Trade Week Analysis for 22/07/13

Last week: There were a few 4hr TS signals last week but the markets are still very choppy. Take a look at the Euro index daily chart (below) and this kind of spells out the broader market sentiment....range bound, undecided and choppy!

This week: I still think the USD, and what ever direction it takes next, will drive short term market sentiment. The USD is stuck under the 84 resistance level and above a weekly bull trend line. I believe that this USD range needs to be broken, one way or the other, to enable any decent new wave of market trend to emerge.

The Ichimoku Charts have chopped in and out of alignment during last week. I’m watching to see if any alignment will return and develop at all and, if so, then I’ll be looking for TS signals in line with this momentum.

The A/U has caught my interest this week. It made a bullish break out of a trading channel last week and two of its crosses, the GBP/AUD and EUR/AUD, gave weekly candles that could be viewed as possible bearish reversal candles or, at least, indecision candles. Any possible bullish moves on the A/U would dovetail in with continued bullish moves on stocks so, I'm on the lookout for any confluence here!

Stocks and broader market sentiment:
The S&P500 has closed the week above a key resistance level and I consider this to be a rather bullish signal. Whether this gives much follow through and, also, translates to other trading instruments remains to be seen though.

I am a trend follower and I'm waiting for the next new trend to emerge so that I can, hopefully, catch a slice of it. I look for a confluence of technical signals across a range of trading instruments that might point to a new market direction but I don't see these forming up in unison just yet. The current topping action across many stock markets has some suggesting that a significant correction is looming. Stocks have had a bit of a pullback but now, to me at least, they look like they might be turning bullish again. The deeper 'pullback' signals I'm watching out for include: 

• S&P500 daily chart: a break and hold below the daily trend line. The trend line was broken temporarily but price has now closed back above this support. I actually spotted a ‘Bull Flag’ here that seems to have evolved. I consider the weekly close above the resistance trend line to be quite significant too. The 1,600 level has held here for some time now and this level might be forming up to be the new 'floor', or support base, for this index.

• Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There was a bearish Tenkan/Kijun cross recently but these bearish crosses, positioned above the Cloud, are deemed ‘weak’ signals. There was not a lot of bearish follow through with this and price has now moved back above the Cloud. There has also been a new bullish Tenkan/Kijun cross, albeit this is a ‘weak’ signal too as it evolved below the Cloud.

• EURX monthly chart: a break of the monthly support trend line (see monthly chart).

• S&P500 monthly 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 2000 and 2007. Elliott wave suggests a bigger correction here though. The May monthly candle looked bearish but is not technically a ‘shooting star’ pattern as the upper shadow is not more than 2x the length of the body.

Some key events to watch out for include:

• Sun 21^st : G 20 meetings and Japanese elections.
• Mon 22^nd: US existing home sales                  
• Tue 23^rd : nil
• Wed 24^th: NZD trade balance, AUD CPI, CNY PMI, EUR PMI, USD new home sales
• Thurs 25^th: NZD cash rate, GBP GDP, EUR business climate, USD unemployment claims and durable goods.
• Fri 26^th: nil

E/U: Price has held above the 1.30 level all week but struggled to get over the 1.32 level. The weekly bull trend line is still supporting price. Price is trading above the Cloud on the daily but in the 4 hr Ichimoku chart which suggests some more choppiness but with a bullish bias. The weekly candle closed as a bullish candle.

• I’m watching the 1.32 level.

E/J: Price chopped upwards from 130 level this week. 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.

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

A/U: The Aussie has managed to hold above the 0.90 level. It actually broke up and out of a descending trading channel during the week. I'm watching to see if it can hold out and up here; above the 0.90 level. This could also be a 'Bear Flag' forming though so trend lines will be important here. A break and hold below the 0.90 level would be quite bearish and, if that fails to hold price, then 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. 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 but is now above the Cloud on the 4hr chart , albeit only just, which suggest choppiness but with a bullish bias. The weekly candle closed as another bullish candle. That makes two in a row after many weeks of decline. Also, the weekly candles on the GBP/AUD and EUR/AUD suggest some possible bullish potential with the AUD. 

