Sunday, November 11, 2012

Trade Week Analysis for 12/11/12

1295 pips from TS signals!
Last week: The USDX rallied late in the previous week, most likely due to US Election uncertainty or thoughts of a possible Romney victory, and continued into last week. This rally triggered a number of ‘risk off’ signals even though there was divergence on the Indices Cloud charts. Reflection on this fact, and a review of the charts, has resulted in another TS Ichimoku Epiphany which I will be documenting on my new blog site. The pip haul for last week was a massive 1295 pips!  Some of these signals are still going.

This week: ‘Fiscal Cliff’ discussion may dictate risk appetite this week and, indeed, until this is  matter is resolved. There is also still the ongoing saga that is 'Europe'. Positive Chinese Trade Balance data, released on Saturday, may promote some ‘risk on’ momentum though. This follows other items of positive Chinese data released earlier in the week.

There is still some divergence on both the EURX and USDX Cloud charts so, with all of these issues, I will be cautious with trading off 4hr charts. There is Ichimoku divergence on some individual currency pair charts too and I would want to see these trading with congruence before taking any of their signals. 

The USDX has broken above the key S/R level of 80.70 and looks bullish. Many Stocks are consequently looking a bit bearish. The S&P500 and Dow are trading below their daily Ichimoku Clouds and below key support levels. The S&P500 closed the week below the key support level of 1,400 and the Dow below 13,000 BUT both are trading above weekly support trend lines. (see my 'Stocks:Nov' page for more charts on these two)

BTW: I have posted a bit of a 'rant' at the bottom of this blog post.

E/U: The monthly bullish inverse H&S pattern is still valid. Price also seems to be forming a bullish inverse H&S pattern on the weekly chart!  Price is trading at the bottom of a trend channel on the daily chart and in a descending wedge on the 4hr chart. Patterns galore! Price is below the Cloud on the 4hr and almost below the Cloud on the daily Ichimoku charts. So, bearish action but some bullish signals.
  • I will look to SHORT the E/U on any new TS signal, if ‘risk off’ remains and if price holds below the daily trend channel.
  • I will look to LONG the E/U on a new TS signal and if ‘risk on’ returns.  

E/J: This pair was quite choppy to start the week, as suspected, but then finally broke below the bull support trend line later in the week and gave a TS signal that delivered up to 120 pips! This signal is still going. Price is trading in the Cloud on the daily chart but well under the Cloud on the 4hr chart.  
  • I will look to LONG the E/J on a new TS signal and if ‘risk on’ returns.
  • I STILL WON’T SHORT the E/J this week given all the persistent rumours about possible BoJ stimulus.

A/U: This pair has been consolidating over recent weeks. It wasn't that long ago that the slightest 'risk off' event sent this pair tumbling. That isn't the case now as is evident by the relatively narrow daily trading range over recent times. There has been a slow but steady de-coupling of this pair from its usual 'risk off' mates, such as the Euro. This can easily be seen with the Euro tumbling over the last week against a rising USD whereas the AUD, whilst choppy, has been quite steady. The Aussie seems to be trying to gather the confidence to 'go it alone'. I see this tension being due to a broadening focus of the country away from traditional sources of influence, such as Europe and the US, to now include a rapidly expanding Asia.

Price is STILL 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. Price is trading above the Cloud on daily and on the 4hr chart. The w/e release of positive Chinese data might give this pair a lift this week.
  • I will look to SHORT the A/U on a new TS signal, if ‘risk off’ returns and if price breaks down from the smaller triangle pattern and closes below the 4hr & daily 200 EMA, weekly pivot and the monthly pivot.
  • I will look to LONG the A/U on any new TS signal. 

A/J: Price broke down below the bull support trend line and the S/R level of 83 last week. There seems to be a possible ‘bull flag' pattern forming on the daily chart though. This would get some support from the w/e release of positive Chinese trade balance data. Price is still trading above the Cloud on the daily chart but is below the Cloud on the 4hr chart. Any BoJ stimulus will most likely help this pair. The daily and weekly  and 4hr 200 EMA and the monthly pivot are below current price and acting as support.
  • 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.

G/U: Price is still trading within a bullish descending broadening wedge pattern on the daily chart.  Last week’s candle was very bearish though. Price is trading below the Cloud on the daily and 4hr chart which is bearish.  There was a TS SHORT signal late last week.
  • I will look to LONG the G/U on any new TS signal and if ‘risk on’ returns. 
  • I won’t chase the SHORT G/U new TS signal.

USD/SGD: Price has continued to be fairly flat and choppy on this pair again this week. This pair is often reported as a 'bell weather' pair for the Asian economy. Price has been trading along sideways, hovering above the triangle trend line on the daily charts, for some time now. Note the narrow daily trading range of late here too. It is much like the A/U in this regard. I suspect they're both biding their time. I'm wondering if this recent Chinese trade balance data might not just give it the kick start to tumble down through this support base and start moving again? Price is trading below the Cloud on the daily chart and above the Cloud on the 4hr chart so, is divergent which spells ‘continued choppy’.  This is exactly what we've had!
  • I will look to LONG the USD/SGD on a new TS signal, if ‘risk off’ remains and if price closes above the Clouds on the Ichimoku charts.  
  • I will look to SHORT the USD/SGD on a new TS signal and if ‘risk on’ returns. 

