and exit to accumulate pips. Longer term traders can stay with this daily and trade.
Flat MA Simple Lines: Tells me more congestion is here. Flat lines is the early warning signs to bail if in the trade because direction is uncertain. Direction may change, continue or congest.. My shorter 5 and 10 day Simple MA's will give me confirmation to the next leg and I will always confirm on my hourly to enter and exit to collect pips.
Sell Mortimer Sell: Game on with confirmation from my shorter term 5 (Blue), 10 (Red), and 14 (Turquois), MA crosses. I will again hit my hourly for entry and exit to collect pips on continuous buys and sells. Longer term traders can stay on this daily and trade the trend.
Trend: 5, 10 and 14: Why? 55 crossed the 100. Shorter term averages always move faster than longer term averages due to their statistical significance in price calculations. When the 55 crossed the 100 day, statistical significance is stronger as a confirmation and lends confidence to the shorter term MA's.
Fakeout Candles: No cross, no trade. Fakeout candle prices calculate to practically zero which says prices don't know where to go. The fact that a cross didn't occur normally says prices will fall back to their original direction. Had statistical significance existed, prices would've changed direction and a cross would've validated the new direction. Fakeout candles say either trend continuation, trend change or price cluster/consolidation. The shorter MA's provide the first early signs to the next leg.
Range Zone. Shorter and longer term MA ranges are getting tighter, a price cluster. 55 day or 5, 10 and 14 day must win the race. Which set wins? Which way for the next leg. I leave this question open so readers can ponder.
55, 100 and 253. I see the whole market. I know where its headed, I know how to react. Direction is set and written in statistical stone.
14 day. Further confirms long or short because that line requires a tornado to break. Normally price breaks due to out of sync news announcements or a fundamantal European flim flam statement that says they solved the world's economic Flu. This line was invented by a 40 year market master technician. Further reading is found in my article in the April 2009 edition of Stocks and Commodities Magazine where I compare this indicator with SMA's vs EMA's and their histories.
Forecast EUR/USD: Short term, I'm trading using my shorter term averages as my guide. With prices above my 14 day Turquois line, longs are safe for now and my 5 and 10 further confirms my longs. I know the 55 day is coming down hard and ranges will get tighter as days pass so my trades are quick until I see who wins the race to tell me the next leg of the price journey.
Stay tuned as Brian Twomey again goes Inside the Currency Market. My book is found at btwomey.com.