• I’m still watching the 0.90 and 0.92 level.

A/J: The A/J has been bullish this week and has bounced again off the 0.89 area. This is the 61.8% fib level from the recent swing high to the last swing low, a previous triangle breakout zone and a major S/R level for the A/J. Price is still trading below the Cloud on the daily but is now above the Cloud on the 4hr time frame which suggests choppiness but with a bullish bias.  The weekly candle closed as a bullish candle. Price seems to be forming up in a triangle on the 4hr chart. I missed a TS signal on this pair last week.

• I’m watching for any new TS signal near whole numbers and the triangle on the 4hr chart.

G/U: Price has held up this week out of the descending broadening wedge that it broke out from last week. Price is still trading below the Cloud on the daily but is now above the Cloud on the 4hr time frame which suggests choppiness but with a bullish bias. The weekly candle closed as a bullish candle.

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 signals.

Kiwi: NZD/USD: Price has been choppy on this pair for weeks now.  Price is still trading below the Cloud on the daily chart but is now above the Cloud on the 4hr charts which suggest choppiness but with a bullish bias. The weekly candle closed as a bullish 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 monthly 200 EMA, at around 0.68, would seem to be the next level of support if this pair returns to being bearish.

• I’m watching for any new TS signals but this pair looks a little ugly at the moment.

EUR/AUD: Price still seems to be trading in some form of a ‘Flag’ or trading channel on the daily chart. It is still trading above the Cloud on the daily BUT only just on the 4hr time frame which is still bullish. The weekly candle closed as a bearish coloured, ‘inside’ candle and one with a bit of a reversal style ‘hanging man’ look to it. This might point to some bullish potential on the AUD!

• I’m still watching the 1.40 level and the flag pattern.

The Yen: U/J: Price bobbed along under the 100 level for the first part of the week but then broke upwards giving a new TS signal. Price is now trading above the Cloud on the daily and on the 4hr time frame which is bullish. The weekly candle closed as a bullish coloured ‘inside’ candle suggesting ‘indecision’.

• I’m still watching the 100 level at the moment.

GBP/AUD: Price seems to be trading within a symmetrical triangle pattern on the daily chart with the apex near the key 1.65 level. It is trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed as a bearish coloured, ‘inside’ pin bar reversal style candle. This, too, might point to some bullish potential for the AUD.

• I’m watching the previous trend line break area and the 1.65 level.

Silver: Silver has broken below the long term monthly support triangle trend line. Silver traded sideways and just under the $20 level for the first half of the week before drifting lower. The weekly candle closed as a bearish coloured ‘inside’ candle suggesting ‘indecision’. The next major support after $20 seems to be down at $15, near the monthly 200 EMA. The current print of the monthly candle is an indecision style 'spinning top'. This is after price bounced off the 78.6% fib retrace level from the last swing high.There is a triangle in play on the daily chart. I'm watching Silver and Gold closely to see if they turn back up on any continued falls with the USD. I'm also stalking some Gold and Silver stocks/ETFs and I wrote about these in a separate post last week.

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 chopped sideways for most of the week and just under the key $1,300 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 in the monthly 200 EMA. The weekly candle closed as a small bullish candle. I’m watching for any close above the $1,300 level as I see that this would be quite a bullish move. The current print of the monthly candle is a bullish candle after a few bearish months. This is after price bounced off the 61.8% fib retrace level from the last swing high. There is a triangle in play on the daily chart. I'm watching Silver and Gold closely to see if they turn back up on any continued falls with the USD. I'm also stalking some Gold and Silver stocks/ETFs and I wrote about these in a separate post last week.

Oil: Oil has now broken from trading within the larger of 2 symmetrical triangle patterns. 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 bullish candle. The softer USD seems to have helped Oil rally over the last few weeks.