Trade Week Analysis for 22/04/13

Rocky and Bullwinkle stuff:   Choppy....... again!

Last week: We are still in to our 3^rd month now of mostly Cloud divergence, choppy markets, few TS signals yet some good 30 min chart trades during the US session.  Again, there were some TS signals but they were choppy A/U = 100, Kiwi = 100, E/A= 170, E/J= -100, E/U= -100, A/U= - 50 and G/U = -50 and another G/U=-100. This has been a consistent pattern during Ichimoku divergence.

This week: The Ichimoku Charts are still divergent but I’m on the lookout for the next wave of alignment.

The EURX has held out from the Bull Flag pattern and is still above the daily Ichimoku Cloud. I’m watching to see if it can get up through the next barrier of the 108.5 level.

Stocks and broader market sentiment:

I received an e-mail this week warning of a major stock (‘risk on’) correction where the Dow could PLUMMET and fall up to 800 points. I'm no expert for sure and I don't make predictions BUT I’m just not seeing signs of that yet. The EURX, or proxy for 'risk appetite' of late, is still looking a bit bullish at the moment. It is above its daily Cloud and knocking on the 108.5 door. Sure, it may reject this and turn south BUT this hasn't happened yet.

The S&P weekly chart had looked like it was setting up to close with a weekly bearish engulfing candle. This, in fact, did not evolve. Instead we got an indecision style 'inside' candle:

The previous S&P500 pull backs in April and Oct, as seen on the weekly chart above, had two things in common for the index on its daily chart. That is, a cross of the Tenkan-sen (blue) below the Kijun-sen (pink) lines AND price moved below the Cloud (Kumo).  This can be seen on the following two charts:

Thus, the chart signs I’m looking for to warn of any stock pull back, and even of a more significant correction, include the following:

• A TS signal to SHORT on the daily S&P500 chart. Not one yet.

• a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line AND 
• price to dip below the Ichimoku Cloud.

And finally, for a clear sign of a more serious and significant market correction, I'm looking for a break of the monthly S&P500 support trend line (see monthly chart). This would result in serious 'risk off' momentum across the broader markets, stocks, currencies etc:

I'd also expect to see the EURX break through its weekly support trend line (chart above).

BTW: I think it most prudent for traders to have an understanding of market sentiment across both stocks and currencies even if they only trade one of these instruments.

Summary: I don't claim to have any idea what the next major market move will be. I will continue to look for signs of  any momentum shift though and, then, I'll follow along. I'm just not seeing any major commitment yet to either 'risk on' or 'risk off', just a whole lot of choppy indecisive movement.

Some key events to watch out for include:

Monday 22^nd: IMF meetings, US home sales data.

Tuesday 23^rd: Chinese PMI data, EUR PMI data, US new home sales.

Wednesday 24^th: NZD cash rate, AUD CPI, US durable goods data.

Thursday 25^th : GBP GDP,US Unemployment claims.

Friday 26^th : NZD Trade Balance, JPY: BoJ statement, USD GDP.

E/U: Price chopped up and down this week. Price is trading in the Cloud on the daily and in the Cloud on the 4hr Ichimoku chart which suggests some further choppiness. The weekly candle closed as a bearish ‘inside’ candle.

• I’m watching for a new TS signal and the 1.3 level.

E/J: Price has chopped around this week within a symmetrical triangle pattern. Price broke out and up from this triangle on Friday and gave a new TS signal. Price is trading above the Cloud on the daily and on the 4hr time frame which is bullish. The weekly candle closed as a bullish candle.

• The E/J gave a LONG signal on Friday. I‘m watching the 130 level.

A/U: Price fell this week to trade just above the major support level of the trend line from the monthly triangle pattern. Price is trading below the Cloud on the daily and on the 4hr chart which is bearish. The weekly candle closed as a large bearish engulfing candle.

• I’m watching for a new TS signal and for any trend line break.

A/J: Price chopped around this week within a symmetrical triangle pattern but broke out and up from this on Friday. Price is trading above the Cloud on the daily but in the Cloud on the 4hr time frame which is divergent so price might be choppy. The weekly candle closed as a bearish ‘hanging man’ candle. This suggests a bearish reversal for the A/J.

• I’m watching the 103 level.

G/U: Price chopped up and down for most of the week and still appears to be trading within an upwards trend channel.  It is still trading in the Cloud on the daily but is also in the Cloud on the 4hr chart so might continue to be choppy. The weekly candle closed as a bearish engulfing candle. I am wary with shorting this pair though given that the March candle closed as a pin bar reversal or ‘hammer’ style candle. This suggest a reversal to the upside....just to confuse us! The daily chart still has a bit of a ‘Bear Flag’ look to it though!

• NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.
• I’m just watching this pair at the moment, especially the Flag pattern.

Kiwi: NZD/USD: Price chopped downwards this week. It looks to be trading within a symmetrical triangle pattern. I have adjusted this triangle pattern after Friday's failed break out. Price is now trading above the Cloud on the daily but below on the 4hr charts which is divergent so price might be choppy. The weekly candle closed as a bearish candle. Note the daily candle from Friday though. Although only a 'daily' candle it has a 'pin bar' or 'inverted hammer' reversal appearance to it and this, appearing at the bottom of a downtrend, would suggest reversal to the upside.

• I’m just watching for a new TS signal and the triangle trend lines.

EUR/AUD: Price rallied this week. It is trading in the Cloud on the daily but above the Cloud on the 4hr time frame which is divergent and suggesting further choppiness. The weekly candle closed as bullish engulfing candle .

• I’m just watching this pair at the moment.

The Yen: U/J: Price has chopped around this week within a symmetrical triangle pattern but broke out and up from this on Friday. Price is trading above the Cloud on the daily and on the 4hr time frame which is bullish. The weekly candle closed as a bullish candle.

• The U/J gave a LONG signal on my 4am candle. I’m watching the 100 level.

Silver: Silver has broken below the long term monthly support triangle trend line. Price had another major fall this week after closing last week below the major support level of $26. The weekly candle closed as a large bearish candle. Thursday's candle was a 'spinning top' and Friday's was a 'Doji' though reflecting indecision with this metal. The daily chart could also be setting up as a 'Bear Flag' though too. The next major support seems to be down at $15 in the monthly 200 EMA.

Gold: Gold has also broken down through major monthly triangle support that dates back to early 2008. That was a major break down for the metal. Price had another major fall this week after closing last week below the major support level of $1,525. The weekly candle closed as a large bearish candle but with a long tail. Price bounced up of the $1,300 level this week and this is the area of the 50% fib pullback from the last swing high. The next major support seems to be down at the whole number, $1,000 level and, after that, at $850 in the monthly 200 EMA. There might be some pause or even retracement this week though given that price is still well outside the Bollinger bands on the monthly and weekly charts. The daily chart here could also be setting up as a 'Bear Flag' though too.