Trade Week Analysis for 04/11/13

Last week:  There was little momentum to start the week as the markets awaited the FOMC release. Demand for USD soared though following FOMC on renewed thoughts of tapering of US QE and, then, due to concern about further possible Euro easing. As a result, the USDX rallied back above the S/R level of the weekly 200 EMA and the Euro index fell heavily and closed back below the significant S/R level of the monthly 200 EMA. The E/U plunged but some other risk instrument like stocks, the Aussie and Kiwi didn’t suffer as badly. TS signals were a bit choppy with this sudden sentiment shift: A/U 70, EUR/AUD 50, U/J 70, AUD/JPY -50 and E/J 130.
This week:
My FX chart update times change (again) from next week. My FX charts open on a Monday at 9am then update 4hrly: 9am, 1pm, 5pm, 9pm, 1 am, 5 am.The most significant FX event this week will most likely be Euro Interest Rate news from the ECB on Thursday.
Stocks and broader market sentiment:
S&P500 stocks struggled a bit this week and, although the index closed as positive for the week, the weekly candle closed as a ‘spinning top’. These candles reflect ‘indecision’ and this needs to be noted:
The daily support trend line, the key support level of 1,685 and the psychological 1,700 level all held for the week though.
Whilst I still don’t see a confluence of technical signals pointing to any major bearish stock market and, thus, ‘risk’ reversal just yet I do see a couple of warning signals, or flashing lights, so I am keeping an open mind. The first warning sign being the weekly S&P500 ‘spinning top’ candle and the second being the recent EURX rejection of the monthly 200 EMA. A major bearish turning point could evolve if the EURX is categorically rejected by this key resistance level. Price has failed to close the month above this level now and I’m watching for any continued bearish follow through. With all of this in mind then, I’m continuing to watch out for further clues as to any new momentum move, long or short! In particular I’m looking out for:
S&P500 daily chart: a break of the daily bull trend line. Price held above the daily trend line, the key 1,685 level and the psychological S/R level of 1,700. It is worth noting that a 61.8% fib pull back of the latest bull move would see price back down near the key 1,685 level. The Elliott Wave indicator on my chart is suggesting that such a move is in store for the S&P500. It would not be unreasonable for price to pull back to test this region as part of any overall continued bull move. BTW: the first day of the trading month was, yet again, another positive day.
Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. A bullish Tenkan/Kijun cross evolved back on Wednesday 23rd! This bullish cross is deemed a ‘strong’ signal as the cross was positioned above the Cloud. My own TS system gave a ‘buy’ signal back on Monday 21st and this signal has not closed off as yet either. Price held above the Cloud all week which is still bullish.
EURX chart: The October candle pulled back to close the month out below the major S/R level of the monthly 200 EMA. A clear and continued rejection of this level could prove to be a bearish turning point for general ‘risk appetite’. I’m watching the support trend line now too just below this monthly 200 EMA:
S&P500 monthly chart: a break of the monthly support trend line (see monthly chart). The monthly trend line remains intact at the moment. A break of this support level would suggest to me of a more severe pull back or correction. The look of this ‘market top’ still appears quite different to that of the previous two market tops from back in 2000 and 2007. Elliott wave suggest a big correction here though. I am still thinking that the 1,600 level might be the new floor for this index. The saying that ‘Old resistance becomes new Support’ holds here. It would not be at all surprising to this 1,600 level tested again. It has only been tested once by a monthly candle since the bullish break and I would expect a significant level such as this to be tested more than this. The August, September and October candles closed above 1,600 and without testing this key level. Also, the previous candle close highs from back in 2000 and 2007 were down near the 1577/1580 area so it is entirely feasible that price may test this region again as well too before any continued move upwards.
Some key events to watch out for include:
  • Sun 3rd: USD daylight saving shift. CNY PMI (this was higher than previous).
  • Mon 4th: JPY Bank Holiday. AUD Retail Sales. GBP Construction PMI.
  • Tue 5th: NZD employment data. AUD Cash rate. JPY BoJ. GBP Services PMI. USD non-manufact PMI.
  • Wed 6th: AUD Trade Balance. GBP manufact data.
  • Thurs 7th: AUD employment data. GBP interest rates. EUR interest rates, ECB conference & ECB Draghi. USD advance GDP and unemployment claims.
  • Fri 8th: AUD RBA statement. CNY Trade Balance. USD NFP, Consumer Sentiment & Ben Bernanke speech.
  • Sat 9th: CNY CPI & Industrial Production.
E/U : Price drifted down from the 1.38 level in a bit of ‘risk off’ prior to FOMC. This news, and renewed Euro easing jitters, helped to further boost the USD though so this pair fell heavily from that point. You can see from the weekly chart how the previous bull move stalled and then reversed at the 61.8% fib pull back level of the last major down move. That divergence on the 4hr chart ended up being a good clue for this week as well! I had mentioned last week that I thought the E/U would most likely dance to whatever QE tune emerged from FOMC and this is what evolved.
Price is still trading within a larger triangle on the monthly chart but this latest bearish move has brought price down to trade just above the support of another trend line on the daily chart. Price stalled during the last 4hr candle on Friday to close just above this trend line but below the psychological 1.35 level. The 1.35 level is a strong S/R level and is also the region of the 50% fib pull back level of the last major down move.
Price is trading above the Ichimoku Cloud on the daily and weekly charts but below the Cloud on the 4hr and monthly charts. The weekly candle closed as a bearish engulfing candle. The monthly candle closed as a reversal style ‘shooting star’.
Ichimoku Index alignment kicked in on Oct 17th and has now finished but the E/U moved about 280 pips during this period. The moves on the E/U this week were better picked up on shorter term charts such as the 30 min charts. This is in line with what I often see when the index Ichimoku charts are not aligned. So, whilst frustrating in some ways this consistent pattern is reassuring in other ways.

