Saturday, October 29, 2011

Indices for week 31/10/11


monthly: Last month’s bullish candle was almost 500 pips. The candle this month, so far, has retraced to almost 80% of that move.

weekly: The trend is down on the weekly chart. The last weekly candle was a large bearish candle. Price broke through the 76 level, pierced the 75 but closed just above 75 level. 75 is a psychological number as well as previous strong S/R. Sound familiar?

Daily: The trend is still down on the daily chart for this month. Friday’s candle, almost a Doji, was small compared to Thursday’s big candle after the EU meeting announcement of positive outcomes. Overall, price has now retraced down to the 78.5% fib level on the daily chart from the last high, earlier this month.

4hr: Price broke through the 76 level to finish off at the 75 level. The descending wedge formation, of last week, did evolve into a bearish continuation pattern and resulted in some good trades last week. The last 6 x 4hr candles have been smallish indecision candles lurking around the 75 level. This could be viewed as a bear flag pattern too; that is, a temporary pause before the next move down.

Thoughts: The market is still digesting the news out of the EU summit from last week. It will be interesting to see how long this positive ‘risk on’ sentiment will last. By 'risk on' it usually means short USD and long the likes of AUD etc. As far as the technical evidence goes though, I will wait and see if the new support level of 75 holds. This is a significant level of S/R and also the 78.5% daily fib re-trace level and, as such, could hold price up. If price holds up, I would be cautious but, I would look for other reasons to long the USD in pairs. Alternatively, another break, close and continued hold below this 75 level though would be a signal to further short the USD. In the absence of any major fundamental news though, I wouldn’t be surprised if price went back to ranging sideways for a bit, again.


Monthly: Last month’s bearish candle was almost 500 pips. The candle this month, so far, has retraced almost 80 % of that move. This is the reverse of the USDX chart. Price held under a monthly bearish trend line.

Weekly: the trend is down on the weekly chart. A symmetrical wedge pattern is still evident and continues to contain price. A weekly bearish trend line in place as well. Last week’s candle though was a bullish engulfing candle...just to confuse matters!

Daily: The trend is up on the daily chart for this month though, opposite to the weekly chart. Positive EU news catapulted price up to the 78.5% daily retrace level of last month’s down move. The last daily candle on Friday was a bearish inside candle. This candle struggled to move up past the 78.5% level which is also near the psychological level of 109 and weekly pivot R2 level. Price closed under the daily 200EMA level of 108.5. There are significant road blocks to further up move for this index.

4 hr: Price has stalled in its up move at around the daily 200 EMA level. There have been a few indecision candles whilst the market continues to digest the implication of the EU news. This price action could also be viewed as a bull flag though; a pause before the next up move. This is the inverse of the USDX.

Thoughts: There are a lot of road blocks to continued up move for this index. I will wait to see if price can break, close and hold above the 109 level. I will be cautious here though as the weekly bearish trend line is just above this price at around 109.5, the weekly R3 pivot level. If price breaks, closes and holds above the 109.5 level though, I would look to long the EUR in pairs. If price struggles to break and hold above the daily 200 EMA I would look to short the EUR in pairs.

NB: The above constitutes technical analysis of these indices. Major news announcements and other fundamental news items can void this analysis at any time though.

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