Trade Week Analysis for 20/05/13

Last week: The USD continued with its rally throughout last week. Although the Index Ichimoku charts are still divergent there have been a greater number of TS signals produced and these have been more reliable and profitable: E/U= 90, E/J= 50, Swissie=150, G/U =230, Kiwi=170 and A/U= 350 (these were all carried over from the previous week). The only new and closed trade signals from this week were the U/J=0 and Swissie=110.

This week: The USD index has now broken and closed above major resistance in the form of the psychological 84 level and the monthly 200 EMA. There is not much above current price stopping the USD from continuing to rally. That is, until it reaches the major bear trend line of the symmetrical triangle on the monthly chart. Traders will need to pay attention to US Fed news this week to see whether any announcements influence the direction of the USD from this point on:

The Ichimoku Index Charts are still divergent on the daily and 4hr time frames but I’m still on the lookout for the next wave of alignment.

The EURX has still failed to break, close and 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. The USD index would need to turn back down for the EURX to break up above the 108.5 level.

Stocks and broader market sentiment:

Stocks have continued to rally along with the USD whereas currencies have been trading more ‘risk off’. I'm watching to see if stocks and currencies continue trading with this divergence or, whether, one starts to join the other.

With this divergence between stocks and currencies in mind, I am 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 bearish warning 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 AND 
• Ichimoku S&P500 chart: price to dip below the Ichimoku Cloud (chart below).
• EURX monthly chart: a break of the monthly support trend line (see monthly chart through link).
• S&P500 chart: a break of the monthly support trend line (see monthly chart below). 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 2000 and 2007. I am not seeing the chart divergence now that was evident back then. Elliott wave suggests a big correction here though:

In fact, if anything, I had a bullish signal for stocks on the Ichimoku S&P500 daily chart at the start of May with a bullish Tenkan/Kijun cross above the Cloud. Bullish crosses above the Cloud are considered to be more valid signals than bearish crosses above the Cloud:

I am seeing some rather bullish patterns setting up across the stocks markets. I'm having trouble reconciling this against all of the bearish patterns forming up the typical 'risk' currency pairs though. I'll continue to ponder this dilemma!

BTW: I have not been able to get my stocks charting platform to open this w/e. I have updated my Stock and Options trades on my Stocks:May page but without charts. The percentage returns here, for some of these trades, are rather astounding. One of these trades is up 250%!

Some key events to watch out for include: There is a lot of news this week to be mindful of:

• Mon 20^th: EUR/CAD Bank holiday.
• Tue 21^st: AUD RBA minutes, GBP CPI.
• Wed 22^nd: JPY BOJ, GBP Retail Sales data, USD Home Sales, FOMC minutes, Ben Bernanke testifies.
• Thurs 23^rd: CNY PMI, GBP GDP, EUR PMI, USD Unemployment claims, USD new Home Sales, ECB Draghi speaks.
• Fri 24^th: NZD Trade Balance, EUR Business Climate, USD Durable goods, BOJ speech.

E/U: Price opened below the 1.30 level and held below this for most of the week. Price is trading below the Cloud on the daily and on the 4hr Ichimoku chart which is bearish. The weekly candle closed as a large bearish candle. There was a new TS SHORT signal on my Fri 11pm candle.

Price reached to within about 35 pips of touching the major weekly support trend line on Friday before bouncing back up a bit. The 4 hr chart shows a bullish 'pin bar reversal' style candle that formed up late on Friday. I would probably wait to see if this major support trend line is either broken or respected before jumping in to this new TS SHORT signal just here. This support trend line forms up the symmetrical triangle pattern that I have had on my charts for months now. So, a break of this trend line would be most significant indeed. I posted last week also about a bearish Head and Shoulder pattern that seems to be forming up on the weekly chart of the E/U. The neck line for this bearish pattern is below the triangle trend line.

Even with all these bearish signals coming through on the E/U I am conscious of the EURX and how, at the moment, it seems reluctant to fall. The fact that the USD index has broken and closed above significant resistance in the form of the 84 level and monthly 200 EMA is not a good sign for the E/U though. 

• I’m watching the weekly support trend line of the symmetrical triangle pattern. There is a current TS SHORT signal.

