A broader perspective on 2015

So that's another year come and gone - and one of the weirdest from a trading perspective. I've seen one or two people refer to 2015 as 'The Year of the Failed Breakout', and I certainly wouldn't disagree with that!

I can remember that moving from 2010 to 2011 seemingly changed the state of the markets from a trending to a non-trending state - certainly on my preferred timeframe. It was literally like someone had flicked a switched on 01 January.

These kind of changes can occur at any time, and when they do, we never know how long the new market state will last for. And, in the case of the markets switching from a non-trending to a trending state, we do not know what the magnitude of the new trend will be - or initially even the direction it will take.

What's there not to like?

It is not often that I post up a potential set up before it decides whether to trigger an entry or not. It is even rarer for me to trade one of the major indices. However, I was struck by the current set up on the chart of the Dow (see below). The S&P and Nasdaq are also showing similar characteristics and price structure.

2015 - any parallels to 1987?

As a trend follower, I'm not in the business of making predictions - I follow where price goes. Elaine Garzarelli I am not. Also, predictions can easily blow up in your face if you are proven wrong. On this post, however, I am simply observing and pointing out a few comparisons between what is happening now and what occurred twenty eight years ago.

So what happened in 1987? 

• The crash followed a recent move down from all-time highs made a couple of months earlier;
• There was an international situation which contributed to the price move - in this case, it was the spat between James Baker and the Germans;
• Price accelerated to the downside throughout the week, culminating in a big drop on the Friday on heavy volume.

A role reversal

It is funny how traders can move in and out of profitable phases at different times, even if they utilise similar trading approaches. In the second half of last year, I went on a record-breaking (for me) run of losing trades, whereas other traders were doing very nicely, thank you.

So far in 2015, the roles seem to be reversed. I've noted that some traders on social media who look for trends to trade have commented on how tricky the markets have been so far this year. Indeed, if you look at the chart of the indices such as the Nasdaq below, you can clearly see an increase in volatility and a lack of direction since 2015 started.

Fiscal cliff and other market unknowns

The buzz words or phrase that everyone is referring to at the moment is 'Fiscal Cliff', and the possible impact it will have on the US economy, as well as the markets.

As it happens, the US indices have performed an abrupt about turn over the last few sessions of the year, and are now on short signals. Perhaps unsurprisingly, the major European indices are showing greater strength, but are also being dragged down in concert.

Market indecision

Both the FTSE and the German DAX are showing strength after giving intra-day short signals a few sessions ago. The pattern of lower highs and lower lows is still intact, so therefore the benefit of the doubt is given to the short signals, which are definitely in place on the major US indices (charts of the FTSE, DAX and Nasdaq below).