Choppy markets but still a few hundred pips on offer last week with TradeSpotting!
Last week: The markets were held captive to ‘Fiscal Cliff’ news until Mr Draghi took front and centre spot with downbeat Euro remarks. This sent the Euro and GBP down. The EURX finished the week lower and the USDX higher following this news. The NASDAQ closed below the key 3,000 level but this was mostly due to the poor performance of Apple. Other stocks have closed the week above key support levels: Dow above 13,000 and the S&P500 above 1,400. The VIX is still low and now below 16 and still well below the 20 ‘watermark’ level.
It was yet another rather choppy week on FX too with only a few TS signals and many faded quickly. The EUR/AUD signal from the previous week ended up giving 100 pips, the NZD/USD TS signal also gave 100 pips and is still going. A G/U signal gave up to 80 pips but signals on the A/U and E/J were choppy and short lived at least with little loss. My experience continues to be that these choppy and divergent markets often give good trades off the 30 min charts during the US session. This was the case again with a great 100 pip trade on the EUR/AUD. So, even in choppy conditions, there were still a few hundred TS pips on offer. There were a few TS signals triggered late in the week off the back of the Draghi comments. I won't chase these few 'risk off' signals unless there is a clear new direction for 'risk off' across other currency pairs and other trading instruments.
It was yet another rather choppy week on FX too with only a few TS signals and many faded quickly. The EUR/AUD signal from the previous week ended up giving 100 pips, the NZD/USD TS signal also gave 100 pips and is still going. A G/U signal gave up to 80 pips but signals on the A/U and E/J were choppy and short lived at least with little loss. My experience continues to be that these choppy and divergent markets often give good trades off the 30 min charts during the US session. This was the case again with a great 100 pip trade on the EUR/AUD. So, even in choppy conditions, there were still a few hundred TS pips on offer. There were a few TS signals triggered late in the week off the back of the Draghi comments. I won't chase these few 'risk off' signals unless there is a clear new direction for 'risk off' across other currency pairs and other trading instruments.
This week: The 'Fiscal Cliff' will probably dominate investor sentiment again this week and this fact was reflected in poor US consumer sentiment data out last Friday. This continues to make technical trading quite challenging. Whilst the global economic outlook is indeed grim I still see a technical possibility for a Christmas Rally based on the current set up on the S&P500 weekly chart. A resolution to the Fiscal Cliff could possibly spur such a rally on:
The following 'bellwether' stocks/indices are also holding up for the time being and are above their 200 EMA:
EEM: Emerging markets ETF
FDX: Fedex
IYT: Transport index
So I am currently seeing some 'risk on' and 'risk off' currency moves, choppy stocks action and Cloud divergence to start the week. There is divergence across the USD and Euro indices, across stocks and across various currency pairs with some holding up for 'risk on' and other trading 'risk off. It doesn't look like this week will be at all easy to trade through. I will trade either way and with the dominant sentiment BUT I want to see some greater directional conformity across the broader trading market first. There was some negative Chinese data out over the w/e so it will be interesting to see if this drives sentiment early in the trading week. There is further important Chinese data out on Monday and Friday and US FOMC on Wednesday so, as always, keep an eye on your trading calendar as news seems to be driving the markets at the moment.
BTW: I have posted anew Stocks page for December 'Stocks: Dec'
The following 'bellwether' stocks/indices are also holding up for the time being and are above their 200 EMA:
EEM: Emerging markets ETF
FDX: Fedex
IYT: Transport index
UPS: United parcel Service
So I am currently seeing some 'risk on' and 'risk off' currency moves, choppy stocks action and Cloud divergence to start the week. There is divergence across the USD and Euro indices, across stocks and across various currency pairs with some holding up for 'risk on' and other trading 'risk off. It doesn't look like this week will be at all easy to trade through. I will trade either way and with the dominant sentiment BUT I want to see some greater directional conformity across the broader trading market first. There was some negative Chinese data out over the w/e so it will be interesting to see if this drives sentiment early in the trading week. There is further important Chinese data out on Monday and Friday and US FOMC on Wednesday so, as always, keep an eye on your trading calendar as news seems to be driving the markets at the moment.
BTW: I have posted anew Stocks page for December 'Stocks: Dec'
E/U: The monthly bullish inverse H&S pattern is still valid. Price still seems to be forming a bullish inverse H&S pattern on the weekly chart! Price finally broke up and over the key psychological 1.30 level and the monthly bear trend line this week and gave over 100 pips. The Draghi comments reversed this move though triggering a new TS SHORT and price is now down in the region of the daily and 4hr 200 EMA and the monthly pivot. This signal has already given over 70 pips. Price is back in the Cloud on the 4hr and the daily Ichimoku charts. The weekly candle was a bearish engulfing candle.
- I MIGHT look to SHORT the E/U on THE new TS signal, if ‘risk off’ returns and if price closes below the monthly pivot.
- I will look to LONG the E/U on any new TS signal and if ‘risk on’ returns.
