Monthly: Ranging upwards. The new monthly candle is printing a small bearish ‘inside’ candle. The monthly 200 EMA is above current price, at around the 84 level, and might help to keep a lid on this!
Weekly: Trend up overall. The weekly support trend line is still supporting price. The weekly candle closed as a bearish candle though. You can see from the weekly chart just how choppy the last 5 weeks have been.
Daily: Trend up. Price rallied for all of February but chopped sideways, and up, for all of March. Price has traded sideways for most of this week. A daily support trend line has been in place for all of March and is still supporting price into April.
Daily Ichimoku Cloud chart: Price is still trading above the daily Cloud but is back below the Tenkan-sen line and is now also below the Kijun-sen line. That isn’t looking too healthy.
4hr: Trend choppy. Price has chopped, up and down, just above the 61.8% Fib level of 82.59 for the last two weeks now. The 82.59 level represents the 61.8% fib retrace level from the last major swing high back in mid 2010 and is still proving to be very significant. Price fell down through this support on Friday after NFP and closed the week just marginally below this key level and, also, below the monthly pivot.
4hr Ichimoku Cloud chart: Price has chopped in and out of the 4hr Cloud for the last 4 weeks. Price fell and closed below the Cloud on Friday after NFP. This is divergent from the daily chart and suggests further choppy action.
Monthly: Trend down overall but 6 of the last 8 months were bullish. The new monthly candle is a bullish engulfing candle at this very early stage.
Weekly: Trend up but has stalled. Price had earlier failed to move above the monthly 200 EMA. This had been major resistance so it was no surprise that price had paused under this level. Price action had been quite parabolic for ‘risk on’ until recently and has since pulled back to the mean of the support trend line; something that is not out of order as part of any continued longer term bullish price action. This pullback is actually playing out in text-book style fashion! Price bounced up and off the major support trend line this week and, thus, the ‘retracement to the mean’ period might have come to an end. The weekly candle closed as a bullish engulfing candle. The current weekly chart print could still be considered as a ‘bull flag’ pattern though. The upper trend line of this flag needs to be broken to confirm that the retracement period is over and that the bullish movement might continue. I’ll be watching out for this during the coming week.
Daily: Trend ranging/downwards. Price seems to have been consolidating under the monthly 200 EMA for February and March, and now into April, in a descending flag pattern. These are bullish patterns and give this index a ‘bull flag’ appearance. Price trended up for most of the week and bounced off the bottom trend line of the potential flag pattern. The major bull support trend line is not far below current price either. The upper trend line of this flag pattern will be the key level to watch in the coming week.
Daily Ichimoku Cloud chart: Price had been below the Daily Cloud all week but pushed up into the Cloud after Friday’s NFP data. Price needs to break up through the upper bear flag trend line and, also, out of the Cloud to be able to continue its bullish movement. It has its work cut out for it!
4 hr: Trend ranging down. Price was fairly flat at the start of the week but then rallied towards the end of the week and gained extra momentum after Friday’s NFP data. Price has broken up through and, also, closed above the weekly pivot, monthly pivot, the 4hr and weekly 200 EMAs. It clearly seems to be on a mission!
4hr Ichimoku Cloud chart: Price traded below the Cloud for the last two weeks but moved up through the Cloud during the mid week Yen easing rally. Momentum then continued after NFP. Price is now trading above the Cloud. This is divergent from the daily chart and suggests further choppy action.
Choppy markets: Technical trading off 4 hr charts has been very difficult over recent weeks in the face of so much news and monetary policy interventions by various Banks. The pattern of: ‘choppy action on the 4 hr time frames and better opportunities off 30 min charts during the US session’ remains with us for the time being.
Choppy markets + Ichimoku: The Ichimoku charts are back to being divergent and this suggest some further choppiness ahead. I do suspect this extended period of choppiness is connected to the current market-top action that is being seen across many global stock markets. Stocks and currencies seem to be at a major junction and are experiencing choppy action ahead of the next major new momentum move. To me, this feels like the thunder building before a major storm. I just don’t know whether the storm will be ‘risk on’ or ‘risk off’. So, even though I have no idea what that directional move will be, when it appears, I will trade it.
The EURX as ‘risk’ barometer: The EURX has been a proxy measure for the mood for ‘risk appetite’ over recent months. The EURX has now pulled back down, and tested, the support of the major monthly trend line. So far, this major support level has held and price is currently bouncing back up from this support. This region will continue to be a significant level for the EURX in the coming days/weeks and could prove to be the turning point for the EURX back to ‘risk on’. This level will be of key interest to me to see whether it:
· Continues to holds price and reverts price action back to ‘risk on’ or
· Is tested again and, then, fails to support price and is breached thereby allowing for continued ‘risk off’.
Price has bounced off this major support level this week but I want to see more follow through to be convinced that the trend has turned. I will be watching the boundaries of the flag pattern on the EURX, especially the upper boundary, to help assess the next major move with this proxy for ‘risk appetite’.
Divergence: I am still bothered by the divergence between the currency (FX) markets and the broader stock markets. These generally trade in tandem, more often than not, and whereas recently currencies have been trading more towards ‘risk off’ with stocks trading ‘risk on’, we saw this swap between these two this week. I do expect they will converge again soon though and I’ll be keen to see which path they follow.
Note: As always, Fundamentals, by way of Euro zone dramas and news announcements, continue to be triggers for price movement on the indices. These events can always have the potential to undermine all Technical analysis.