Trade Week Analysis for 17/02/14

Last week:  There were several new TS signals last week: A/U= 70, A/J= 80, GBP/AUD= -100, EUR/AUD= 130, A/J= -70 and U/J= -40. The Cable signal from the end of last week is still going and is up at 350 pips.

GBP/AUD signal: this trade was a loser during the week BUT I had warned against this trade given the size of the signal candle AND that it was outside of the Bollinger band. This type of signal candle has failed in the past as well and, thus, I am deleting such signals for the future.

This week:

USD weakness was the flavour of last week and traders need to watch to see if this trend continues.

Monday is a holiday in the USA for President’s Day.

Gold and Silver rallied last week to close above key resistance levels. This would suggest bullish continuation but any trend reversal with the USD could undermine this new momentum. I saw on Twitter yesterday that some were claiming to have called the 'heads up' here. I note that none of these seem as early as my first bullish observations documented back on January 13th!
Stocks put in a bullish close for the week and logged their best weekly gains so far for 2014. The bearish H&S pattern on the S&P500 never got going but a ‘triple top’ situation is now ahead for this index.
Monthly charts: a number of trading instruments are sitting at major levels and this is best seen on their monthly charts. The E/J, U/J, Cable, S&P500 and Nikkei for some. There has been a bit of choppiness on some of these already as they navigate these major levels and this may continue for a bit longer and needs to be considered in your trading. Each may offer shorter term 'short' and/or 'long' opportunities but it pays to be aware of the ‘big picture’ on their charts.

This w/e marks the three year anniversary of my cancer surgery and is a milestone I’m happily celebrating. This blog had its genesis here as it was during my recovery and months of chemotherapy that I turned to focus on my own TS system. Writing about my trading in this blog has been some form of therapy in itself. Three years along now and I’m keeping well (touch wood) and close to swapping over to a new and more functional trading website so, watch this space. The S&P500 was singing this recently and may well do so again soon but, for this weekend, this song is all mine!

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Stocks and broader market sentiment: The S&P500 stock index has closed back above the key 1,800 level and, whilst the bearish ‘Double Top’ seems a distant memory, there is a looming ‘Triple Top’ situation to contend with now. This potential barrier may shape activity here next week and any close above this key demarcation level would be quite bullish.
I'm still
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: I’m watching for any break of the daily trend line. Price is holding above the daily trend line but I’m watching for any bearish ‘Triple Top’ action.  It is worth noting that a 78.6% fib pull back of this latest bull move would see
price back down near the key 1,685 level. We had a 50% pull back recently and that
may be all we get for now.


Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. Abearish Tenkan/Kijun cross evolved on the daily S&P500 on Thursday 6th Feb. This cross is deemed 'neutral' as it evolved within the Cloud. Price is back up trading above the Cloud though now and starting to look bullish. Any new bullish Tenkan/Kijun cross above the Cloud would be quite significant. The last such bullish cross marked the start a long running uptrend.
EURX chart: The November and December monthly candles closed above the major S/R level of the monthly 200 EMA. November was the first monthly close above this S/R level in almost 2 ½ years! This was a major achievement for the index but it failed to hold these levels for the January close. Price closed this week back below the monthly 200 EMA but managed to hold above the new support trend line.
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. I am not seeing the divergence now that was evident back then. 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, October, November, December and January candles closed above this key level and without testing this at all. 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 before any continued move upwards.


Items to watch out for:
  • Mon 17th: USD: Bank holiday. NZD: Retail sales. USD: Fed Chair Yellen testifies. EUR: Eurogroup meetings.
  • Tue 18th: AUD: monetary policy minutes.  BoJ: monetary policy statement. GBP: CPI. EUR: German economic sentiment. EUR: ECOFIN meetings.
  • Wed 19th: GBP bank rate votes & unemployment rate. USD: building permits & PPI & FOMC minutes.
  • Thurs 20th: CNY: manufacturing PMI. EUR: French & German manufacturing PMI. USD: CPI & unemployment claims & Philly Fed Manufacturing Index.
  • Fri 21st: GBP: retail sales. USD: existing home sales.


E/U: Price was choppy here last week as it traded and under the bear trend line of a triangle pattern and near the previous S/R level of 1.365. Price rallied on Thursday though to break up and out of the triangle pattern and above the 1.365 level. A weak TS signal was noted on my Friday 11 am candle BUT I would prefer to wait for any close and hold above the 1.37 level. This level has been significant resistance here over recent weeks and is best observed on the 4 hr chart.
Price is trading above the Ichimoku Cloud on the 4hr and in the top edge of the Cloud on the daily chart which suggests choppiness BUT with a bullish bias.
The weekly candle closed as a bullish candle.
It is worth noting that price is only about 260 pips below a major trend line; the bear trend line of the monthly chart triangle pattern. The E/U has a lot of heavy lifting in its path and I would anticipate a bit more choppiness here.
  • There is a new TS signal on this pair BUT I’m waiting for any close above the 1.37 level.




E/J: Price continued to grind higher to start the week but then stalled as it met significant resistance in the form of a bear trend line, monthly pivot and the psychological whole number level of 140. The major level of the 61.8% fib of the 2008-2012 bear move looms large and is just above price too. This is best observed on the monthly chart. The 61.8% fib level is a significant demarcation price for the E/J. A rejection here might signal the start of a downward move but another break and hold above this level would suggest that a bullish reversal has set in.
Price has already pulled back to test the top of the monthly Cloud and I'm on the lookout to see where it heads from here. The November and December candles were the first to close above the resistance of the monthly Ichimoku Cloud since 2008!  I had thought that price might pull back down to test this key break out level before any possible bullish continuation and this seems to have evolved. Price is trading above the Cloud on the 4hr, in the Cloud on the daily and above the Cloud on the weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘spinning top’ candle reflecting some indecision here at this major level. The weekly chart continues to have a bit of a ‘Bull Flag’ look to it though so I will keep watching this ‘flag’ trend line next week.
  • I’m watching for any new TS signal on this pair.





A/U: The Aussie traded higher earlier in the week on the back of strong Chinese GDP data but Aussie employment data on Thursday brought it tumbling back down soon after. USD weakness towards the end of the week helped to hold this pair up above the 0.89 level. This pair continues to trade more in response to fundamental events than to technical patterns of late.
I had been watching a possible a bearish H&S build on the weekly chart recently but this didn't ever follow through. I’m now seeing what looks like a bullish ‘inverse H&S’ on the daily chart with a 'neck line' at the 0.905 region. Just something else for me to keep an eye on.
Price is trading above the Cloud on the 4hr but in the Cloud on the daily and monthly chart and below the Cloud on the weekly chart.
The weekly candle closed as a small bullish candle.
  • I’m watching for any new TS signal on this pair and the daily chart 'inverse H&S' pattern.




A/J: The A/J traded similarly to the A/U for most of last week and for much the same reason; strong Chinese data followed by weak AUD data. A daily bear trend line above price continues to be resistance for this pair.
Price is still trading above the Cloud on the 4hr but below on the daily and weekly charts which suggests choppiness but with a bullish bias.
The weekly candle closed as a bullish coloured ‘spinning top’ candle.
  • I’m watching for any new TS signal on this pair.




G/U: The Cable has had a sensational week and successfully battled a major hurdle; the monthly 200 EMA. I do consider the Cable might be a bit conservative but suspect she may have been singing this under her breathe as she powered along this week.
This bullish move was a continuation following the previous weeks break out from the bullish descending wedge. This move had also brought the 4 hr chart’s bullish ‘inverted H&S’ pattern well into life and triggered a new TS signal. Positive BoE news during last
week gave this bullish move a further kick along and the TS signal has so far yielded a massive 350 pips. Price rallied at the end of the week and made a most significant close above the key resistance of the monthly 200 EMA.
The Cable has finally managed to break out of ‘no man’s land’! It had been stuck ranging between the two major S/R levels of the monthly 200 EMA and the previously broken monthly triangle trend line. The weekly close above this key S/R level is a rather bullish signal. This is a major level that has been broken though and I would anticipate some choppiness as the Cable navigates and possibly tests this major level. This period may offer some shorter term ‘short’ and ‘long’ opportunities BUT, as suggested above, traders need to keep an eye on the monthly charts. We are only half way through the month and I would be wanting to see where price closes at the end of February before getting too excited. A close above the monthly 200 EMA for February would suggest bullish continuation here. Let’s see how February closes first though as this could also mark a turning point if the monthly 200 EMA level is ultimately rejected.


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 now only about 1,500 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.  I had raised a few eye brows when I suggested this target some weeks ago but it doesn't seem so out of order now!
Price is now trading above the Cloud on the 4hr, daily and weekly and in the upper half of the Cloud on the monthly which is thus looking quite bullish.
The weekly candle closed as a large bullish candle, engulfing the small body of last week’s Doji.
I had hoped that this hurdle of the monthly 200 EMa might have triggered some choppiness and, thus, allowed for a new TS signal and another entry point but this hasn't happened yet. I'll be on the lookout for this possibility though in coming sessions.
  • There is an open TS signal on this pair.




Kiwi: NZD/USD:  Price drifted higher all week but ran into the resistance of a more recent daily chart bear trend line and closed for the week just below this level. The daily chart shows how price has been pretty range bound here, basically, since last October. I’ll be watching to see if price bounces back down, thereby possibly continuing its range bound pattern, or if it tries to make for a break out. This may be one to watch this week!I'm keeping the potential 'inverse H&S' pattern on the AUD/NZD in the back of my mind here too. Any bullish retreat on the Kiwi might help this AUD/NZD pattern develop.
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 bullish candle.
  • I’m watching for any new TS signal on this pair and the daily chart bear trend line.




EUR/AUD:  This pair was choppy last week given the fluctuating AUD. It traded lower to start the week with AUD strength following the positive Chinese data. It then bounced off support later in the weak when AUD weakness set in after the poor Aussie employment result. It seems to be shaping up in a bullish broadening descending wedge pattern on the 4hr chart so I’ll keep an eye on the margins here.
The monthly chart still looks bullish though and suggests that price has broken through key resistance of the monthly 200 EMA, tested this level and looks poised for bullish continuation. Price is currently below the monthly 200 EMA but, only just, and this current month has some way to go still.
The monthly chart also shows how this pair made a big move down from 2008 to 2012. The 61.8% fib retrace level of this big down move is back up at the 1.75 region. The 1.75 is also a major S/R level for this pair and would be a possible target for any continued bullish movement.
The E/A is trading below the Cloud on the 4hr but in the top edge of the Cloud on the daily suggesting some further choppiness.
The weekly candle closed as a bearish coloured ‘spinning top’ candle reflecting the recent indecision here.
  • I’m watching for any new TS signal.




The Yen: U/J: The U/J chopped sideways and just under the key resistance of the monthly 200 EMA until Thursday. Price pulled back a bit on Friday along with the weakness in the Nikkei and the USD. The U/J did not run along with its usual stable mate, the S&P500, this week.
Like with the E/J, the 61.8% fib of the 2007-2012 bear move looms large and just above current price. This is a major demarcation point here too; a continued hold below this level would be bearish but any new close and hold above would most likely signal bullish continuation.
Price is trading just below thin Cloud on the 4hr chart, in the bottom of the Cloud on the daily and above the Cloud on the weekly and monthly charts suggesting further choppiness. November was the first monthly candle close above the Ichimoku Cloud since mid-2007! A look at the monthly Cloud chart shows how a test of the monthly 200 EMA, and even the top edge of the Cloud, would seem quite reasonable even if there was to be bullish continuation. This may be what is evolving at the moment.
The weekly candle closed as bearish engulfing candle.
Weekly Chart Bullish Cup’ n’ Handle pattern: The bullish break out from the ‘Cup ’n’ Handle’ pattern on the weekly chart has still peaked at 600 pips for the time being. The ‘Handle’ of this pattern is the same as the triangle or ‘Bull Flag’ that was watched on the daily 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.
  • I’m watching for any new TS signal and the monthly 200 EMA.





Nikkei: The Nikkei closed for December and for 2013 above the 16,000 level and, also, above a major bear trend line that had been in play for over 20 years. This was a significant development for this index and a rather bullish signal.

Price has closed below the 15,000 level again this week and, also, below the previously broken trend line. This seems rather bearish for now but I would still be waiting to see where this candle closes for February. There are still two weeks of trading before the month closes.
Note how the 15,000 level is near the 38.2% fib retrace level of this huge down move. The 61.8% fib level is back up near the whole number 20,000 level and would be an obvious target for any continued bullish momentum.


UJ and S&P500: The U/J and S&P500 have been trading with positive correlation for much of 2013. A bit of divergence set in last week though. The U/J was dragged down by the Nikkei but not so for the S&P500!


Nikkei and U/J: (U/J: black. Nikkei: green). The Nikkei and U/J are still trading with positive correlation.


Nikkei and S&P500: (S&P500: green. Nikkei: black). These indices have been trading with positive correlation for much of the last 12 months but some divergence set in last week:


AUD/NZD: The A/N pair chopped up and down this week at the mercy of the AUD. Price fell on Thursday to test the key S/R level of 1.075 and this level helped to support price to close out the week. The daily chart looks like it could now be setting up in a bullish ‘inverse H&S’ pattern. The ‘neck line’ of this pattern is at 1.09. This inverse H&S follows on from one that completed earlier on the 4hr chart and I’ll keep an eye on this. Price is also trading within a descending channel on the 4hr chart.
Price is trading in the Cloud on the 4hr but below the Cloud on the daily, weekly and monthly charts which suggests further choppiness.
The weekly candle closed as a bearish coloured ‘spinning top’ candle reflecting the recent indecision here.
  • I’m watching for any new TS signal and the ‘inverse H&S pattern’.




GBP/AUD: This pair traded lower to start the week given AUD strength but then rallied as the AUD weakened, following the poor Aussie employment data and, also, as the GBP strengthened following an upbeat midweek BoE assessment. 

The main feature I can note on this chart is the look of a possible bearish H&S pattern setting up on the daily chart. The right hand shoulder would need to turn at around the monthly pivot for this pattern to form up so I’ll be watching that area this week.

Price is now trading in the top edge of the Cloud on the 4 hr and above the Cloud on the daily chart suggesting choppiness.
The weekly candle closed as bullish coloured and as, essentially, an ‘inside’ style candle reflecting this latest indecision.
The continued hold above the 1.75 level is still rather bullish though. The monthly chart shows how this pair has had a major move down starting back in 2007 and only bottomed out in April 2013. The 61.8% fib retrace level of this down move is back up at the 2.1 area and this is also the region of the monthly 200 EMA, just for added confluence. This 61.8% fib area might be a possible target for any continued bullish momentum.
  • I’m watching for any new TS signal and the monthly pivot.




Silver: The previous week’s bullish engulfing candle was right on the money here! Silver continued to grind higher last week and closed well above the key $20 support level and the broken triangle trend line.
The daily chart shows how the $20.50 has been key resistance for Silver but price made a very bullish break up through this level on Friday. The next key resistance level it has to face is the $21.50 level, also best seen on the daily chart, and price closed for the week just below this level.
The major bear trend line of the monthly chart triangle pattern is still above price but looming closer now. This bear trend line has contained price since April 2011 and any break above this would be a major bullish development.
Silver is now trading above the Ichimoku Cloud on the 4hr and daily chart but below the Cloud on the weekly and monthly charts. This is a significant bullish shift here though.
The weekly candle closed as a large bullish candle.
The major support level below $20 seems to be down at $15, near the monthly 200 EMA.




Gold: Gold continued to grind higher last week and the daily chart’s bullish ‘inverse H&S’ pattern really came to life. In fact, the expected move of this bullish pattern has almost completed now!  The height of the ‘Head’ to the ‘neck line’ was about $70 (700 pips). Thus, the expected bullish move above the neck line would be projected to be around $70 (700 pips). This puts the target up at the $1,330 level and price is only $10 (100 pips) below that level now!
There have been a number of bullish signals on Gold charts over recent weeks and all of these patterns have been pointed out in my blog updates:
  • Daily chart: bullish ‘inverse H&S’ pattern; setting up over recent weeks. This was first noted in my TradeWeek Analysis back on Jan 13th 2014.
  • Monthly chart: the bullish reversal ‘railway track’ pattern noted at the close of the January monthly candle:
  • Weekly chart: the bullish reversal ‘railway track’ pattern noted last week.
The monthly and weekly charts shows how the December candle tested the June low of $1,180, a level that was just above the 61.8% fib pull back level of the 2008-2011 bull move.  Any break of this $1180 level would be quite bearish. The next major support after this seems to be down at the whole number, $1,000 level and, after that, at $850 in the monthly 200 EMA. For now, though, this 61.8% fib seems to have offered decent support for Gold as it continues to trade higher from this junction.
Gold is now trading above the Ichimoku Cloud on the 4hr and daily chart but still below the Cloud on the weekly chart. The current monthly candle is pushing up into the bottom edge of the Cloud. 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!  I have been wondering whether Gold is simply rising to test the bottom of the monthly Ichimoku Cloud, following the earlier bearish break down here, so I’ll be watching this region of the monthly Cloud closely as the February candle completes to see where it eventually closes.
The weekly candle closed as a large bullish candle.