Swissie USD/CHF: Price has also continued to be very choppy on this pair! That’s the Cloud divergence for you. Price is now trading in the Cloud on daily but still above the Cloud on the 4hr chart, so, is divergent which spells ‘continued choppy’.  
  • I will look to LONG the USD/CHF on a new TS signal, if ‘risk off’ remains and if price closes above the Clouds on both of the Ichimoku charts.  
  • I will look to SHORT the USD/CHF on a new TS signal and if ‘risk on’ returns. 

Loonie: USD/CAD: Price action has continued to be rather choppy on this pair last week as it navigated passing parity with the USD.  Price is trading above the Cloud on the 4hr and the daily chart which is bullish.
  • I MIGHT look to LONG the USD/CAD on a new TS signal, if ‘risk off’ remains and if prices 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. It’s too choppy at the moment though.

EUR/AUD: I started watching this pair again recently. Price is trading just in the bottom of the Cloud on the daily but below the Cloud on the 4hr. This pair gave 170 pips last week. I’m much more interested in this pair this week given that the positive Chinese data, released over the w/e, may boost the AUD relative to the Euro. I'll be watching this pair very closely over the coming weeks.
  • I will look to SHORT the EUR/AUD on any new TS signal.
  • I will look to LONG the EUR/AUD on any new TS signal. 

Gold/Silver: Both Silver and Gold gave TS LONG signals last week that are still going. Caution is needed here though. The recent rally in the metals seems to be out of fear due to ‘Fiscal Cliff’ concerns. Both metals have been rising along with a rising USD which is not the usual correlation. Some will see this situation as a win/ win though:
  • Gold/Silver rallies: Gold rising out of fear due to 'Fiscal Cliff' concerns and, 
  • Gold/Silver rallies: If the ‘Fiscal Cliff’ issues are sorted soon and the USD then falls due to reduced fear, then the metals may revert to the usual correlation of rising against a falling USD.
  • Gold /Silver rallies: further monetary easing.
The only way that I see the metals falling now is if we get a return in confidence and optimism and money then flows into other 'risk on' instruments like stocks and the Aussie etc.


My 'rant' for the week: Optional reading for sure!
I sometime feel that we are witnessing a period not all that dissimilar to what the Industrial Revolution must have been like and with all of the changes that it brought. I’m sure the blacksmiths, Farriers and hay providers of those days weren't too thrilled about the advent of the car. It wasn't much point complaining though. As the saying goes, ‘You can’t stop progress’. In the same way now traditional business, and their business models, are going to need to adapt to survive. The internet has leveled the playing field enormously enabling whole new segments to access the many and varied markets. No longer does a writer have to wait and hope for someone to publish them, they can simply publish themselves online. Traditional store retailers and the print media are just some who are currently struggling to embrace this new medium and to adapt to new business models to enable financial survival. 

This ‘level playing field’ has meant that there are many more participants and all with their various wants and needs but this, too, brings opportunity. Catering to the ‘wants’ and ‘needs’ of the growing middle class within China and India is just one example of this.  Whilst many global communities struggle with their deep economic problems, these abundant opportunities may enable struggling economies to emerge into the new, competitive and exciting technology-based paradigm of the future. 

The continual drip feed of positive data out of China is encouraging and adds to other recent data suggesting the economic down turn may have bottomed, and even be turning back up, for some economies. It appears vital that House Speaker John Boehner, and all Republicans, put politics aside and work in a bipartisan manner with the President and Democrats to resolve the so called US ‘Fiscal Cliff’ issue. This issue is bigger than politics, it's about national survival. This matter needs to be resolved quickly too. Otherwise the US risks falling off the so called ‘cliff’ and tumbling, in ‘free fall’ motion, alongside a falling Europe. The US then risks being relegated to a chapter in history, next to the chapter on ‘Europe and the Euro’, and slotted in somewhere behind chapters on the ‘Roman Empire’. The parent in me wants to say to the US "stop arguing, just get on with it". 

You can deny we’re facing a new world business paradigm and, most possibly, an Asian Century all you like and risk missing out on the action. Or, you can adapt and embrace change and grab on to the coat tails of the Asian move and reap benefit from it in whatever way you can. Europe already seems to be fast losing its relevance in the global landscape as it struggles to solve its significant and many economic problems. We are already starting to see signs of this demise in the dismantling of the correlation between the Euro and the AUD. The Aussie simply needs the confidence to realise it can embrace ‘risk on’ in this Asian century without its usual running mate of the Euro. 

To me, at the moment, it is like the many global economies are lining up for this new race. Call it the ‘New Technology Race’ or the ‘Asian Century Race’ or whatever. Europe, at the moment, seems so sick that it risks not making it to the start line. The US is at the start line but bickering about what ‘fiscal’ shoes to wear. I’d be saying here: ‘hurry up, choose the best shoe and just get going or risk missing out on competing’. Many of the BRICS seems to be already off and running. Some of them are so poor though that they don’t even have shoes but they’re still running! Australia is having a minor shoe crisis of its own though too. It has been used to wearing a ‘mining/resource’ running shoe. Personally, I think we should be choosing more of a ‘cross trainer’. One suited to multi events such as: mining, broadened agriculture, food provision and tourism and service provision. Essentially though, all economies need to get fit and turn up to the start line to be at all competitive. This is where I see the challenge lies for many economies.

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