Monthly: Trend ranging / upwards. The September candle, with only one trading day to go, is forming a large bearish engulfing candle. The monthly 200 EMA and the 84 area continue to be effective resistance.
Weekly: Trend up overall. Price fell heavily the week before with FOMC so it wasn’t too surprising that price action stalled a little bit this week. It’s probably still trying to work out what hit it and, then, what to do next! The weekly candle closed as small bearish candle. Price closed the week again below the major support trend line and, also importantly now, below the weekly 200 EMA. It is worth noting that price has not closed below the weekly 200 EMA since January this year.
Daily: Trend choppy/ranging. Price spent most of the week trying to recoup some of the previous week’s losses. The index retraced a little but didn’t make it up much past the weekly 200 EMA and certainly not back up as far as the broken weekly trend line.
Daily Ichimoku Cloud chart: Price traded below the Cloud all week.
4hr: Trend choppy/down. Price chopped sideways for most of the week, skulking along the weekly 200 EMA and weekly pivot level. This action formed up into a bit of an ascending triangle pattern with the upper boundary being previous S/R of the 80.70 level. The 80.70 level is the 50% pullback level from the last swing low of early 2011 to the previous swing high back in mid 2010. Price broke down through the ascending triangle and also back down through the weekly 200 EMA on Friday.
4hr Ichimoku Cloud chart: Price traded below the Cloud until Thursday at which point it traded in the bottom edge of the Cloud. Price finished the week trading below the Cloud though. This is in alignment with the daily chart and supports short USD or ‘risk on’.
Monthly: Trend down overall. The September candle has evolved over the month from a bearish spinning top, to a bullish coloured ‘spinning top’, a bullish engulfing candle but has retreated in the final stages to being just a small bullish candle.
Weekly: Trend up, overall. Price had failed to move above the monthly 200 EMA after several attempts but seems to waiting to have another go. This level has been major resistance so it was no surprise that price had paused here. Price action had been quite parabolic for ‘risk on’ and subsequently pulled back to the mean of the weekly support trend line. This support level had held up for 22 weeks but was broken recently. Price fell away after that bearish break but only made it down as far as the previous S/R level of 108.5. This is a major S/R level and if you cast your eyes across the weekly chart you can see how significant this level has been. Price has rallied since forming a bottom there and now looks set to try and take on the monthly 200 EMA once again. The weekly candle closed as a bearish coloured ‘inside’ candle just below the junction of the broken trend line and monthly 200 EMA.
Daily: Trend up overall. Price chopped sideways this week as it continued bouncing along just under the key resistance of the monthly 200 EMA. You can see from the daily chart that price is printing what looks like a ‘triple top’ pattern. Another pattern seems to have emerged now though too. I am also seeing what looks like a bullish ‘inverted Head & Shoulder’ pattern. The neck line of this pattern looks to be at around 110 which is just below the monthly 200 EMA level.
Daily Ichimoku Cloud chart: Price bounced along just above the top edge of the Cloud all week. The bullish Tenkan/Kijun cross has held up this week despite this choppy action. This bullish cross occurred within the Kumo though so is considered a ‘neutral cross’.
4 hr: Trend ranging/choppy: Price chopped sideways this week under the major resistance of the monthly 200 EMA. This action has price setting up in a bullish ‘descending wedge’ pattern, just under this key resistance.
4hr Ichimoku Cloud chart: Price opened the week above the Cloud but drifted back into this on Thursday. It finished the week in the Cloud and this suggests some choppiness might be ahead.
USDX: The USDX closed lower for the week and this follows the huge fall the week before. Price is still trading under the weekly support trend line and the weekly 200 EMA.
EURX: the EURX also traded lower this week whilst it hovered under major resistance.
Final Thoughts: Both indices essentially chopped sideways this week against a backdrop of ongoing US debt and QE tapering concern. This lack of any real directional move meant that price on the 4hr charts drifted back into the Ichimoku Clouds thereby undermining the Ichimoku alignment.
Monday is the final trading day for the month and, also, for the quarter. Monday is also the deadline for US Congress to agree on a budget deal to avoid a government shutdown. So, pending the outcome of this event, this could result in major moves on these indices. Current technical patterns on both of the indices need to be viewed in this context as they could be easily undermined by Congress news so care needs to be taken with any trading decisions taken prior to this event.
Note: The analysis provided above is based purely on technical analysis of the current chart set ups. As always, Fundamental-style events, by way of any Euro zone or Middle East based dramas and/or news announcements, continue to be unpredictable triggers for price movement on the indices. These events will always have the potential to undermine any technical analysis.