WARNING: Fundamental news events will most likely undermine all technical analysis for the coming week. There is the US Presidential Election on Tuesday 6th and the Chinese Leadership change on Thurs 8th. There are persistent rumours about further Chinese and Japanese monetary easing to throw into the mix as well. Next week is not one of the better weeks to be relying on technical analysis using longer time frame charts for trading ideas. Continued Ichimoku divergence supports this warning call.
Last week: Divergence on the Indices Cloud charts continued throughout the week and we got the choppy market action that I suspected we would. The pattern of "some great trades on the shorter time frame 30 min charts during the London and US sessions BUT choppy, short lived trends on the 4hr charts" continued throughout the week. This predictable pattern continues to be of great reassurance for me as it further supports the value, and validity, of my TS trend trading system. Some of the great 30 min chart trades are shown below:
Yet again, there were only a few TS signals on the 4hr charts and most of them, apart from the metals, yielded only about 50 pips or so. Some of these signals are still going though. There were a few signals carried over from the week before: E/U 50, USD/SGD 0 and Swissie 40. Then, mid week, there was a G/U signal for 50 pips max and a EUR/AUD signal that gave a max of 70 pips. Signals on Friday produced the most numerous and biggest moves, especially with the metals; E/U 50, Swissie 40, G/U 70, Silver 80+ and Gold 300+! All of these signals are still in play too. I had discussed last Thursday about what I thought looked like ‘bear flags’ developing on the metal charts. These patterns unfolded, like textbook, along with TS signals and yielded almost 400 pips between them! These charts are discussed in more detail below.
Note on the ADX: There was a good example on Friday of the benefit of the ADX as a key part of my TradeSpotting system. The chart below shows the S&P500 on the 30 min time frame. One might have thought from the EMA breakout that the trend, running into the US session, would be to go 'LONG'. The ADX did not give any support to a 'LONG' position though. See arrows on chart. The next momentum move is to go 'SHORT" and the ADX did give confirmation for this move. The ADX is a key part of my TS system:
Note on the ADX: There was a good example on Friday of the benefit of the ADX as a key part of my TradeSpotting system. The chart below shows the S&P500 on the 30 min time frame. One might have thought from the EMA breakout that the trend, running into the US session, would be to go 'LONG'. The ADX did not give any support to a 'LONG' position though. See arrows on chart. The next momentum move is to go 'SHORT" and the ADX did give confirmation for this move. The ADX is a key part of my TS system:
This week: The 'Warning', noted above, outlined significant issues surrounding US and Chinese leadership for this coming week. There is still divergence on both the EURX and USDX Cloud charts as well so I will be cautious with trading off 4hr charts. There is continued Ichimoku divergence on some of the individual currency pair charts too and I would want to see these trading with congruence before I’d trade them.
The USDX has broken above the key psychological and previous S/R level of 80 and looks bullish. Stocks are looking a bit bearish. The S&P500 and is sitting at the bottom of its daily Ichimoku Cloud but the Dow has emerged below and is now sitting just under its Cloud. It is worth noting though that the S&P500 closed above the key support level of 1,400 and the Dow above 13,000. I would want to see these key levels broken before trading ‘risk off’ for stocks.
E/U: The monthly bullish inverse H&S pattern is still valid. Price has broken down from trading within the smaller of two symmetrical triangle patterns though. Price is also now below the key S/R level of 1.3. Price is below the Cloud on the 4hr and embedded in the Cloud on the daily Ichimoku charts, so, is still potentially choppy. There was a TS SHORT signal late last week.
- I will look to SHORT the E/U on THE new TS signal, if ‘risk off’ remains.
- I will look to LONG the E/U on a new TS signal, if ‘risk on’ returns.
E/J: This pair has continued to bounce around this week and is still trading above the bull support trend line. Last week’s candle was an indecision spinning top candle but price has held above the key 103 level. Price is trading above the Cloud on the daily but just under thin Cloud on the 4hr, so, is divergent which spells ‘potentially choppy’.
- I will look to LONG the E/J on a new TS signal, if ‘risk on’ returns and if price closes and holds above the trend line.
- I WON’T SHORT the E/J this week given all the persistent rumours about possible BoJ stimulus.
