The Outlook for the major Forex pairs using Demark Indicators
The indicators TD Sequential and TD Countdown were developed by the market analyst Tom Demark as a way of measuring trend exhaustion and market turning points.
The indicators can be used individually or together. TD Sequential gives an initial signal following 9 strong trending price bars. This then initiates TD Countdown, which requires another 13 trending bars to complete. Once the final 13th bar of the TD Countdown is reached the signal for the end of the current trend occurs.
It is not always the case that after the TD Sequential setup occurs you will get a full TD Countdown 13 afterwards sometimes a signal from TD Sequential alone is enough to initiate a market turn. In this article I have only summarised how the indicators work and for more information there are several excellent books on the subject by Tom Demark himself and others.
From a Demark perspective the outlook for cable is overall quite bearish. The monthly chart isn’t so informative although the TD Sequential in June 2010 could be taken as a long-term bearish sign despite the countdown having been stalled for over a year and a half.
The weekly shown below, however, yielded a complete TD Countdown close 13 in August 2010, and since then the market has obeyed the signal and gone down – if only slowly.
Meanwhile the daily chart struggles to post a TD Countdown final 13 after a recent sell-off on bar 12, although a 13 if it eventually comes would reaffirm the bearish analysis derived from the weekly charts as it will signal exhaustion of the uptrend.
The dollar-yen pair on the monthly chart shows a TD Countdown 13 was completed in 2010 just before the recent all-time lows. Although it was early and the market continued lower it still stands as supporting evidence for a major low being put in place. This would support the generally more bearish outlook for the yen derived from other techncial studies and major shifts in economic fundamentals, such as Japan’s new reliance on imported fossil fuels.
The weekly chart – not shown – likewise illustrates a TD Countdown completed tis 13 before posting lower lows, although this time the 13 came in May 2011.
The daily chart below shows a TD Sequential setup on the recent rally and TD Countdown having reached 11 so far. This seems to indicate the possibility – although nothing more – of higher prices still to come.
The monthly chart of euro-dollar completed a TD Sequential 9 at the 2008 high but this was not followed up by a TD Countdown 13 as the setup was subsequently cancelled after the market made a new low below the low of the the 1st bar in the TD setup sequence. There have been no subsequent set-ups on the monthly.
The weekly similarly yields little in the way of forecasting value despite a timely TD Sequential setup given at the January lows.
The daily chart shows a TD Sequential occurred in early February and the TD Countdown has reached 8 so far. There has been a move down from the highs already, although the fact that TD Countdown has not yet reached 13 could infer the rally may have higher to go.