Traders need to be mindful that there is significant Euro news this week with Thursday’s ECB meeting.

  • I’m watching for any new TS signal, the 1.35 and daily support trend line.
 
E/J: Price drifted up to the 135 level prior to FOMC but fell heavily following this news. There is a ‘double top’ look to the daily chart and any break down through the daily support trend line and 133 area might see more bearish momentum. These two areas might step up to offer some support though and, thus, need watching.
Price is trading above the Cloud on the daily chart but below on the 4 hr chart which suggests choppiness. It is still trading above the weekly Cloud and seems like it’s trying to emerge from the top of the monthly Cloud. The weekly candle closed as a bearish engulfing candle but above the S/R level of 133. The monthly candle closed as an indecision style ‘spinning top’. I still see the 140 level as a possible target if any bullish sentiment prevails.

Traders need to be mindful that there is significant Euro news this week with Thursday’s ECB meeting.

  • There is an open TS signal on this pair BUT I’m watching the daily support trend line and 133 area.
 
A/U: The A/U traded lower this week due to USD strength. It fell through the 0.95 support and is currently trying to hold above the 0.94 support.  There is AUD interest rate data on Tuesday and we might see this drift sideways until then. There is also a bit of Chinese data out this week that might impact here. An interest rate ‘hold’ decision might help to support this pair.
Price is trading above the Cloud on the daily but below the Cloud now on the 4hr chart suggesting choppiness. The weekly candle closed as a bearish candle. The monthly candle closed as a bullish candle but with a long upper shadow almost mimicking a bearish, reversal-style ‘shooting star’.
Price has already pulled back to the 50% fib level of the last major down move. The 61.8% fib is up at the 0.99 area and would have to be considered as a possible bullish target if any USD weakness returns. Further bearish movement back below the 0.92 would suggest much lower targets though. As mentioned in previous posts: I don’t see much other support until down at the 0.83 level! The 0.83 is the monthly 200 EMA. After that there is the 80 level that is near the 61.8% fib retrace from the last swing low to high level so this isn’t too ridiculous a notion! Any continued pause or pull back with the stock market might see price visit these low levels.
  • I’m watching for any new TS signal, the wedge trend lines and the 0.94 level.
 
A/J: Price chopped sideways this week with the competing forces of AUD weakness but U/J strength. There is AUD interest rate data on Tuesday a bit of Chinese data out this week that might impact here.
Price is trading above the Cloud on the daily but below the Cloud on the 4hr chart suggesting choppiness. The weekly candle closed as a small bearish candle.  Like the A/U, the monthly candle here closed as a bullish candle but with a long upper shadow almost mimicking a bearish reversal style ‘shooting star’.

The 50% fib pullback is in the 96 area and price bounced down from this last week. A 61.8% pullback to the last major swing high would be to about the 98 area and this might be a possible target for any continuing bullish moves.

  • I’m watching for any new TS signal.
G/U: The Cable fell this week with USD strength to test the support of the 1.60 level. This level held until Friday but some weak GBP data then saw price fall through this support. A weekly support trend line is now clearly broken too. The 30 min chart below shows how this latest bearish move would have been best captured on the shorter time frame charts.
The daily chart had been forming up with a ‘double top’ look to it during the week with the 1.60 level as the ‘neck line’. This ‘neck line’ has been broken now suggesting further bearish movement. Traders need to be aware though that price could possibly pull back to test this level before any further bearish continuation. Price is outside the Bollinger band on the 4hr chart so it might stall or retrace a bit due to that as well. I received a signal to ‘short’ here on Friday but missed this as it came on my midnight candle. I’m putting in an order to sell from 1.60.
Price is trading below the Cloud on the 4hr and only just above the Cloud on the daily chart which suggests choppiness but with a bearish bias. The weekly candle closed as a large bearish candle. The monthly candle closed as a bearish coloured ‘inside candle’ reflecting indecision.
NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.
  • There is an open TS signal on this pair.
 
