The tech heavy Nasdaq index has led the 3 major indices with the surprising V shaped recovery off the Dec 24th lows. This week the Nasdaq 100 is set to hit the old all time high resistance level of 7,655 as well as the original long term uptrend line on the weekly chart (shown with green rectangle box).

The reason this is important is because the market is facing two major resistance areas simultaneously which could cause disruption to the current uptrend for 2019. When the long term uptrend was breached in late Oct 18, the market gave the signal that something was wrong and to pay attention.

Given the bullishness of the market lately, it's likely we will retest the old resistance level this trading week. The key question once this has been achieved is what happens next?

With the steepness of the rally in 2019 and the uptrend line shown, we can only tolerate a minor pullback / consolidation period otherwise we could see the market break the uptrend line into the red circle area.

If this occurs we would have to review any bullish positions on the Nasdaq 100 index and show caution to potential short term volatility and draw-down period ahead.

Given the price action is currently sitting comfortably above the weekly chart moving averages, I'm suggesting that we could see a number of weeks of volatility and consolidation ahead, rather than a suggestion it's time to look at potential shorts for the Nasdaq index.

My switch to an overall bearish stance for the Nasdaq 100 will occur when I see the price action form a lower high and lower low pattern on the daily chart. Until then, I'm only highlighting caution ahead for the major inflection point above.

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Gold’s price action this week has provided a few big shifts with its sell off towards the end of the week. Gold has now confirmed its right hand shoulder of a Head & Shoulder pattern, while simultaneously breaking its uptrend line which commenced in Nov / Dec 18.

The price action has also formed a lower low & lower high, which I covered last week to members. The final confirmation for a Head & Shoulders formation, which is a breach of its neckline / support level, appears to be a high probability event going forward. Whether this occurs this coming trading week or the next, Gold is looking likely to breach its major support at $1,280 & head back to longer term uptrend line shown around $1,240 - $1,260.

When you consider that the market today is now pricing a 76% chance of a rate cut in 2019, the price action of Gold relative to the future Fed funds rate direction is at odds. However the market is always right & we have to respect the price action currently being shown by Gold.

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US Macro Data

The chart below shows the last 2 years of US economic data summarized under 'soft data' which comprises of various surveys on the US economy, 'hard data' which comprises of all actual macro economic data as a whole. 'Hope' which is survey's based data on sentiment on the economy.

From mid 2017 you can see clearly all 3 categories peaked and have been making lower highs and lower lows since then, as the macro data continues to weaken further. This is a trend that has been occurring in most countries around the world. Because of this increasing trend of weak economic data overall, I've been bearish on the US economy for some time now.

This has also let me to suggest there is a high probability of a US recession occurring either in 2019 or early 2020 based on these trend. In fact if you strip out the increase in US Government spending in the last GDP quarter the US would of already reached a negative GDP print.

S&P 500 Chart = Bullish Stocks

Please note: Chart was taken from close 22nd March

Since I'm a trader as well as an investor, I have had to learn to sometimes hold an opposing view that contradicts each other when viewing charts as a trader. Taking the close of the S&P500 chart from Friday, we can see the current trend of US stocks as an index since the end of December, looks a whole lot different to the economic data chart shown on the above chart.

The current trend is moving higher with successive higher lows (green circles) with the green lines highlighting this overall strength. If you look at left side of the chart below from Oct 2018 - Dec 2018 period you can see a different weak down trend, with the market giving clues and warnings (black circles forming lower highs) for US stocks before the sharp declines in late Nov & Dec 18.

Once we broke support in Mid Dec (red circle) we saw a sharp decline for the next 2 weeks. Coming back to current trend in March 19, as a trader I have to keep a bullish stance overall even with the strong selloff we experienced on Friday 22nd March. The bullish stance will hold unless I see the S&P500 close below its most recent higher low around 2740 level. Followed by a confirmed lower high on the charts.

If this doesn't occur then as a trader I need to view any subsequent pullback in stocks, which is likely to continue this week as a healthy consolidation within an uptrend. This explains my reasoning why as a trader I'm bullish US stocks overall, while as an investor I'm bearish the US economy.

If you enjoyed this review of the US economy and the S&P 500, that was originally posted for members at Guruhaven.com, you can join the community free to receive macro news, trading ideas, education along with chart review requests on your favorite positions & trades from Crush The Market and other traders and investors. Simply visit Guruhaven using referral code: Crush19 by clicking here

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With the release of this week's Gurhaven newsletter, we cover some of the top posts from Guruhaven.com from last week. I review just what's going on with Silver, with the likely levels to look out for. Plus our traders and investors from Guruhaven discuss US markets, NASDAQ, Forex, China and more. To view the Silver review and for the round up of great content Click here for the latest newsletter

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Guru Haven releases its weekly newsletter wrap up of some of the best posts from the week on the markets, macro news & trading ideas & trends.

