Trade Week Analysis 27/05/13

Last week: The USD rally stalled a bit last week as did that seen recently with stocks. There were only two 4hr TS signals last week: EUR/AUD= 130 and the A/U = -100.

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

The EURX has still failed to hold above the resistance of the 108.5 level. It has also failed to break down through the support of the Ichimoku Cloud on the daily chart.  I’m watching the EURX and these S/R levels to see which way it heads from this point.

Stocks and broader market sentiment:

Stocks were a bit choppy last week. I am still on the lookout for charting signals to warn me of any possible stock correction and/or new market direction and trading sentiment. I don’t have any signals of this AS YET.  The signals I am watching for include:

• Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line (see below) AND 
• Ichimoku S&P500 chart: price to dip below the Ichimoku Cloud (see below).
• EURX monthly chart: a break of the monthly support trend line (see monthly chart).
• S&P500 chart: a break of the monthly support trend line (see monthly chart). A break of this support level would suggest to me of a more severe pull back or correction. The look of this ‘market top’ appears quite different to that of the previous two market tops from back in 200 and 2007. Elliot wave suggest a big correction here though.

S&P500 Ichimoku:

S&P500 monthly: 

I do note that there has been a very early bearish signal by way of a possible minor 3/7 EMA cross on the daily chart. Not all such 3/7 EMA crosses result in significant bearish follow, as I've noted on the chart below, BUT any significant pull back will obviously start as some point with just such a cross!  Friday’s candle though could be viewed as having a bit of a bullish ‘pin bar reversal’ look to it. (See daily chart below). I would want to see a 7/21 EMA cross before getting concerned about more of a pullback that might lead to the signals described above.

Reflection: Stocks, currencies, the USD and Euro were all choppy last week. I'm wondering if this collective choppiness might possibly be pointing to some kind of tipping point? I don’t know which way things will move as there are conflicting signals across the broader instrument indices. As a trend trader though, I simply hope to jump on board the next momentum move once it finally gets going.

Some key events to watch out for include:

Mon 27^th: Holiday USA/UK.

Tue 28^th: USD Consumer confidence.

Wed 29^th

Thurs 30^th: AUD Building approvals & Private Capital expenditure. USD: GDP/employment/home sales data.

Fri 31^st: NZD Business confidence.

Sat 1^st : Chinese PMI

E/U: Price has chopped around this week under the 1.3 level on the back of some positive data and the fact that the USD rally stalled a bit. The weekly bull trend line has managed to support price so far. Price is trading in the Cloud on the 4 hr and only just below on the daily Ichimoku chart which suggests choppiness BUT with a possible bullish bias. The weekly candle closed as a bullish coloured ‘inside’ candle. These candles reflect indecision. There is still the suggestion of a bearish ‘Head and Shoulder’ pattern building on the weekly chart but this has not developed fully as yet. I do find this strange though as there is a bullish ‘inverse Head and Shoulder’ pattern building on the Euro index chart!

• I’m watching the weekly support trend line below current price and the 1.30 level above current price.

E/J: Price action was very choppy this week courtesy of much BoJ chatter. Price is trading above the Cloud on the daily but is now below on the 4hr time frame which suggests further choppiness might be ahead. The weekly candle closed as another indecision style, ‘spinning top’ type of candle but bearish in colour.

• I’m just watching this pair at the moment. I still see 140 as a possible bullish target.

A/U: The falls with the A/U were not as marked this week. The slowdown with the USD rally most likely helped here, as would the slow down with price falls in commodities like silver and gold etc. The A/U pace slowed as it neared the 0.96 level and a look at the weekly and monthly charts show this level to be quite a significant S/R level. A break of this level would be quite bearish for the poor Aussie I think and, apart from whole numbers, I don’t see much support until down at the 0.80 level! The 0.80 is near the 61.8% fib retrace from the last swing low to high level so this isn't too ridiculous a notion! Any continued pause or pull back with the stock market might see price visit these low levels. Price is still trading below the Cloud on the daily and on the 4hr chart which is bearish. The weekly candle closed as a bearish candle. The look of the EUR/AUD chart also doesn't inspire any confidence here either. The monthly candle is currently printing a very large bearish candle and I’ll be keen to see how and where this closes. Any shift back to ‘risk on’ with stocks and the Euro might help to drag the A/U along with it, especially if the USD turns back down.