E/J: Price bounced sideways along the 132 level all week. Price is trading above the Cloud on the daily and on the 4hr time frame which is bullish. The weekly candle closed as an indecision style, small ‘spinning top’ candle. I still see the 140 level as a possible target here.

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

A/U: Price continued to fall this week following last week's RBA rate cut, the AUD Budget, the ongoing USD rally and the fall with commodities. Price has now fallen through a weekly support trend line and the 98 level.  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 candle.

I have had a 'bull flag' pattern on this monthly chart here for some time now. AUD Monetary policy has worked hard here to lower the AUD and, thus, to undermine this bullish technical pattern though. I might have to let it go. There is much talk about how the AUD should stay above 90 cents BUT, to me, and from the charts, there looks to be very little technical support now before the 83 cents level. The 83 level is the 200 EMA on the monthly chart. Add, to this, the continued bearish look with commodities, Gold especially, then the future for the A/U looks a bit bleak. The other matter niggling here at me too is the bullish, channel breakout on the EUR/AUD monthly chart. This is also suggesting further AUD pain.

I am aware that this current bearish context here for the AUD sits at odds with stocks and the usual correlation that the AUD has with stocks. This is 'curiouser and curiouser' stuff for sure! Are we witnessing the end to this long held correlation between the AUD and stocks or is this just a temporary blip, courtesy of the current 'market topping' choppiness? 

• There is a current signal to SHORT the A/U.

A/J: Price chopped downwards this week under a bear triangle and bear wedge trend line but above the key 100 level. Price broke down through the 100 level for a short time but has closed the week back above this S/R level. Price is trading in the Cloud on the daily but below on the 4hr time frame which is divergent and suggests some more choppiness. The weekly candle closed as a large bearish candle.

• I’m watching the 100 level.

G/U: Price has finally broken down from trading within an upwards trend channel.  It is trading just below the Cloud on the daily and below the Cloud on the 4hr chart which is bearish. The weekly candle closed as a large bearish candle. The daily chart ‘Bear Flag’ has evolved. There was a new signal to SHORT the G/U on my Fri 11pm candle. There is a lot of GBP news and data this week that might impact here so caution is needed with any technical trading but especially off the longer term 4hr charts. The 1.5 level isn't too far below current price either and might offer a lot of support.

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

• There is a current TS signal to SHORT the G/U.

Kiwi: NZD/USD: Price has fallen over 400 pips since the break down from my bearish H&S pattern! Price has now also closed below a major support trend line. Price is now trading below the Cloud on the daily and 4hr charts which is bearish. The weekly candle closed as a large bearish candle. As with the A/U, there does not seem to be much support here now until down at the 68 cent level. The 68 is an area of previous S/R and the vicinity of the monthly 200 EMA.

• I’m watching for a hold below the broken trend line.

EUR/AUD: Price has now closed the week above the upper trend line of the monthly chart trading channel and the key 1.30 level. This represents a significant bullish break for this pair. It is 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 watching to see if price tests the 1.30 level at all again.

• I’m watching the 1.30 level. There is a current TS signal to LONG this pair.

The Yen: U/J: Price chopped sideways and upwards this week to finally close above the major S/R level of 103. Price closed just below the monthly 200 EMA though. This monthly 200 EMA could possibly prove to be a significant resistance level for this pair. Price is 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. There was a new signal to LONG the U/J on my Sat 3 am candle.

• There is a current TS signal to LONG this pair. I'm watching the monthly 200 EMA. 

Commodities: Growing US consumer confidence and the rallying USD are putting a lot of pressure on Gold, Silver and many commodities. Any continued USD rally will continue to put downward pressure on these instruments.

Silver: Silver has broken below the long term monthly support triangle trend line. Price fell for most of the week. The weekly candle closed as a large bearish candle. The next major support seems to be down at $15 in the vicinity of 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 fell this week. The weekly candle closed as a large bearish candle. The next major support seems to be down at the whole number, $1,000 level and, after that, at $850 in the vicinity of the monthly 200 EMA.

Oil: The constant drip of positive USD data might add support for further demand for Oil and, thus, flow on to support price. (no puns intended here!)There are many other factors that impact Oil pricing though so one would not trade it on this bias alone. The weekly candle closed as a bearish style, ‘hanging man’ candle but price is trading under a triangle trend line and looks poised for a possible breakout.