The newsletter includes posts from our Gurhaven residents as well as a number guest contributors of traders and investors.

If you enjoyed the recent newsletter and are looking for macro news, trading ideas, education along with chart review requests on your favorite positions & trades from CTM and other traders and investors, visit
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Disclaimer: Please note all information presented in the Guruhaven weekly newsletter and within the website and its community platform are presented for educational purposes only,  and does not represent financial advice in any way. If you require financial advice please seek a licensed advisor who can provide these services.

Crush The Market has recently been invited to be a In House Guru resident and content provider at Guruhaven.com.

The trading, markets and finance community currently has four Guru content providers, as well as a team of moderators who are providing daily ongoing content in the Lounge and Study Hall areas. With regular discussions and charts on US markets, commodities, stocks, forex and other trading instruments.

Recently Guruhaven just issued its first newsletter showcasing some of the best pieces of content shared by the content providers, moderators and special guest contributors. To view a sample of the content at Guruhaven.com download the newsletter PDF file below.

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Guest Article Written By  - Trader, Pete Armstrong - Twitter: @PeteArmstrong

2018 is drawing to a close although the markets show no sign of going into holiday mode until the
machines are switched off and forced to take a break for a few days.

As a trader in the southern hemisphere it’s our annual summer holiday period for at least 2 weeks.
I always use this time to reflect back on the last 12months, draw a line in the sand and consider
the new game starting in January……It can be a satisfying time or very depressing period.

A traders life is not anything close to what society deems as “normal”, and as such no one but us
traders can really relate to what we actually go through.
This isn’t a story about how lonely trading is because I’m one of the weird ones who trades best
in total isolation. It’s just a fact we can go through things that no other career can throw at you
and a lot of the time we bring it upon ourselves due to the nature of this business and how us
humans are wired……I brought it all upon myself this year. Here is a story of a period I went
through.

It is amazing how easily you can lead yourself off course, down a path you know isn’t going to
end well, but at the time, in the moment, you honestly think you are making intelligent decisions.

The last few years have been hard in this game.
• Volatility contraction but now expanding dramatically forced me to alter my approach and
mindset towards the market (I struggled with the mindset aspect),
• Algo’s exacerbating “chop” in price action due to a number of factors made tight entries harder
than previous years,
• Politicians ramping up their desire to have public feuds,
• Geopolitical issues seem to be piling up, adding another risk to manage daily,
• Fake headlines from “Sources” that Algos react to with sudden bursts of price action that will
fade sometimes and not other times.

The list could go on, but markets are always evolving and we have to evolve with them, however I
found myself fighting these factors when in-fact I thought I was just working hard to adjust and
get on top of them.

This year I found myself so determined and focused on getting on top of this market that I worked
around the clock; sleep was optional and only when the body forced me or on weekends.

Down the Rabbit Hole I Go.

In my mind it was a case of; “Yes I know this isn’t sustainable or smart but if I can push through
this period, get on top of it, then I can rest, do all the right things and get back to a sustainable
balanced approach/lifestyle of making returns”

I would tell myself daily - “It’s just a phase the market is going through, this isn’t your first rodeo
you have been here before, you just need to grit your teeth and work through it.”

Telling myself to back off a little, ride it out with lower performance expectations whilst working
through fine tuning my approach would have been the intelligent thing, but with pressures of
performance and life etc, I was always feeling like my back was against the wall and I needed to
go harder at it not back off. Cue the Anxiety.
That last paragraph I think was the root cause of this stupid behaviour

Obviously my day to day trading thought process are extremely clouded in this exhausted state,
more errors were being made than normal, frustration builds and everything is second guessed.
Confidence evaporates.

The harder I tried the worse it become!

[ Side Story - I used to be a golf pro, and pros will play their best when they let themselves be free
of pressure and they believe in their ability to execute. The harder a golfer tries to “ steer” a shot
under pressure down the fairway the more they spray the ball all over the course. I was trying to
steer every trade instead of letting it just happen]

All this leads to crippling depression periods and constant anxiety.
The dark times are dark. Very Dark!

It takes rock bottom to snap me out of it.

Tired, exhausted, mentally drained, angry at myself, constantly sick, no confidence and for the
first time I truly can’t wait to step away from the markets.

I knew better, I made it all harder than it needed to be and I’m feeling to consequences of it.

