Trade Spotting: Trade Week Analysis 07/01/13

A great way to start the year: TS signals worth 680 pips in the first week!

Last week: The markets opened the week with a ‘risk on’ gap and delivered some great trades. E/J 150, G/U 130, Gold 150 and the A/J now up to 250 pips. There was a loss on the Kiwi though of -50. The USD then rallied mid week after some Fed comments suggesting that monetary easing may wind down later this year. Those comments seem to have been countered on Friday though and the USD promptly went back to slide mode.

This week: I’ll be watching to see if the usual correlation of a 'falling USD with rising ‘risk' appetite' continues. I’ll also be watching to see which way the USD continues to track; ‘risk on’ or ‘risk off’. This matter was discussed briefly in my previous w/e update on the FX Indices.

I also consider other instruments when assessing the markets mood for 'risk appetite'. US Stocks have been trading up and point to continued positive momentum. All three US indices have held above key levels; the S&P500 above the 1,400 level, the Dow Jones above 13,000 and the NASDAQ above 3,000. This is no guarantee that they will stay at these levels but it is an obvious measure of current market pulse. The S&P500 and Dow Jones are both trading above their daily Ichimoku Clouds which is bullish for continued 'risk on':

Check out the weekly chart of the S&P500! It would not be surprising to see some sort of a pull back after such a bullish week:

London's FTSE has seen a bullish triangle breakout and close above the psychological 6,000 level:

The Aussie market still looks like it is going to try for the whole number 5,000 level too:

The Hang Seng has seen a bullish triangle breakout too:

The VIX, or fear gauge is well down and below the 14 level. I keep saying that I wonder whether this might not surprise us all with a break downwards rather than upwards!

BTW: I have updated my Stocks: Jan page with some weekly price increase data for the stocks I've been stalking.

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! Price is trading within a smaller symmetrical triangle on the weekly chart. Price is still trading above the Cloud on the daily Ichimoku charts but below the Cloud on the 4hr chart so might be choppy to start the week. The weekly candle closed as a bearish engulfing candle but price is still supported by a bull trend line from the triangle pattern.

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

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! BoJ easing continues with Yen pairs though. Price spent much of the week hanging around the weekly 200 EMA. Price closed the week above this level and also above the psychological whole number 115 level. This is a major bullish break up for this pair. Price is still trading above the Cloud on the daily and on the 4hr chart which remains bullish. The weekly candle closed as a bullish candle. I almost have a TS signal to go LONG on the 4hr chart but need to see how this chart opens on Monday.

I WOULD look to LONG the E/J on any new TS signal, if ‘risk on’ returns and if price holds above the weekly 200 EMA.
I STILL WON’T SHORT the E/J this week given the ongoing stimulus.

A/U: I still see this pair trading in a 'bull flag' style pattern on the monthly chart with a monthly bull trend line in place. This pair looked set to rally hard early in the week until the Fed ‘easing’ comments were made. Price started to bounce back on Friday though. Price is trading above the Cloud on the daily and the 4hr chart which is bullish and it is also trading above a bull support trend line on the daily chart. The weekly candle closed as a large bullish engulfing candle and Friday’s candle was a huge pin bar bullish reversal candle. Price also closed above the monthly pivot. These all point to bullish potential for this pair. Watch the Bollinger bands on the 4hr chart though; they are clamping down and could stall price.

I will look to SHORT the A/U on any new TS signal, if ‘risk off’ returns and if price closes and holds below the daily bull trend line.
I will look to LONG the A/U on any new TS signal and if ‘risk on’ returns.

A/J: This pair had a great first week of January. Yen strength continued to help this pair and a new TS signal gave 250 pips this week. This signal really never closed off fully either. Price has closed above the major S/R level of 91.5. Action stalled at this level for some time this week but started moving upwards again late on Friday. The significance of this 91.5 level can be seen on the monthly chart. Price is still trading above the Cloud on the daily and on the 4hr chart which is bullish.

I WON’T SHORT the A/J this week given talk of further BoJ stimulus.
I will look to LONG the A/J on any new TS signal and if price holds above the 91.5 level. (I still have a LONG trade going on this pair)

G/U: I really don’t like this pair. It gave two signals last week; a LONG that I saw and a SHORT that I missed (after the Fed comments). The latter signal gave up to 150 pips though! Price is still trading above the Cloud on the daily but below on the 4hr chart so might continue to be choppy.

I MIGHT look to LONG the G/U on any new TS signal.
I MIGHT look to the SHORT the G/U on any new TS signal.

USD/SGD: Price rallied on the back of the Fed comments last 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 as another bullish candle.

Swissie USD/CHF: This pair also rallied due to the Fed comments but didn’t produce a clean TS signal. It bounced back down from the upper trend line of a symmetrical triangle pattern. Price is trading below the Cloud on daily and above the Cloud on the 4hr chart which suggest further choppiness. The weekly candle closed as a large bullish engulfing candle.

I MIGHT look to LONG the USD/CHF on any new TS signal, if ‘risk off’ returns and if price closes and holds above the triangle pattern .
I will look to SHORT the USD/CHF on any new TS signal.

Loonie: USD/CAD: Price on this pair has chopped around again this week. Price is trading below the Cloud on the daily chart and on the 4hr chart which is bearish. The weekly candle closed as a large bearish engulfing candle.

I WON’T trade the USD/CAD.

Kiwi: NZD/USD: This pair had a choppy week. It is trading above the Cloud on the daily and just above the Cloud on the 4hr chart so is starting to look bullish. The weekly candle closed as a bullish 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’ returns.

EUR/AUD: Price broke down early last week from the flag pattern under the major S/R level of 1.28 but this move didn't produce a clean TS signal. The move generated 200 pips though! The weekly candle was a large bearish engulfing candle.

I will look to LONG the EUR/AUD on any new TS signal.
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 though now. 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 look for the bullish breakout. Both metals again formed weekly candles that were indecision style ‘spinning top’ candles. Note the huge pin bar reversal candle on the daily chart for Silver and a similar candle for Gold.

Whilst the wedge or handle patterns are still holding for both metals they are getting close down to major support trend lines that date back to 2008. The Fed 'easing' comments hurt both metals last week. I’ll be watching them closely to see if the bull trend lines can continue to support price. A breach of these support lines would be most significant indeed and a very bearish signal.

Silver monthly: note the bull trend line