Trade Spotting: Trade Week Analysis 24/12/12

Another fantastic week for TS! An extra 700 pips this week. Over 1,700 pips from the last 2 weeks!

Last week: The markets traded ‘risk on' for most of the week until the USDX got down and close to the huge support level of the weekly chart's H&S neck line. Price action became choppy then and was greatly shaken by the postponement of the Fiscal Cliff vote. Prior to the vetoe though, 'risk on' had been the major move for the last 2 weeks. TS signals from the previous week carried through and delivered a further 700 pips. The E/U gave up to 340 pips, the A/J gave 220, the E/J 550, the EUR/AUD 300 and the Swissie gave up to 150. The EUR/AUD trade is still going. These TS signals all started at the beginning of the wave of ‘risk on’ alignment across both the EURX and USDX Ichimoku Cloud charts. I had been warning about this impending 'Cloud' alignment phenomenon for weeks. I recorded this alignment in my blog on Thursday 13th Dec, two weeks ago, allowing for a monster haul of pips. My observations of high probability and long trending TS signals during such periods has been borne out yet again making me just a tad excited down here!

This week: The Fiscal Cliff will continue to dominate investor sentiment this Christmas week. There are many and varied views about the type of Fiscal deal, if any, that will be struck and, then, whether this will happen before the end of the year or sometime in the beginning of the new year. This continues to make technical trading quite challenging. Markets will be rather thinly traded this holiday and 'Fiscal Cliff' week so I will be cautious with any trading. There are now conflicting signals across the broader markets as well:

Chart patterns across the broader markets are still geared more towards further ‘risk on’ momentum than to ‘risk off’.
The Dow and S&P500 are both still trading above their daily Ichimoku Clouds which is bullish for continued 'risk on'.

Stocks also held above key support levels; S&P500 held above 1,400, the Dow above 13,000 and the NASDAQ above 3,000. Stocks were also up for the month and the week.

The Euro dollar index is holding above its weekly chart's bullish ‘inverse Head and Shoulder’ pattern favouring ‘risk on’.

The USD index though has not yet breached the neck line of its bearish weekly chart's ‘Head and Shoulder’ pattern. It bounced off this level late last week which suggests ‘risk off’.

The weekly candles of a number of currency pairs also point to some possible ‘risk off’ movement.
There is a continual stream of encouraging economic data. The US this week had real estate data, consumption, income, and even durable goods data that all performed better than expected.

BTW: I've sold a few more Puts and bought some Calls but will update my Stocks:Dec page tomorrow when I get some time.

E/U: The monthly bullish inverse H&S pattern is still valid. Price has also formed a bullish inverse H&S pattern on the weekly chart! The TS signal from the previous week continued and this signal delivered up to 340 pips. Price is still trading above the Cloud on the 4hr and the daily Ichimoku charts which is bullish. The weekly candle closed as a bearish ‘shooting star’ style candle and this might point to a bearish reversal.

I will look to SHORT the E/U on a new TS signal, if ‘risk off’ remains and if price breaks down from the flag pattern.
I will look to LONG the E/U on a new TS signal, if ‘risk on’ returns and if price breaks up and out from the flag pattern.

E/J: Price has continued to hold 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. The TS signal from the previous week continued and this signal delivered up to 550 pips. Price is still trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed an indecision style ‘long legged Doji’ and may indicate a reversal is looming. BoJ easing continues with Yen pairs though. The 111 level is hugely significant level for this pair being a major S/R level going back for some years. The longer this pair stays at, or above, this level then the more likely it will be to move on and up from here.

I will look to LONG the E/J on any new TS signal, if ‘risk on’ returns and if price breaks out and up from the flag pattern.
I STILL WON’T SHORT the E/J this week given the ongoing stimulus.