I think I got stuck down the rabbit hole due to the pressures that I have on me. Some your typical
life pressure we all have, and likely some others all manifested in my head. Thats something to
explore during the time off.

When I return it will be fresh, back to basics, structure and discipline. Focus hard on not losing my
way again.

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Guest Article Written By: Robert Blake

When the US Federal Reserve raises interest rates it always affects the US dollar. In this case, the hike would normally reduce the inflationary pressure, and as a result appreciates the dollar. The latest decision to raise the target for the fed-funds rate to a range between 1.75%-2%, in June of this year, was due to a stronger economy and a healthy US jobs market.

We mentioned previously on Crush the Market how interest rates have been steadily rising since 2015.
With three to four increases forecasted for 2018, the graph of the Fed “dot plot” below illustrates how eight policy makers expect four or more quarter-point increases for the year.

Traditionally, interest rates in the United States averaged about 5.72% from 1971 to 2018, with Money Cafe reporting a high of 20% in March 1980 and a record low of 0.25% in December 2008.

Higher interest rates generally mean a lower economic growth, but also slower inflation. In the past, the best way to achieve full employment and stable prices was to set the inflation rate of the dollar at 2%, which would grow the economy at a healthy pace. The Fed hiked this year, in response to a growing economy and fear of rising inflation, increased interest rates by a quarter of a percentage point. Jerome Powell, Chairman of the Federal Reserve, remarked that the “economy is doing very well,” following the rate hike announcement. The graph below shows the historical Fed rates over a period of 47 years.

Historically, even with low interest rates the US dollar enjoyed favorable exchanges rates in relation to major currencies like the Euro or the Pound. Investopedia reveals that this is in part due to the US dollar being the reserve currency for much of the world. As a result of higher interest rates and a strengthening dollar, more Forex traders will be hedging on the US dollar.
FXCM outlines that the Forex market trades an average volume exceeding $5 trillion daily, and the current Fed interest rate plays a factor in determining the value of the US dollar. 

However, it is mainly its perception as a safe haven in uncertain economic times, which has been the main reason for its high value in relation to other currencies. However, it is mainly its perception as a safe haven in uncertain economic times, which has been the main reason for its high value in relation to other currencies.

Bloomberg reported how the dollar spot index, which tracks a number of global currencies against the US dollar, rose temporarily immediately following the Fed announcement.

As was expected, however, the trend that the Federal Open Market Committee (FOMC) is following seems to indicate that it’s stepping up the pace of rate hikes, stating that economic growth should continue regardless. While the course of the increases will remain gradual, the perceived aggressive pace demonstrates how the FOMC is looking to tighten policy amid falling unemployment levels (which fell to their lowest of 3.8% in May) and national growth.

The following chart illustrates the historical date of the price-adjusted US dollar index published by the FOMC.

For now, the economic forecast indicates that core inflation will reach the Fed's target of 2% by the year’s end with an overall economic growth of 2.8% for 2018. As such, with a fourth and final hike projected for this year, the Fed indicated that it will expect more rate hikes in 2019. Despite the recent hikes, as part of their long term forecast, the committee indicated that they still see the rate increasing to 2.9% and peaking at 3.4% by 2020, with an estimated GDP increase of 2.4% in 2019 and 2% in 2020. In addition to upwards estimates for GDP and inflation, the committee also estimated a cut to their original unemployment projection, from 3.8% to 3.6% for the full year. Despite the current political turmoil in the US, the economy continues to look positive.

Author Bio: Robert Blake is a freelance financial adviser and consultant. Since gradating from university he has started writing finance articles online to help give readers a clearer understanding of the US and global economy. In his spare time he can be found visiting financial seminars.

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Stellar Run

Netflix has been on a tear over the last 12 months as investors continue to focus on the rampant rise of subscriber growth especially in the international market. From the image below you can see that domestic growth has been steadily rising in the US, however the real star has been international growth as Netflix has been introducing its content into several new countries.

Even more surprising has been the record surge in the stock from the start of this year now having risen 30% year to date.

Netflix stock jumped higher today in the futures market after the stock closed for trading as the market digested the earnings report. I have added the latest jump taken from CNBC.com where the stock has moved a further 8% after a strong day leading up to the earnings release. It seems the company cant do no wrong.

What Investors Are Ignoring

One of the key reasons why Netflix subscriber growth has been so spectacular has been due to the fact that Netflix pricing for its streaming services is extremely low. This is even more evident when you compare it to traditional cable / pay TV companies.

By keeping the pricing low its placed a huge strain on its cash flows, as the company has been spending record amounts of its cash as its business model clearly inst sustainable even though company is growing so quickly. With the chart below you can see its latest cash burn was staggering at $523 million for the most recent quarter.

