Trade Week Analysis for 03/06/13

Last week: The USD rally traded sideways in a bit of a directionless week. There were a few 4hr TS signals last week but these were very choppy: E/J=-50, A/J=-90, U/J=30, G/U=60, and E/A=-50.

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.

There was better than expected Chinese PI data that was released after the markets closed. The impact of this, if any, will need to be gauged at market open.

Stocks and broader market sentiment:

Stocks sold off quite heavily late on Friday. Whether this was the start of a broader pull back or just month end activity remains to be seen. 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:

• S&P500 daily chart: a break of the daily support trend line.

• 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.

• 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. The May monthly candle looks bearish but is not technically a ‘shooting star’ pattern. 'Shooting star' patterns in an uptrend suggest a bearish reversal but, in this case, the upper shadow does not seem to be the requisite '2x the length of the body'.

Humble musings: AAPL: I'm wondering if this big stock is playing out as some kind of a 'smoking gun' or proverbial 'canary in the coal mine'. It has now closed and held out of its Ichimoku Cloud which is quite a bullish signal and a fellow trader also pointed out the bullish 'inverse Head and Shoulder' pattern. The short term future of this stock might prove to be a metric by which to assess the health of the broader markets:

Some key events to watch out for include: there is a lot of data out this week:

• New monthly pivot levels.
• See what impact the positive Chinese PMI data has on pairs at market open on Monday 3^rd.
• Mon 3^rd : NZD Bank Holiday, AUD retail sales, GBP PMI, CNY PMI and USD PMI.
• Tue 4^th : AUD Interest Rates. GBP PMI, USD Trade Balance.
• Wed 5^th : AUD GDP, GBP PMI, USD employment data and PMI.
• Thurs 6^th : AUD Trade Balance, GBP Interest Rates, EUR ECB conference and Rates data and USD unemployment claims.
• Fri 7^th : USD NFP
• Sat 8^th : Chinese Trade Balance.

E/U: Price has chopped around this week just above the 1.28 level. The weekly bull trend line has managed to support price so far. Price is trading in the bottom edge of the Cloud on the daily but above on the 4 hr Ichimoku chart which suggests choppiness BUT with a possible bullish bias. The weekly candle closed as a bullish candle but with long shadows reflecting some indecision. The monthly candle closed as a bearish candle though and one looking like an ‘inside candle’. 'Inside candles' suggest indecision. There is still the suggestion of a bearish ‘Head and Shoulder’ pattern building on the weekly chart too 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, the 1.28 and the 1.30 levels.

E/J: Price action has chopped around in a triangle pattern this week. Like the EURX index, it gave a false bullish breakout and is now back within the triangle confines. 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 an inverted hammer candle and suggests a possible bullish reversal. The monthly candle closed as a small but bullish candle.

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

A/U: The Aussie chopped around just above the support of the 0.96 level for most of the week with a few dips below this level earlier in the week. Price dipped back down on Friday and closed  @ 0.9567. A weekly break of this level now seems quite bearish for the poor Aussie and, apart from whole numbers, I don’t see much support until down at the 0.83 level! The 0.83 is the monthly 200 EMA. After that there is the 80 level that 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 monthly candle closed as a huge bearish candle. There was some positive Chinese PMI data released on Saturday that might help to add some support to this pair though. So, I’d be cautious shorting here just yet on that fact alone but, also, on the fact that there might be some pullback given there was such a large monthly candle.

• I’m watching the 0.96 level. I don't have a sell signal here yet. I'm waiting to see how the Chinese PMI impacts this pair.

A/J: Price chopped around this week above the 97 level but fell below this on Friday to close lower @ 96.114. 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 closed as an almost bearish engulfing candle.

• I'm waiting to see how the Chinese PMI impacts this pair..

G/U: Price chopped sideways all week above the major support level of 1.500. The 1.5 level is a hugely significant S/R level and price may now have formed a bullish double bottom pattern above this level. It is trading just below the Cloud on the daily but above the Cloud on the 4hr chart which suggests choppiness. The weekly candle closed as a bullish coloured ‘inside candle’ and the monthly candle closed as a bearish coloured ‘inside candle’. 'Inside candles' reflect indecision.

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 for any new TS signal and the 1.50 level.

Kiwi: NZD/USD: Price was choppy again last week as it bounced around just above the 0.80 level. Price fell through this support on Friday though. 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. The weekly candle closed as a large bearish candle. 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 now that the 0.80 level has been breached. This is the region of the weekly 200 EMA. After that, there is the 0.68 region that is the monthly 200 EMA. The monthly candle closed as a large bearish candle. Traders need to see how this pair reacts to the positive Chinese data released over the w/e.

• I’m watching the 0.80 level. I did get a sell signal here on my Sat 3am candle BUT I'd be waiting to see if the positive Chinese PMI impacts here first. 

EUR/AUD: Price continued to grind higher this week. 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, as did the monthly candle.

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

The Yen: U/J: Price chopped sideways again this week within, what looked to me, like a bearish descending triangle. I’m now wondering though if this pattern is looking more like a bearish descending wedge! I have adjusted my trend lines to show this later pattern. I’ll be watching the trend lines to work out which, if any, breakout evolves. Price has still 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 below the Cloud on the 4hr time frame which suggests further choppiness. The weekly candle closed as a bearish candle BUT with some reversal style ‘inverted hammer’ look to it. The monthly candle closed as a large bullish candle.

• I’m watching the wedge/triangle trend lines and the 103 and monthly 200 EMA level.

AUD/NZD: This pair has come to my attention recently. The daily chart reveals how a descending trading channel has now been broken. Whilst I didn't get a clean TS signal to LONG on my 4hr chart I am keeping an eye on this pair. It is trading below the Cloud on the daily chart but above the Cloud on the 4hr chart suggesting some new bullish bias. The weekly candle closed as a large bullish candle; the first such candle for over 10 weeks! The monthly candle closed as bullish, reversal style 'hammer candle'. The 1.2 level seems to be a key S/R level here and, thus, worth watching.

• I'm watching for any re-test of the broken trading channel trend line and the 1.2 level.

Silver: Silver has broken below the long term monthly support triangle trend line. Silver traded sideways for most of the week but with a small, and short lived, bullish burst on Thursday. The weekly candle closed as a bearish candle but with a bullish ‘inverted hammer’ look to it. The next major support after $20 seems to be down at $15, near the monthly 200 EMA. The monthly candle closed as a bearish candle with long lower shadow.

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. Like Silver, Gold traded sideways for most of the week and also with a small, but short lived, bullish burst on Thursday. It has continued to trade above the $1,300 S/R level. The $1,300 level is the 50% fib pullback from the last swing low to swing high. The next major support after $1,300 seems to be down at the whole number, $1,000 level and, after that, at $850 with the monthly 200 EMA. The weekly candle closed as an indecision style Doji candle. The monthly candle closed as a large bearish candle.

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 large bearish candle. Any continued rally with the USD would be bearish for oil. The monthly candle closed as a bearish candle but with a reversal style ‘inverted hammer’ look to it.