Trade Week Analysis 14/01/13

Week 2 of 2013 has been great too! 800+ pips from TS signals!
Last week: Ichimoku Cloud divergence last week suggested we might be in for a choppy week and that was exactly what we got at the start. There were only a few TS signals and I was not keen to take them given the divergence. The E/U and Swissie signals early in the week never got past the key monthly pivots. I closed them off at -10 pips each. The U/J and A/J on Thursday morning did eventually kick on. Positive Chinese export data and ECB news later on Thursday triggered a return to ‘risk on’ trading and further TS signals. The maximum pip tally currently stands at: E/U: 170, E/J: 370, A/J: 180 G/U: -25, Swissie: 60, Gold -70 and U/J: 140. All of these 4hr signals are still going too except for Gold.
This week: Many traders are expressing amazement that the Euro, given all of the economic woes that beset this region, could be rallying the way it has been. Thus, many have missed some great trades on these pairs. You have to trade what you see and not what you think though and the charts have been printing signs of this bullish ‘risk on’ potential for some time. Personally, I can’t see why the E/U is at 1.33 or why the EUR/AUD is at 1.266. I’d have the latter under parity in my reckoning but, hey, I’ll go with the flow or, rather, with the momentum.  
We are back to a situation of having alignment across the Ichimoku Index charts that supports optimum conditions for ‘risk on’ trading. This is a rare occurrence to have alignment across the indices for either ‘risk on’ or ‘risk off’. There is usually some form of divergence, even if only minimal. These situations have been characterised in the past as periods of aligned TS trading signals that trend with high probability and for long periods. I’ll be watching to see if this situation is repeated.

The Euro dollar and USD indices are both approaching key levels that will test them. These levels could prove to be too strong a resistance and result in reversals to ‘risk off’. They could though, if breached, open the flood gates for major ‘risk on’ moves. I’ll be watching and ready to trade whatever direction becomes the next dominant momentum move, ‘risk on’ or ‘risk off’.

I mentioned a point mid week and again in yesterday’s post. There seems to be a mood of what I refer to as ‘post apocalyptic trading fatigue’. By this I mean a situation where many folk seem tired of all the global economic negativity, no longer think ‘the sky is going to fall in’, are sick of sitting on the trading sidelines and just want to get on and trade/invest.

Confluence: A bias to ‘risk on’ is still being supported across other trading instruments as well. This is no guarantee that the current market trend will continue BUT it does give a broader context to the sentiment underpinning the current market momentum.  Some charts of just a few of these are posted below:
S&P500/Dow Jones: The S&p500 and Dow Jones are trading above their daily Ichimoku Clouds which is bullish. 
S&P500: The S&P500 has a big hurdle in front of it though. That being the 1475 level which is the 100% fib retrace level from the last major swing high:


Dow Jones: has broken the 78.6% fib retrace level
Oil is looking bullish too:


IYT: Transport Index: looking bullish still too:

UPS: shipping and fright looking healthy too:

FDX: Courier business breaking out

XLF: financial services ETF attempting a break out?

KBE: Banking ETF has held out and up from a triangle break:


Hang Seng: Hong Kong markets


FTSE: London’s markets have had a triangle breakout:

Sensex: India trending up:

VIX: fear gauge is trading below 14 and looks bearish

BTW: I have updated my Stocks:Jan page

The currency pairs:

E/U: The monthly bullish inverse H&S pattern is still valid. Price has also formed a bullish inverse H&S pattern on the weekly chart!  Price has broken out and up from trading within the smaller symmetrical triangle on the weekly chart. It is currently sitting at the next major resistance level of the weekly 200 EMA. The E/J took over 2 weeks to wind and navigate its way up through its weekly 200 EMA and the E/U might face a similar battle. (Check the weekly E/J chart to see this). Price is still trading above the Cloud on the daily Ichimoku chart and on the 4hr chart which is bullish. The weekly candle closed as a bullish engulfing candle. The E/U gave two TS LONG signals this week. I ignored the first signal due to Ichimoku divergence. Maybe I shouldn’t have! I got in late on the second signal at the triangle breakout BUT, if I had have taken the first signal with my usual STOP size then I’d be up around 250 pips now! I’m giving this new trade a wide berth and leaving my STOP with just a few pips profit locked in.
  • I will look to SHORT the E/U on a new TS signal, if ‘risk off’ returns and if price breaks down below the bull support trend line.
  • I am LONG the E/U on the latest TS signal.

E/J: The BoJ is just the gift that keeps on giving! Price has continued to hold out and up from the broken bear trend line of the monthly chart that dated back to mid 2008! Price spent much of the week trading in a channel and hanging around the weekly 200 EMA again. Price broke up and away from this level on Thursday and was also helped by the ECB interest rate comments from Super Mario. Price is still trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed as another bullish candle
  • I am LONG the E/J on the latest TS signal. 
  • I STILL WON’T SHORT the E/J this week given the ongoing stimulus.

A/U: This pair traded in choppy style, in an upwards trend channel, for most of the week. This action was not clean enough to produce a TS trend signal though. Strong Chinese data out on Thursday kick started this pair up further. Price ended up breaking up and out from the major symmetrical triangle on the monthly chart but closed for the week back within the triangle. Price is trading above the Cloud on the daily and the 4hr chart which is bullish.  The weekly candle closed as a bullish candle with a long upper shadow, pointing to the indecision. Many traders would be conscious of the Aussie Governments desire to see the AUD trading lower and the prospect of further lowering of interest rates. There is a lot of talk though seeing this pair back at 1.10 soon.
  • I will look to SHORT the A/U on any new TS signal, if ‘risk off’ returns and if price closes and holds below the daily bull trend line.
  • I will look to LONG the A/U on any new TS signal and if ‘risk on’ returns. 

A/J: Yen weakness continued to help this pair. Price traded in a channel near the major S/R level of 91.5 for most of the week until strong Chinese data kicked it back to life. The significance of this 91.5 level can be seen on the monthly chart. Price broke out and up from this channel and gave over 180 pips. Price is still trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle was another bullish candle.
  • I WON’T SHORT the A/J this week given further BoJ stimulus.
  • I will look to LONG the A/J on any new TS signal and if price holds above the 91.5 level. 

G/U: I really don’t like this pair. Price is trading just above a weekly support trend line. It is still trading above the Cloud on the daily but just below the bottom edge of the Cloud on the 4hr chart so might continue to be choppy. This pair gave a new TS LONG on Friday.
  • I won’t chase the LONG G/U on the new TS signal. 
  • I MIGHT look to the SHORT the G/U on any new TS signal and if the bull support trend line is broken. 

USD/SGD: Price was choppy for most of the week until the USD started to fall on Thursday and it followed suit. I am not looking to trade this pair this week but will just keep an eye on it for any new trend. The weekly candle closed as a bearish inside candle. 

Swissie USD/CHF: This pair chopped around for much of the week until the USD started to fall on Thursday. Prior to that it had looked like it might try to nudge up through the bear trend line of the triangle pattern it’s been trading within. Like the USD/SGD though, it stated to fall then too. It bounced back down from this upper trend line and is now approaching the bottom trend line of the same triangle. Price is trading below the Cloud on daily and on the 4hr chart which is bearish.  The weekly candle closed as a bearish candle giving two ‘railroad’ track candles. This can be a sign of reversal which might suggest more downside possibility for this pair. This pair gave a TS SHORT on Friday.
  • I MIGHT look to LONG the USD/CHF on any new TS signal, if ‘risk off’ returns and if price closes and holds above the triangle pattern.  
  • I won’t chase the SHORT USD/CHF current TS signal.

  
Loonie:  USD/CAD:  Price on this pair has chopped around again this week until the USD fell.  It is trading under a bear trend line in a triangle pattern. Price is trading below the Cloud on the daily chart and on the 4hr chart which is bearish. The weekly candle closed as a small bearish candle.
I WON’T trade the USD/CAD.

Kiwi: NZD/USD: Price chopped upwards all week but, like the A/U, it didn’t ever produce a clean TS LONG signal. Also like the Aussie, it reached up to the upper trend line of the monthly chart triangle pattern and then bounced back down. It is trading above the Cloud on the daily and on the 4hr chart so is bullish.  The weekly candle closed as a bullish candle with a long upper shadow pointing to the indecision around this pair.
  • I MIGHT look to LONG the Kiwi on any new TS signal and if ‘risk on’ returns.
  • I MIGHT look to the SHORT the Kiwi on any new TS signal and if ‘risk off’ returns.

EUR/AUD: Price had been choppy to start the week on this pair. It then gave a TS signal to LONG after Super Mario but I missed this. This signal is still going and up 140 pips. It is now trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle was a bullish ‘inside’ candle which points to some indecision on this pair.
  • I will look to LONG the EUR/AUD on any new TS signal.
  • I will look to SHORT the EUR/AUD on any new TS signal.

The Yen: U/J: I’ve started watching this pair again. Price broke out from a trading channel this week and gave a TS signal that is now up 140 pips.  It is trading above the Cloud on the daily and on the 4hr chart so is bullish.  
  • I won’t trade the USD/JPY

Gold/Silver: The bullish ‘Cup and Handle’ patterns on the weekly charts are still valid for the time being. The ‘handle’ part for both metal charts seems to be forming a bullish broadening ascending wedge pattern though now. The theory is that the breakout target is equivalent to the depth of the cup. The handle patterns can be seen on the daily charts and this is the area where you can see the bullish breakout. Both metals formed bullish weekly candles again this week. Last week’s huge pin bar reversal candles from the Friday chart for Silver and Gold suggested this reversal. Whilst the wedge or handle patterns are still holding for both metals they are getting close down to major support trend lines that date back to 2008. I’ll continue to watch them closely to see if the bull support trend line can continue to hold up price. A breach of these support lines would be significant indeed and a very bearish signal. 
Silver weekly

Silver daily

Gold weekly

Gold daily