Whats even more worrying is the company is forecasting to burn through a total of $4 Billion in 2018.

Original Content Is Its Achilles Heel

The other key reason for the massive cash burn for Netflix is its huge budgets spent on generating its own original content. Not only has it been rising every year for the last five years, but its expected to hit $7.5 + Billion based on forecasts. (See Below)

The company's historical content spending is as follows:

2018: $7.5-$8 billion (forecast)
2017: $6 billion
2016: $5 billion
2015: $4 billion
2014: $3 billion
2013: $2 billion

Netflix content also outpaces its competitors own content budgets by a significant amount with a spend of approximately double its closest competitors content budget.

The end result of Netflix business model is the company is knowingly placing huge strains on its balance sheet with the loss of billions in cash each year and rising debt which is sitting around $20 Billion to fund its yearly cash burn.

For the moment none of this matters as stock investors cheer the company on by bidding it higher and higher rewarding the company for such reckless spending that it clearly cannot sustain.

Why Low Rates Are Important?

Netflix like many companies listed in the US are more reliant than ever on low interest rates to fund their business model. If US Government 10 year bond yields continue to move higher it will spell disaster for Netflix and other companies who continue to accelerate their debt levels to fund their losses.

If yields move beyond 3% it will mean significantly higher interest payments and accelerate already high cash burn levels which could ultimately lead to bankruptcy under their large debt levels. However until that day its celebrations all round for investors as the fundamentals don't matter at all.

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The top 200 largest stock index in Australia (XJO200) has run into long term resistance in May as it failed to breach the 5925 level. After hitting the resistance level late April and early May the XJO index has fallen around 200 points from the recent high of 5925.

Since forming a double top and confirming the reversal lower in May, the XJO index of the top 200 largest stocks is set to continue to fall further as it takes a breather from the recent strong run over the last 12 months. The road ahead for the index isnt clear as a number of major headwinds are approaching making further gains difficult.

Monthly Chart Review

Can The XJO Breakout Of The 5925 Resistance Level?

From a number of technical indicators the XJO index is likely to pause from its recent strong rally higher as it runs into some exhaustion within its uptrend.

Since the the XJO index is in a uptrend that has been running for a number of years as shown in the chart below, its likely that the index will head lower towards its long term uptrend around the 5525 which is its first level of support. If the index continues on its reversal lower towards support it could be several months before we see the chance for the index to make another run higher towards 5925.

XJO Headwinds - Potential For A Break Of Long Term Uptrend

The momentum indicators are supporting a move lower over the next few months leading into earnings season in Australia. In addition the slow stochastic is approaching its peak upper level on the monthly chart and about to cross lower. If the slow stochastic crosses over like it did back in March 2015 (See chart below), we would most likely see considerable correction in the XJO index over a 12+month period resulting in a break of if its long term uptrend. If this was to occur the only thing that could potentially reverse the move lower would be consecutive drops in interest rates by the RBA and or Government stimulus.

Australia's Macro Headwinds Could End The Long Term Uptrend

The other headwind facing Aussie stocks for the remainder of the year and 2018, comes from the macro picture in Australia, as the slowdown of the real estate market has begun with prices starting to fall in Sydney and Melbourne in May (See article below). The property boom up until recently has been driving the economy and a large part of the GDP growth. However this appears to be over as a number of interest rates from the banks, has finally stopped the strong real estate growth in prices. Together with construction boom spending now falling as the banks continue to tighten lending standards likely to slow the economy as well.

Below is a few recent articles outlining the headwinds stocks, real estate and the economy are facing over the coming months.

Weekly Chart Review

The weekly chart of the XJO shows a similar story to the monthly chart, with the index making a double top as well as the momentum indicators falling as the buying spree reaches exhaustion within the XJO index.

The only difference with the momentum indicators is that momentum has turned negative sitting at -62.2 and the slow stochastic has turned several weeks ago and looks to continue to move lower of the next  few weeks.

On the weekly chart I would look out for a pull back in prices, potentially to the target area drawn on the chart around support of 5570. The key to watch is if the XJO index breaks down further closing below the blue uptrend line on the weekly chart.

If the weekly uptrend (blue line within target area) is broken all bets are off as we could see a move down all the way to around 5000 over the next few months.

Add in the earnings season which starts in late July, there is potential for a lot more volatility over the next 3 months.

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If you would like to view my most recent macro article on the US economy click the link below:

Rising Rates About To Crack The US Economy Under Record Debt Levels

To view my most recent Stock review  click the link below:

Telstra Goes From Bad To Terrible As It Closes Below Long Term Support

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.