Indices Review for Week 5/3/2012

I have posted 2 reviews today, Saturday 3/3/12.  My Indices Review and my Trading Week review.  Only one e-mail alert will be sent though most likely.  Please make sure that you read the Trading Week Analysis as well so that you understand what I am looking for in the pairs this week.

USDX

Monthly: Trend up overall.  The new candle is only a week old but is forming a bullish engulfing pattern at this stage.

Weekly:  Trend up, overall / sideways. Last week’s candle was bullish.

Daily:  Trend down overall.  Price traded down early in the week and hit the 78 level I had been warning about.  Price has since bounced and rallied off this strong support level.

4hr: Trend turned up.  Price bounced off the 78 level on Wednesday and has rallied since then.  I have moved my trend lines for this index now. Price is currently trading within a symmetrical triangle but appears to have just broken out from this triangle on the 4hr charts as of late on Friday.  Price has not yet broken up through the next major resistance level of 79.5 yet though.

Thoughts:  There was a major turn in the market this week from 'risk on' to 'risk off' trading.  This turn was accompanied by another shift where much of the usual correlation between the pairs was absent.  This is probably not surprising given the momentum shift after 6 weeks of trading 'risk on'. This break in correlation concerned me to the point where I, unfortunately, ignored a valid TS 'risk off' entry signal though on Thursday.  This shows how powerful my TS system actually is though.  

It is worth noting that the USDX is still trading within the confines of the previous narrow trading range of 79.5 – 78.5.  I also want to see the normal correlation to the pairings return.  It is NFP jobs data out on Fri of this week.  The data is expected to be positive in light of the good 'auto data' out last week so, 'risk on' could quickly return.  There has been a tendency to shrug off bad news of late too though so, I will be on the lookout for signs to shift focus back to 'risk on'.

I will look to LONG the USD in pairs on valid TS signals if price breaks, closes and holds back above the 79.5 level and triangle pattern.  We have already had a new TS signal to go LONG on this index.

I will look to SHORT the USD in pairs on valid TS signals if price returns to trade within the symmetrical triangle pattern and moves below the monthly pivot at the 79 level.

As always, Fundamentals, by way of Euro zone dramas and news announcements, continue to be triggers for price movement on the indices.  These events can always have the potential to undermine all Technical analysis.

EURX

Monthly:  Trend down BUT has turned.  Last month’s candle ended up forming a bullish engulfing candle.  The new candle, albeit only a week old, is a small bearish candle.

Weekly:  Trend up.  Last week’s candle was quite bearish though.

Daily: Trend up overall but has turned.  Price did indeed retrace back up to the 61.8% level of around 106 that I had been warning about.  Price failed to push through this strong resistance level though and has traded down since then.  Price finished the week at just above the monthly pivot point level of 104.2

4 hr: Trend down.  Price has fallen since butting up, earlier in the week, against the strong resistance level of the daily 200 EMA at around the 106 level.  The index is now resting just above two key support levels in the monthly pivot at 104.2 and the daily 200 EMA at around 103.8.

Thoughts:  I will look to SHORT the Eur in pairs on valid TS signals if the EURX breaks, closes and holds below the daily 200 EMA.

I will look to LONG the Eur in pairs on valid TS signals and if the EURX turns to trend upwards, produces a new TS LONG signal and fails to break below the monthly pivot at 104.2.