A/U: Price is trading within two symmetrical triangles, one on the monthly chart and one on the daily chart. Price action is still printing a bull flag pattern on the monthly chart. The down move on Gold helped to pull this pair down on Friday. Price is trading below the Cloud on daily and just above on the 4hr chart, so, is divergent which spells ‘potentially choppy’.
- I will look to SHORT the A/U on a new TS signal, if ‘risk off’ remains and if price breaks down from the smaller triangle pattern.
- I will look to LONG the A/U on any new TS signal, if ‘risk on’ returns and price breaks up, closes and holds above the triangle pattern.
A/J: Price is still trading above a bull support trend line on the 4hr chart and above the significant S/R level of 83. This pair was set to take off after the positive US jobs data but the fall in Gold seems to have stalled this move. Price is still trading above the Cloud on the daily and 4hr chart which is bullish. Any BoJ stimulus will most likely help this pair.
- I WON’T SHORT the A/J this week given rumours of possible BoJ stimulus.
- I will look to LONG the A/J on any new TS signal, if ‘risk on’ returns and if price breaks, closes and holds above the 83.5 level.
G/U: Price is still trading within a descending broadening wedge pattern, which is a bullish pattern, but price is now back below the 1.6 level. Last week’s candle was a bearish inside candle pattern. Price is trading in the Cloud on the daily and below the Cloud on the 4hr chart so the G/U may continue to be a bit choppy. There was a TS SHORT signal late last week.
- I will look to LONG the G/U on any new TS signal, if ‘risk on’ returns and if price breaks, closes and holds above the monthly pivot and 1.6 level.
- I won’t chase the SHORT G/U new TS signal.
USD/SGD: Price has been fairly flat but choppy on this pair again this week. Price is trading below the Cloud on the daily chart and above the Cloud on the 4hr chart so, is divergent which spells ‘potentially choppy’.
- I will look to LONG the USD/SGD on THE new TS signal, if ‘risk off’ remains and if price closes above the Clouds on the Ichimoku charts and above the 4hr 200 EMA.
- I will look to SHORT the USD/SGD on a new TS signal and if ‘risk on’ returns.
Swissie USD/CHF: Price has been very choppy on this pair! That’s the Cloud divergence for you. Price is still trading below the Cloud on daily but above the Cloud on the 4hr chart, so, is divergent which spells ‘potentially choppy’. There was a TS LONG signal last week.
- I WON’T chase the USD/CHF on THE new TS signal.
- I WON”T SHORT the USD/CHF on any new TS signal if ‘risk on’ returns.
Loonie: USD/CAD: Price action has continued to be rather flat and choppy on this pair last week as weel as it sits under parity with the USD. Price is trading in the Cloud on the 4hr but above on the daily charts which is divergent so accounts for the choppiness. I watch this pair but I’m not a huge fan of it. Note the 'spinning top' on the weekly chart! It clearly doesn't know whether to break above or stay below parity.
- I MIGHT look to LONG the USD/CAD on THE new TS signal, if ‘risk off’ remains and if prices breaks, closes and holds above parity.
- I MIGHT look to SHORT the USD/CAD on any new TS signal and if ‘risk on’ returns.
Kiwi: NZD/USD: I’m not a huge fan of this pair but I’m watching it too anyway. Price broke out and up from trading in a trend channel but, yet again for over 2 weeks now, there was little follow through. Price is still trading above the Cloud on the daily and the 4hr chart which is bullish.
- I MIGHT LONG the Kiwi on a new TS signal and if ‘risk on’ returns.
- I MIGHT SHORT the Kiwi on a new TS signal, if ‘risk off’ remains and if price closes below the Clouds.
EUR/AUD: I started watching this pair again recently. Price is still trading in the Cloud on the daily but below the Cloud on the 4hr so it may continue to be a bit choppy. I’ll watch this pair more with the next round of AUD interest rate news and if Gold/Commodities continues to fall. This pair gave a TS signal to short last week.
- I probably won’t trade this pair this week.
Gold/Silver: Both look now to have formed more of a ‘double top’ on their daily charts. I posted about Gold and Silver during the week and commented how they looked to be forming bear flag patterns. They both broke up and out of my flag patterns after my posting BUT I didn't receive a TS signal to go LONG on either of them! The two of them then retraced and then closed below the bottom trend line where I did get a TS signal to go SHORT.
Silver:
Gold:
Silver:
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