Kiwi: NZD/USD: Price chopped sideways for much of this week.
Price is now trading above the Ichimoku Cloud on the daily chart but below on the 4hr charts which suggests further choppiness. The weekly candle closed as a ‘spinning top’ candle reflecting indecision. The monthly candle closed as an, almost, bearish reversal ‘shooting star’. Thursday’s candle was a Doji and Friday’s was a ‘spinning top’ so there is clearly a bit of indecision here!
As with the A/U, any recovery with risk sentiment might help to boost the Kiwi but a fall in stocks would most likely see the Kiwi fall heavily. The monthly 200 EMA, at around 0.68, would seem to be the next level of support if this pair returns to being bearish.
  • I’m watching for any new TS signal.
 
EUR/AUD: Price was up and then down this week and this pair still holds little appeal for me. The daily chart shows how price is still ranging in between the 1.4 and 1.5 levels.
The E/A is trading below the Cloud on the daily but in the Cloud on the 4hr chart suggesting choppiness. The weekly candle closed as a bearish candle. The monthly candle closed as a small bearish candle.

There is AUD interest rate data on Tuesday a bit of Chinese data out this week that might impact here. Traders also need to be mindful that there is significant Euro news this week with Thursday’s ECB meeting.

  • I’m watching for any new TS signal.
 
The Yen: U/J: This pair continued to chop upwards this week. It is edging up closer to the bear trend line of the triangle pattern.

Price is now trading above the Cloud on the 4hr and in the top edge of the Cloud on the daily chart which suggest choppiness but with a bullish bias. Price is also above the Cloud on the weekly chart and trying to break up and out of the Ichimoku Cloud on the monthly chart. The weekly candle closed as a bullish candle. The monthly candle closed as an indecision-style Doji.

This pair still looks like it could be simply poised and gathering steam before it makes another attempt at breaking through the monthly 200 EMA resistance area. I still see what looks like a possible bullish ‘Cup ’n’ Handle’ pattern setting up on the weekly chart though.
  • There is an open TS signal on this pair.
 
Nikkei: My U/J vs Nikkei comparison charts aren’t loading this week but I am able to assess the Nikkei. This Index closed below the monthly chart triangle trend line and key 15,000 level for October. Price is now trading down to be just above the daily support trend line and this warrants watching.


AUD/NZD: Price chopped lower this week. This pair holds no appeal for me at the moment.

Price is now trading in the Cloud on the daily chart and below on the 4 hr time frame which suggests choppiness. The weekly candle closed as a bearish coloured ‘inside’ candle. The monthly candle closed as a bullish candle.
  • I’m watching for any new TS signal.
GBP/AUD: This pair traded sideways this week and holds no interest for me at the moment. Price is trading below the Cloud on the daily chart and just above the Cloud on the 4 hr chart suggesting choppiness. The weekly candle closed as a Doji candle. The monthly candle closed as a bearish candle.
  • I’m watching for any new TS signal.
 
Silver: Silver was up and down this week with FOMC nerves but then fell with the resulting USD strength. Price has held above the key $21.50 for now though. The $21.50 level is key support and was a turning point back in 2007.
Silver is now trading below the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts which is bearish. The weekly candle closed as a bearish engulfing candle. The monthly candle closed as a ‘spinning top’ just above the support of the monthly pivot. A close back below the $21.50 would be very bearish. Continuing USD strength could be harmful for Silver.
The next major support level below $20 seems to be down at $15, near the monthly 200 EMA.
Gold: As with Silver, Gold was up and down this week with FOMC. Price has managed to hold above the key $1,300 for now. Price seems to be trading within a triangle on the weekly chart now.
The $1,300 level remains a key level as it is the 50% fib pullback from the last swing low to swing high. The next major support after $1,300 seems to be down at the whole number, $1,000 level and, after that, at $850 in the monthly 200 EMA.
Gold is now trading below the Ichimoku Cloud on the weekly and daily chart. It is in the bottom edge of the Cloud on the 4hr and monthly chart. The weekly candle closed as a bearish engulfing candle also just above the support of the monthly pivot. The monthly candle closed as a ‘spinning top’ here too. A close back below the $1,300 would be very bearish. Continuing USD strength could be harmful for Gold.