Trade Week Analysis for 17/06/13

Last week: There were a few 4hr TS signals last week: E/J=-100, E/U= 120, G/U= 80, A/U = currently down, AUD/NZD= currently flat  and the GBP/AUD from last week added another 200 to make a total of 800 pips.
This week: The Ichimoku Charts have chopped in and out of alignment for ‘risk on’ during the week. I’m watching to see if this alignment will return and develop at all or whether it will flip back to a ‘risk off’ alignment. 
I believe that the USD will be driving market direction this week and that Ben Bernanke might just be behind the wheel.  The USD index is delicately poised above a major support trend line as we move into a week where FOMC news might be a trigger for movement.

I think that the next major broader market move will depend on the direction that the USD takes from here. A bounce and rally would most likely trigger broader ‘risk off’ moves whereas a failure of support would probably result in ‘risk on’. I can only imagine the stress that Mr Bernake must be under knowing that his every utterance could trigger a major, market moving shift. I do hope he has been able to kick back this weekend over a BBQ with friends and relax with a glass of Pinot despite this burden.

I am still reading about impending stock market doom and the likes of the Hindenburg Stock Omen but, for now at least, the best I think anyone can really say about the current US stock market action is that it is consolidating before the next major move. This is hardly unexpected given that many global stock markets have recently printed new highs. One would expect a bit of a pause and regroup, and definitely some testing of the broken resistance levels, before any possible continuation would occur. This next market move could go either way and, based on the current technical patterns, I don’t see how anyone can accurately predict the new direction it will eventually take. In fact, the most reliable market predictor for me over recent months seems to be the Mary / travel factor. The markets often seem to trend whilst I’m away and I’m heading off on Friday for 3 weeks so I’ll keep an eye on this correlation too!

I am a trend follower and I’m waiting for the next new trend to merge so that I can, hopefully, catch a slice of it. I do look for a confluence of technical signals that might point to a new market direction but I don’t see these forming up in unison just yet. I am acutely aware that fundamental based market news can undermine technical analysis and technical patterns quite easily too. That is why I look for a confluence of technical signals and not just one indicator. One of these signals that I watch for has now developed.  The signals I watch for include:

  • S&P500 daily chart: a break of the daily trend line. I actually see here what looks like, to me at least, a possible ‘Bull Flag’. Trend line breaks will give the clue here though. I don’t have a TS ‘sell’ signal here at all either just yet.
  • Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There has been a bearish Tenkan/Kijun cross but it noteworthy that crosses such as these positioned above the Cloud are deemed ‘weak’ signals. Only two of the last 3 such bearish crosses resulted in any pullback.
  • Ichimoku S&P500 chart: price to dip below the Ichimoku Cloud.
  • EURX monthly chart: a break of the monthly support trend line (see monthly chart).
  • S&P500 monthly chart: a break of the monthly support trend line (see monthly chart below). A break of this support level would suggest to me of a more severe pull back or correction. The look of this ‘market top’ appears quite different to that of the previous two market tops from back in 2000 and 2007. Elliott wave suggest a bigger correction here though. The May monthly candle looks bearish but is not technically a ‘shooting star’ pattern as the upper shadow is not more than 2x the length of the body.
Some key events to watch out for include:

  • Mon 17th
  • Tue 18th G8 meetings, GBP CPI, AUD monetary policy minutes, GBP Inflation report, EUR economic sentiment, USD CPI, building permits & housing starts.
  • Wed 19th G8 meetings, USD FOMC, GBP monetary policy minutes.
  • Thurs 20th NZD GDP,CNY PMI,EUR PMI, GBP retail sales, USD unemployment claims, home sales data and Philly manufacturing index.
  • Fri 21st

E/U: Price rallied all week and has managed to hold above a daily support trend line. Friday’s candle was bearish and engulfing though and price pushed back down to finish the week sitting on the support of this daily trend line. The weekly bull trend line is still supporting price too. Price is trading above the Cloud on the daily and above on the 4 hr Ichimoku chart which supports a bullish bias. The weekly candle closed as a bullish candle. There is still the suggestion of a bearish ‘Head and Shoulder’ pattern building on the weekly chart but this has not developed fully as yet. The 1.33 and weekly 200 EMA level seem to be the right hand shoulder of this pattern and a clear break of this level might void this developing pattern. I do find all this strange though as there is a bullish ‘inverse Head and Shoulder’ pattern building on the Euro index chart!
  • I’m watching the daily trend line here.

E/J: Price chopped downwards in a bullish descending broadening wedge pattern this week. Price is trading at the bottom edge of the Cloud on the daily but is below on the 4hr time frame which suggests further choppiness might be ahead. The weekly candle closed as a large bearish candle.
  • I’m watching the wedge pattern at the moment. I still see 140 as a possible bullish target.

A/U: The Aussie bounced off lows down near 0.93 early in the week. Price seemed to recover though as the USD continued to weaken. Price broke out and up from the descending trading channel on Thursday and gave a new TS signal. I also see a possible bullish ‘inverse Head and Shoulder’ pattern on the 4hr chart with the 0.96 level being the neck line. A 50% fib pull back here would put this pair back near parity; if it can make it that far.  For any continued bearish moves: I don’t see much 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. Price is still trading below the Cloud on the daily but is now in the top edge of the Cloud on the 4hr chart which suggest choppiness but with a bullish bias. The weekly candle closed as a large bullish candle.
  • There is an open TS signal on this pair at the moment. I’m still watching the 0.96 level.

A/J: The A/J has continued its slide after breaking down through the 100 level some weeks ago. I mentioned last week to watch out for the 0.89 level. This is because this level is the 61.8% fib level from the recent swing high to the last swing low, a previous triangle breakout zone and a major S/R level for the A/J. Price bounced off that level exactly mid week and gave a pin bar reversal candle. Friday’s action was bearish though and price seems to be heading back down to test the 0.89 level. Price is still trading below the Cloud on the daily and on the 4hr time frame which is bearish but I’m watching for any move here back above the 4hr Cloud. The weekly candle closed as a large bearish candle.
  • I’m watching for any new TS signal near whole numbers, the 0.89 level and the 4hr Ichimoku Cloud.

G/U: Price rallied all week and has held above a daily support trend line, although I have relaxed this somewhat. Price gave a triangle break earlier in the week and a 50 pip move from a TS signal before closing off.  Price certainly seems to have formed a bullish double bottom pattern now. It is trading above the Cloud on the daily and above the Cloud on the 4hr chart which suggests bullishness. The weekly candle closed as a large bullish candle BUT Friday’s candle closed as a ‘hanging man’ candle and this suggests that a bearish reversal might be in store.
  • NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.
  • I’m watching the daily support trend line and for any new TS signals.

Kiwi: NZD/USD: I have been writing for weeks how the 0.78 level might be some support and reaction area for the Kiwi. This is because this is the region of the weekly 200 EMA. You can see that price bounced up off this 0.78 level during the week as the USD weakened.  Price also broke out and up from a descending broadening wedge pattern on Thursday and gave a new TS signal. A 50 % fib pullback from the last swing high to low would put price back at the 0.82 level which was a major S/R level so this might be a suitable target if the bullish bias remains at all. Price is still trading below the Cloud on the daily chart but is now above the Cloud on the 4hr charts which suggest choppiness but with a bullish bias. The weekly candle closed as a bullish engulfing candle. 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.
  • There is an open TS signal on this pair at the moment.

EUR/AUD: Price has been choppy this week as both the EUR and AUD have rallied a bit. It is now back below the major S/R level of 1.40. The monthly chart shows how significant this 1.40 level is. There is a daily support trend line in place and price is gradually pulling back to this. It is still trading above the Cloud on the daily BUT only just on the 4hr time frame which is still bullish. The weekly candle closed as a bearish candle with long upper and lower shadows suggesting indecision. Price has now moved 1000 pips from the original channel and 1.30 break out and I wish I had simply taken the trade back then! Any close and hold above the 1.40 level might offer a new entry here.
  • I’m still watching the 1.40 level.

The Yen: U/J: Price chopped downwards this week within a broadening descending trading channel. Price has now pulled back to the 38.2% fib level from the move up from the last swing low to swing high. This pullback is seen more easily on the weekly chart. A bigger pull back to the 61.8% fib would put price in the region of the weekly 200 EMA as well at the 87 area! Price is now trading below the Cloud on the daily and on the 4hr time frame which is bearish. The weekly candle closed as a large bearish candle.
  • I’m just watching this pair at the moment.

AUD/NZD: This pair has come to my attention recently. The daily chart reveals how a descending trading channel has recently been broken. Price has been choppy this week though as the AUD and NZD try to sort themselves out and a ‘Flag’ pattern seems to be forming up on the daily chart. It is trading below the Cloud on the daily chart and on the Cloud on the 4hr chart which is bearish. The weekly candle closed as a large bearish candle.
  • I’m just watching this pair at the moment.

GBP/AUD:I dredged this chart up recently. Price, back then, was trading just under the upper trend line of a monthly chart descending trading channel. Price broke out shortly after and gave a new TS signal on the 4hr chart. This pair has now moved 800 pips since the TS signal! Price stalled and reversed as it reached the strong S/R level of 1.65 and the monthly chart shows just how significant this S/R level has been. It is trading above the Cloud on the daily but only just on the 4hr chart which, whilst bullish, suggest some weakness. The weekly candle closed as a bearish candle, the first one in 8 weeks. The 1.65 level still might offer a possible new trade entry position if the bullish momentum is maintained but price might also pull back to test the previously broken channel trend line.
  • I’m watching the previous trend line break area and the 1.65 level.

Silver: Silver has broken below the long term monthly support triangle trend line. Silver traded sideways for most of the week. The weekly candle closed as a bullish coloured ‘inside’ candle. ‘Inside candles’ suggest indecision. Price has so far managed to hold above the S/R $20 level. The next major support after $20 seems to be down at $15, near the monthly 200 EMA.

Gold: Gold has also broken down through major monthly triangle support that dates back to early 2008. That was a major break down for the metal. Price chopped sideways for most of the week but formed up into a symmetrical triangle mid week. Price has now broken out and up from this triangle but I don’t have any new TS signal. It continues to hold above the $1,300 level. The $1,300 level 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. The weekly candle closed as a small but bullish engulfing candle. This bears watching!

Oil: Oil seems to have just broken from trading within the smaller of 2 symmetrical triangle patterns. There are many fundamental factors that impact Oil though so one would not trade it on this bias alone. The weekly candle closed as a large bullish candle. The soft USD seems to have helped Oil this week as price chopped upwards.