A/U: Price failed to break out and up from the symmetrical triangle pattern. Price has now reversed from hovering under this breakout level and has broken down through a bull support trend line that has been in place for the last few months. This move down did not produce a clean TS signal though. Price is trading above the Cloud on daily but below the Cloud on the 4hr chart so this pair may continue to be choppy. The weekly candle closed as a large bearish engulfing candle.

I will look to SHORT the A/U on any new TS signal and if ‘risk off’ remains.
I will look to LONG the A/U on any new TS signal and if ‘risk on’ returns.

A/J: This pair broke up and out over a bear trend line last week that has been in force since mid 2007! The TS signal from the previous week continued and this signal delivered up to 220 pips. Price is trading above the Cloud on the daily but in the Cloud on the 4hr chart so price action may become more choppy. I would not be surprised to see price re-test this broken trend line at around the 87 level before any continuation move. I will look out for such a pullback move and put an order in to LONG @ 87.

I WON’T SHORT the A/J this week given further BoJ stimulus.
I will look to LONG the A/J on any new TS signal.

G/U: Price rallied for most of the week on a move that did not ever produce a clean TS signal. Price broke down from a flag pattern though after the vetoed Fiscal Cliff vote. This move produced a large candle and a new TS signal to short that I am wary of. Price is now trading above the Cloud on the daily but only just above on the 4hr chart which is still seen as bullish. This pair has been messy lately though. The weekly candle closed as a bearish ‘shooting star’ candle that may support a bearish reversal move.

I MIGHT look to LONG the G/U on any new TS signal.
I WON’T look to the SHORT the G/U on this new TS signal due to the large signal candle.

USD/SGD: Price has continued to be fairly choppy on this pair again this week. I am not looking to trade this pair this week but will just keep an eye on it for any new trend. The weekly candle closed an indecision style Doji. The 4hr chart might make a nice geometric wallpaper pattern and the weekly chart could be used as a yard stick maybe?

Swissie USD/CHF: The TS signal from the previous week continued and this signal delivered up to 150 pips. Price is still trading below the Cloud on daily and on the 4hr chart which is bearish. A new TS signal to LONG is trying to form. The weekly candle closed as an indecision style Doji as well.

I MIGHT look to LONG the USD/CHF on any new TS signal and if ‘risk off’ remains.
I will look to SHORT the USD/CHF on any new TS signal.

Loonie: USD/CAD: Price on this pair traded up most of the week whilst the USD was moving down. Price is trading in the Cloud on the daily chart but above the Cloud on the 4hr chart so might be choppy. The weekly candle closed as a bullish engulfing candle.

I WON’T trade the USD/CAD.

Kiwi: NZD/USD: I’m not a huge fan of this pair but I’m still watching it. Price broke out and up three weeks ago from trading within a symmetrical triangle on the weekly chart. Price fell most of last week but without producing a clean TS signal and has now fallen back into the triangle pattern. Price has also closed below a bull support trend line that has been in play for the last 2 months. It is trading above the Cloud on the daily but below the Cloud on the 4hr chart so might be choppy. The weekly candle closed as a large bearish engulfing candle.

I MIGHT look to LONG the Kiwi on any new TS signal and if ‘risk on’ returns.
I MIGHT look to the SHORT the Kiwi on any new TS signal and if ‘risk off’ remains.

EUR/AUD: I started watching this pair again recently. Price is trading in the Cloud on the daily and above the Cloud on the 4hr which is mixed. The TS signal from the previous week continued and this signal has now delivered up to 300 pips and is still going! Price has now broken and held above a major trend line on the monthly chart. The weekly candle was a large bullish candle.

I WONT chase this TS LONG on the EUR/AUD.
I will look to SHORT the EUR/AUD on any new TS signal.

Gold/Silver: The bullish ‘Cup and Handle’ patterns on the weekly charts are still valid for the time being. The ‘handle’ part for both metal charts seems to be forming a bullish broadening ascending wedge pattern. 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. Both metals formed weekly candles that were large and bearish but both also held above major trend line support.

Silver: weekly