• I’m watching the 0.96 level.

A/J: Price was very choppy this week as with the E/J. Looking back though you can see there was a clear trend line break at the 100 level out from the bearish descending wedge pattern I had posted about last week.  It would have been a bumpy, albeit almost 300 pip profitable, short trade though for those with deep pockets and wide stops. Price is now trading below the Cloud on the daily and on the 4hr time frame which is bearish. The weekly candle closed as a large bearish candle. The monthly candle is currently printing a bearish engulfing candle so I’ll be keen to see where this closes.

• I’m watching the monthly candle close.

G/U: Price continued to hold out and down from the upwards trend channel.  It was rather choppy this week as it bounced off the major support level of 1.500. The 1.5 level is a hugely significant S/R level as the condensed monthly chart (below) reveals.  It is trading in the bottom edge of the Cloud on the daily but below the Cloud on the 4hr chart which is still a bit bearish. The weekly candle closed as a bearish candle but with long upper and lower shadows that reflects the indecision with this pair. The monthly candle is currently printing a very large bearish candle and I’ll be keen to see how and where this closes. Does anyone else see a possible H&S on the monthly chart?

NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.

• I’m watching the 1.50 level.

Kiwi: NZD/USD: Price has moved 450 pips since the break of the 4hr H&S pattern I had posted about! Price was choppy last week as it bounced around just above the 0.80 level. The weekly chart shows how significant this 0.80 S/R level is. Price is still trading below the Cloud on the daily chart and on the 4hr charts which is bearish. There has been a weak bullish cross on the 4hr Ichimoku chart though!.The weekly candle closed as a spinning top candle reflecting some indecision though. The monthly candle is currently printing a very large bearish engulfing candle and I’ll be keen to see how and where this closes. As with the A/U, any recovery with risk sentiment might help to boost the Kiwi but a fall in stocks would most likely see the Kiwi fall heavily. The 0.78 level would seem to be the next port of call if the 0.80 level is breached. This is the region of the monthly 200 EMA.

• I’m watching the 0.80 level.

EUR/AUD: Price has continued to hold out above the upper trend line of the monthly chart trading channel and the key 1.30 level. It is still trading above the Cloud on the daily and on the 4hr time frame which is bullish. The weekly candle closed as a large bullish candle.

• I’m still watching the 1.30 level for any pull back.

The Yen: U/J: Price chopped sideways again this week and failed to close and hold above the monthly 200 EMA and 103 level. Price is trading above the Cloud on the daily but is now in the bottom edge of the Cloud on the 4hr time frame which suggests further choppiness. The weekly candle closed as a large bearish candle.

• I’m watching the 103 and monthly 200 EMA level.

Silver: Silver has broken below the long term monthly support triangle trend line. Price falls with silver stalled as the USD rally also stalled and as it approached the support of the key psychological $20 level. The weekly candle closed as a long legged Doji candle reflecting some indecision. The next major support after $20 seems to be down at $15, near 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 falls with gold also stalled as the USD rally stalled and as it approached the support of the key psychological $1,300 level. The $1,300 level is the 50% fib pullback from the last swing low to swing high. The weekly candle closed as a small bullish candle. The next major support after $1,300 seems to be down at the whole number, $1,000 level and, after that, at $850 in the monthly 200 EMA.

Oil: Oil is still trading within a symmetrical triangle pattern. There are many fundamental factors that impact Oil though so one would not trade it on this bias alone. The weekly candle closed as a bearish engulfing. Any continued rally with the USD would be bearish for oil. there was a great 4hr trade here though last week: