Trade Week Analysis for 23/06/14

Last week:  There were 6 valid TC signals last week. The FX signals were rather poor but the one on Gold made up for them: E/U= closed -50, U/J = closed for -30, E/U= closed 5, Cable = closed = -10 and GBP/JPY = closed =- 10 and Gold = $41!

Gold and Silver were the stand out performers last week. Silver continued with its bullish run following a triangle break out and Gold is continuing within the bullish inverse H&S pattern. A TC signal from Gold last week delivered up to $41 and is still open.

This week:

FOMC led to USD weakness last week and I’ll be looking to see if this continues. I wrote last week about how I’m wondering if some conventional ‘risk on’ may be about to return and I’ll be watching for that too. This may seem hard to believe, especially given the current geo-political landscape, but traders need to trade what they see and not what they think.

Whilst US stocks continued a slow grind higher, it was another week of indecision for some FX pairs. The E/U, EUR/AUD and E/J printed weekly ‘inside’ candles, the U/J printed a Doji and the A/U printed a ‘spinning top’ candle. All of these candles reflect indecision.

A/J: I have been tracking a bullish ascending triangle here. The weekly candle closed a bearish-reversal ‘Hanging Man’ candle though so I’ll be keeping an open mind here with any triangle breakout.

Events in the Ukraine, and now Iraq, continue to have the potential to undermine any developing ‘risk’ appetite and needs to be monitored.

NB: I am away at the moment and further updates will be brief and less frequent. There is a comment here that is relevant to this blog. We are currently in Singapore and this is a quick return visit after an absence of 7 years. The most striking observation on this trip though is the massive amount of major construction and development occurring throughout the city. I often read of trading commentary warning of a slow down in Asia, and the obvious implications for Australia. I’ll be taking all of that chatter with one very big grain of salt from now on though as this place appears to be booming and, as a gateway to Asia, this can only inspire confidence in broad based Asian progress. 

Stocks and broader market sentiment:

The S&P500 and DJIA both had a bullish week printing bullish engulfing weekly candles, closing at all time highs and continuing on from their bullish ascending triangle breakouts. The NASDAQ has stalled a little though and is a bit behind the S&P500 and DJIA as it navigates a potential ‘Double Top’ region:

NASDAQ

I published an article on the S&P500 during the week where I discussed possible bullish and bearish targets. This article can be found here. I would not be surprised to see stocks take off with a bit more momentum IF the NASDAQ makes a bullish break above this ‘Double Top’ region. The three of them would then have their respective ‘monkeys’ off their backs! Not predicting here at all….just suspecting and watching!

Despite all of this bullish activity I am still seeing divergence on the monthly S&P500 monthly chart though and whilst this might just be warning of a pause, as the index navigates these new highs, the chance of a pullback cannot be ruled out either. There has not been any real deep pull back since the break up through the 1,577, 1,600, 1,700 and 1,800 levels and the major break of the 1,577 level was only tested once.  Thus, I am still being cautious here now even though the daily support trend line of the S&P500 has not been broken.

It is worth remembering that a 61.8% fib pull back of the recent bull run (Nov 2012-present) would bring price down to exactly the 1,577 area. Something to keep in mind as I watch the daily support trend line.

Thus, with all of this, I continue to watch out for further clues as to any new momentum move, long or short though! In particular I’m looking out for:

S&P500 daily chart: I’m watching for any break of the daily trend line but price is holding above this for the time being. The index has held above the top trend line of the bullish ascending triangle.

S&Pdaily

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There was a Tenkan/Kijun bullish cross a while ago and price is still above the Cloud which is bullish.

S&PdailyCloud

EURX chart: Price has held below the monthly 200 EMA support level and the weekly triangle this week which is bearish. The weekly 200 EMA looks to be offering some support here

EURXweekly

S&P500 monthly chart: a break of the monthly support trend line (see monthly chart). The monthly trend line remains intact. 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. I am seeing divergence on the monthly chart though. This may just be as the index pauses and ponders this new high or it could be warning of a pull back. Elliott wave suggest a big correction here though. I am still thinking that the 1,600 level might be the new base line for this index. The saying that ‘Old resistance becomes new Support’ holds here. I still believe that 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 breakthrough and I would expect a significant level such as this to be tested more than once. Maybe I’m wrong here though as there have now been eleven consecutive months of candles that have closed above this key level, and, without testing this region at all. To add to this thought of bearish pull back potential, 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 even test this region again before any continued move upwards. I actually won’t be too comfortable with any bullish continuation move on the S&P500 until this 1,577 level is tested again but, for the moment, the trend seems to be continuing higher.