E/J: Price has held out and up from the broken bear trend line of the monthly chart that dated back to mid 2008! Yen easing continues to help this pair. It struggled at the psychological 107 level this week though and then drifted lower after the Draghi comments, giving a new TS SHORT signal. Price is trading above the Cloud on the daily but in the Cloud on the 4hr chart. The weekly candle here was also bearish and engulfing.
- I will look to LONG the E/J on any new TS signal and if ‘risk on’ returns.
- I STILL WON’T SHORT the E/J this week given all the persistent rumours about continuing BoJ stimulus.
A/U: This pair has diverged from its other ‘risk on’ Euro and GBP friends this week. Price has held up above the broken upper trend line of the smaller symmetrical triangle pattern. Price is still trading above the Cloud on daily and on the 4hr chart which is still viewed as bullish. The weekly candle here was bullish and engulfing!
- I will look to SHORT the A/U on any new TS signal and if ‘risk off’ returns.
- I will look to LONG the A/U on any new TS signal.
A/J: Price has been trading within a trend channel for much of the last 2 weeks. This pair is also helped by talk of further easing. Price is trading above the Cloud on the daily and just above on the 4hr chart which is still bullish. Price is getting up close to the bear trend line from the monthly chart and I will be watching this pair for a possible breakout from here. This pair also had a weekly bullish engulfing candle.
- I WON’T SHORT the A/J this week given further possible BoJ stimulus.
- I will look to LONG the A/J on any new TS signal.
G/U: Price broke out from trading within the symmetrical triangle and gave up to 80 pips. The Draghi comments reversed this momentum though too. Price is still trading just below the Cloud on the daily but just above on the 4hr chart. Note the 'shooting star' reversal candle on the weekly chart though!
- I will look to LONG the G/U on any new TS signal.
- I will look to the SHORT the G/U on any new TS signal.
USD/SGD: Price has continued to be fairly choppy on this pair again this week. Price bounced up off the weekly bull support trend line that has been in play since mid last year! Price is still trading below the Cloud on the daily chart and above the Cloud on the 4hr chart so, is divergent which spells ‘potentially choppy’. This is exactly what we've had! The weekly candle here was an indecision style 'spinning top' candle.
- I will look to LONG the USD/SGD on a new TS signal and if ‘risk off’ returns.
- I will SHORT the USD/SGD on any new TS signal.
Swissie USD/CHF: Price had been trading flat along the lower trend line of a symmetrical triangle until the Draghi comments kicked it into life. This gave a new TS signal to go LONG. Price is still trading just below the Cloud on daily and in the top edge of the Cloud on the 4hr chart. The weekly candle was a bullish engulfing candle.
- I MIGHT look to LONG the USD/CHF on THE new TS signal, if ‘risk off’ returns and if price closes and holds above the monthly pivot.
- I will look to SHORT the USD/CHF on any new TS signal.
Loonie: USD/CAD: Price broke down in choppy trade during the week from trading within the smaller of the two symmetrical triangles. This choppy action didn’t produce a clean TS SHORT signal but it has moved down about 50 pips. Price is trading back in the top edge of the Cloud on the daily chart but below the Cloud on the 4hr chart so might continue to be a bit choppy next week.
- 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 the trend line break holds.
Kiwi: NZD/USD: I’m still not a fan of this pair. It traded more cleanly this week though as it broke out and up from its triangle. Price broke out and up during the week from trading just under the bear trend line of a symmetrical triangle as seen on the weekly chart. This TS signal has given up to 100 pips already and is still going. There is also an extra bull support trend line on the daily chart. It is trading above the Cloud on both the daily and 4hr chart which is still viewed as bullish.
EUR/AUD: I started watching this pair again recently. I am finding this to be a good pair at the moment as the Euro and AUD have been diverging a bit. It has also been a good pair when there is this divergence as well as no clear cut 'risk on' or 'risk off' direction. Price is trading below the Cloud on the daily and on the 4hr which is bearish. This pair gave a TS ‘LONG’ signal late last week that gave up to 100 pips. There was a TS signal late last week that is now up about 40 pips.
- I MIGHT look to LONG the Kiwi on the new TS signal, if price holds above the triangle trend line and if ‘risk off’ remains.
- I MIGHT look to SHORT the Kiwi on any new TS signal and if price closes back below the triangle trend line.
EUR/AUD: I started watching this pair again recently. I am finding this to be a good pair at the moment as the Euro and AUD have been diverging a bit. It has also been a good pair when there is this divergence as well as no clear cut 'risk on' or 'risk off' direction. Price is trading below the Cloud on the daily and on the 4hr which is bearish. This pair gave a TS ‘LONG’ signal late last week that gave up to 100 pips. There was a TS signal late last week that is now up about 40 pips.
- I WONT chase this TS SHORT on the EUR/AUD.
- I will look to LONG the EUR/AUD on any new TS signal if price closes above the monthly pivot.
Gold/Silver: The bullish ‘Cup and Handle’ patterns on the weekly charts are still valid for the time being. Silver is holding up better than Gold though. The theory is that the breakout target is equivalent to the depth of the cup. The handle patterns can be seen on the daily charts and this is the area where you can see the bullish breakout.
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