S&Pmonthly

Items to watch out for:

  • Mon 23rd: CNY HSBC Flash Manufacturing PMI. JPY BoJ Gov Kuroda speaks. EUR German & French Flash Manufacturing. USD Existing Home Sales.
  • Tue 24th: EUR German Ifo Business Climate. USD Consumer Confidence and New Home Sales.
  • Wed 25th: USD Core Durable Goods.
  • Thurs 26th: GBP BoE Gov Carney speaks. USD Unemployment Claims.
  • Fri 27th: NZD Trade Balance. EUR German Prelim CPI. GBP Current Account.

E/U: The E/U continued to find support from the bull trend line of the monthly chart’s triangle pattern. This region was also near the top of the weekly Ichimoku Cloud, the psychological 1.35 level and the 50 % fib from the 2011-2012 bear move. Thus, this is fairly strong support and it wasn’t surprising to see it hold. Price drifted higher from there throughout the week but couldn’t manage to close back above the 1.365 S/R level.

Price is now trading just above the Ichimoku Cloud on the 4hr chart, below on the daily chart, above the Cloud on the weekly chart and in the Cloud on the monthly chart.

The weekly candle closed again as a bullish coloured ‘inside’ candle reflecting the indecision here.

  • I’m watching for any new TC signal on this pair and the triangle trend lines.    

EUmonthly EUweekly EUdaily EU4

E/J: The E/J drifted a bit higher last week.

Price is now trading in the Cloud on the 4hr, below on the daily chart but above the Cloud on the weekly and monthly charts. The November and December candles were the first to close above the resistance of the monthly Ichimoku Cloud since 2008.

The weekly candle closed as small bullish ‘inside’ candle here too reflecting indecision.

The weekly chart still has a ‘Bull Flag’ look to it though BUT any bearish follow through here would quickly undermine the look of this pattern.

  • I’m watching for any new TC signal on this pair and the 140 level.

EJmonthly EJweekly EJdaily EJ4

A/U:  The AUD drifted down to the top of the daily Cloud and this proved to be effective effective support and price subsequently rallied back up from there to close the week just below the resistance of the 0.94 level.  

Bearish ‘Triple Top?’: I’m leaving this trade idea in here in case bearish sentiment returns: I would expect that any new close below the 0.9225 level would be bearish. The height of this possible ‘Double/Triple Top’ is about 180 pips. Any bearish close and hold below the 0.9225 level would then suggest a follow through move of about 180 pips as well. Interestingly, this move would bring price down to the 0.905 level which is a significant previous level of support/resistance.

There was a recent bullish Tenkan/Kijun cross on the daily Ichimoku chart and this was deemed a strong signal as it evolved above the Cloud. The Tenkan line had ticked a bit higher giving support to this signal but this has waned a bit since then. I’m not sure if this is a coincidence or not but this Tenkan fizzle happened about the same time that images of our Prime Minister in a stetson were beamed across the globe.

Price is now trading in the Cloud on the 4hr, above on the daily chart, in the bottom of the Cloud on the weekly chart and in the middle of the Cloud on the monthly chart. Thus, I would expect this pair to continue to be quite choppy.

The weekly candle closed as a bearish coloured ‘spinning top’ candle. This reflects the indecision here.

  • I’m watching for any new TC signal on this pair and the 0.94 level.  

AUweekly AUdaily AUdailyCloud AU4

A/J: The A/J chopped down and up last week and still just under the major level of 96. This has been a major S/R level for the A/J and this is best seen on the monthly chart. The A/J is forming up into a bullish ascending triangle on the 4hr chart.

Price is also now trading in the top of the Cloud on the 4hr, above on the daily and monthly and in the top of the Cloud on the weekly chart.

The weekly candle closed as a bearish reversal ‘Hanging Man’. This candle pattern is bearish so I’ll be watching for any triangle breakdown here; bullish or bearish.

  • I’m watching for any new TC signal on this pair, the top of the weekly Cloud, the triangle trend lines and the 96 level.

AJmonthly AJweekly AJdaily AJ4

G/U: The Cable chopped along under the 1.7 level following last week’s bullish descending wedge breakout. It made a bullish break above this resistance level towards the end of the week and managed to close the week sitting just above this key 1.7 level. This move triggered a new TC signal but this closed off for a small loss.

I have been saying for weeks that I was bullish on the Cable as long as it held above the monthly 200 EMA and I still am.  

Bullish targets for a hold above the monthly 200 EMA: This level remains a key level to watch here. It is important to remember that February was the first monthly close above this S/R level since September 2008 and, also, the highest monthly close since the bear move of 2007-2009. These were major achievements. A possible target for any continued bullish movement is best determined from the monthly chart. The 50 % fib level of the 2007-2009 bear move is up at around the 1.73 region and the 61.8 % fib is at the 1.82 region. Both of these levels might be possible profit targets. The 61.8% fib level is only about 1,200 pips away and might seem an impossible task but I’d advise you to look at the monthly chart of the E/J and U/J before you reject this idea. 

Price is now trading above the Cloud on the 4hr, daily, weekly and the monthly candles is currently poking just above the monthly Cloud.

The weekly candle closed as a small bullish candle.

  • I’m watching for any new TC signal on this pair.

GUmonthly GUweekly GUdaily GU4

GBP/JPY: The GBP/JPY chopped higher last week following a bullish triangle breakout and close above the 173 resistance level. The daily chart reveals how significant the resistance at 173 has been and the G/J has managed to close the week out sitting above this key resistance now turned support. I’ll be watching to see if it can continue to hold above this major psychological level. This move triggered a new TC signal but this also closed off for a small loss.

Triangle breakout targets: The GBP/JPY has now broken out from trading within a triangle pattern on the daily chart. This pattern has been giving the weekly and monthly charts a ‘Bull Flag’ appearance. The daily triangle pattern is worth about 1000 pips and technical theory would suggest that the possible bull move from any breakout and continuation would be of a similar order of magnitude. A 1000 pip move would take the GBP/JPY up to about 184 which is near the 50% fib of the 2007-2012 bear move for some added confluence. The 61.8% fib, another popular trading target, is up at the 200 level which is 2,600 pips away

Price is now trading above the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts which is bullish.

The weekly candle closed as a small bullish candle.

  • I’m watching for any new TC signal on this pair.

GJmonthly GJweekly GJdaily GJ4hr

           

Kiwi: NZD/USD:  The Kiwi chopped a bit higher again last week but huge resistance of the major high and 0.88 level loomed large just above current price action. A TC signal here during the week was not valid.

The Kiwi is still trading within a bullish ascending wedge on the monthly chart and is edging back up to near the top of this pattern.

Price is still trading above the Ichimoku Cloud on the 4hr chart, daily, weekly and monthly charts which is bullish.

The weekly candle closed as a small bullish candle

  • I’m watching for any new valid TC signal on this pair.

KiwiMonthly KiwiWeekly KiwiDaily Kiwi4

EUR/AUD:  This pair chopped a bit higher last week after bouncing off the the support of the bottom trend line of the daily chart’s descending trading channel/wedge. If viewed as a ‘descending wedge’, then, these patterns are typically bullish so I’m keeping an open mind here too. This would suggest a bearish AUD and bullish EUR landscape though.

The E/A is now trading in the Cloud on the 4hr but below the Cloud on the daily chart which suggests choppiness.

The weekly candle closed as a small bullish coloured ‘inside’ candle reflecting indecision.

  • I’m watching for any new TC signal on this pair and the trading channel trend lines.

EAmonthly EAweekly EAdaily EA4

The Yen: U/J:The Yen: U/J: Not much has changed here with the U/J and it chopped sideways for most of last week and formed up into a symmetrical triangle on the 4hr chart. There was a false breakout from this on Thursday and a new TC signal here failed as well. This 4 hr chart triangle formed up within the larger triangle pattern on the daily chart. The daily chart triangle is a descending triangle with a base at the 100.7 S/R level.

The 61.8% fib of the 2007-2012 bear move is still above current price. This remains as a­­ major demarcation point here: a continued hold below this level would be bearish but any new close and hold above would most likely signal bullish continuation. I still think it is still too soon to say whether this level has been categorically rejected. A clear break down from the current triangle pattern and the bottom trend line 100.7 level would be fairly convincing but this has not evolved as yet.

Price is now trading in the Cloud on the 4hr chart, just below the Cloud on the daily chart and just above the Cloud on the weekly and monthly charts. November was the first monthly candle close above the Ichimoku Cloud since mid-2007 and the bullish hold above the Cloud continues to be noteworthy.

The weekly candle closed as a bearish coloured Doji candle reflecting indecision.

Weekly Chart Bullish Cup’ n’ Handle pattern: I am still seeing this pattern building on the weekly chart. The theory behind these patterns is that the height of the ‘Cup’ pattern is equivalent to the expected bullish move from the ‘handle’ breakout. The height of the Cup for the U/J weekly chart is around 2,400 pips. The interesting point here is that a 2,400 pip bullish move up from the ‘Handle’ would put price up near the 124 level. This level is the last major swing high for the U/J from back in 2007 and represents the 100% fib pullback for the move down in 2007 to the lows of 2012. Possible targets along the way include the 61.8% fib retrace level at the 105.5 region and the 78.6% fib up near the 112 region.

The weekly charts still has a ‘Bull Flag’ look to it.

  • I’m watching for any new TC signal and the monthly 200 EMA.

UJmonthly UJweekly UJdaily UJ4

Nikkei:  The Nikkei has closed above the 15,000 level for the week and is trading above the previously broken trend line. 

AUD/NZD: The A/N drifted lower to start the week and, as suspected, traded down to the support of the 1.075 S/R level.  Price, so far, has held up from here and a support trend line can be seen on the daily chart.

The messy ‘Double Bottom’, appears more so now and may be in some doubt.

Price is still trading below the Cloud on the 4hr but above on the daily chart which suggest choppiness.

The weekly candle closed as a small bearish candle.

  • I closed my LONG and will look out for any new TC signal.

ANmonthly ANweekly

ANdaily

AN4

GBP/AUD: This pair chopped up and down last week. I have adjusted the channel trend lines here to reflect the recent support and resistance.

Price is now trading above the Cloud on the 4hr chart but in the Cloud on the daily chart which suggests choppiness.

The weekly candle closed as a small bullish candle and this followed on from last week’s bullish-reversal ‘Hammer’ candle.

  • I’m watching for any new TC signal.

GAmonthly GAweekly GAdaily GA4

Silver: Silver continued to rally last week after breaking up and out from the weekly/ monthly chart’s triangle pattern during the previous week. This was a very bullish signal for Silver as this bear trend line had contained price since 2011. The continued hold above this trend line suggests a reversal for Silver and a major shift in polarity and sentiment. Silver closed above the key $20.50 S/R level and up $1.60 since the trend line breakout.

Silver is now trading above the Ichimoku Cloud on the 4hr and daily charts but below the Cloud on the weekly and monthly chart. This represents a further bullish shift here.

The weekly candle closed as large bullish candle.

The major support level below $20 seems to be down at $15, near the monthly 200 EMA.

  • I’m watching for any new TC signal and the triangle trend lines.

SilverMonthly SilverWeekly SilverDaily Silver4hr

Gold: Gold also rallied last week with USD weakness. A new TC signal was triggered during the Asian session on Thursday and this has so far delivered up to $41!  I wrote on Friday that I would expect price to at least test the daily 200 EMA, or even the $1,300 S/R level, before further possible bullish continuation and this seems to be where Gold is consolidating at the moment whilst it contemplates its next move!

The bullish ‘inverse H&S’ pattern continues to shape up on the weekly chart. The ‘neck line’ of this inverse H&S is still up around the $1,400 region, which is also up near the weekly 200 EMA level.

Gold is now trading above the Ichimoku Cloud on the 4hr chart, in the middle of the Cloud on the daily and in the bottom of the Cloud on the weekly and monthly charts. This represents a major bullish shift here as well. It is worth remembering that the November candle was the first monthly candle close below the Ichimoku Cloud since January 2002, a period of almost 12 years!  Price had pulled back up to test the Cloud but the March, April and May candles closed back below the monthly Cloud. This may be a case now of Gold now forming a base, as the ‘inverse H&S’ would suggest, and starting to climb its way back.

The weekly candle closed as a large bullish candle.

It is worth noting that Gold has now made a 61.8% fib pull back of the bull move from the last swing low back in October 2008. Gold bears should take note of this as this region seems as good a place as any to start to try carving out a ‘basing’ pattern.

  • There is an open TC signal on Gold.

GoldMonthly GoldWeekly GoldDaily Gold4hr