Trade Week Analysis for 09/09/13

Last week: There were some great TS signals last week but these were mostly fueled by the rally with the AUD: A/U= 200 pips, A/J= 240 pips and EUR/AUD= 440 pips were just 3 of the signals!

This week: The critical thing to watch for here now is whether there is any continued rally with the USD. The previous week had seen a USD rally shaped mostly by a return of fear with rising Middle East tension in Syria. The rally this last week though was more due to positive US data and renewed thoughts of tapering of QE. Friday’s NFP may have altered this tapering concern somewhat though. One needs to watch for any USD rally and to try and assess whether this is driven out of ‘fear’, due to the Syrian conflict, or due to ‘optimism’ based on any continuing strong US economic data. This will help to shape an understanding of the type of evolving market condition. Any ‘fear’ driven USD rally would most likely see a typical ‘risk off’ type of move with stocks, commodities and the A/U, Kiwi etc falling. A ‘US optimism’ driven USD rally would be harder to predict but would probably see the return of a joint USD and stocks rally. The direction with currencies might be harder to predict though with this latter scenario.

Stocks and broader market sentiment:

There haven’t been any new bearish signals on the S&P500 this week. There are still two main concerns here though that can impact sentiment: the Syrian situation and tapering of QE.  I'm continuing to watch here for further clues as to any new momentum move. In particular I’m looking out for:

S&P500 daily chart: a break of the daily bull trend line. The daily support trend line is still in place here but has been tested, again, this week. I always expected that price could pull back further to test this as part of any continued, overall uptrend. The TS signal to ‘SHORT’ closed off during the week. I would not be shorting this index, on a daily time frame though, until there was a clear break, close and hold below the daily trend line.

I mentioned during the week that this chart is starting to form up a possible bearish ‘Head and Shoulder’ pattern. One ‘shoulder’ and the ‘head’ have formed and I’ll be watching to see if the other shoulder forms up too. The previous ‘high’ of 1,685 is, again, key here. A respect of this resistance level could help to form up the other shoulder. The neckline is at about the 1,577 level and this is the area of the previous highs from back in 2000 and 2007. Confluence!

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There has been a bearish Tenkan/Kijun cross but these crosses, positioned above the Cloud, are deemed ‘weak’ signals. There was not a lot of bearish follow through on the last signal like this, but, still, I’m keeping an eye on it anyway. Price spent the whole week trading within the Cloud. The bottom of the Cloud has acted as some support and needs watching.

EURX monthly chart: a break of the monthly support trend line (see monthly chart). This support trend line is still broken and this can be viewed as a bearish signal BUT the break is also shaping up into a bit of a flag pattern that could be viewed as a 'Bull Flag'. 

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’ still appears quite different to that of the previous two market tops from back in 2000 and 2007. Elliott wave suggest a big correction here though. I am still thinking that the 1,600 level might be the new floor for this index. The saying that ‘Old resistance becomes new Support’ rings for me a bit here. It would not be at all surprising to this 1,600 level tested again. It has only been tested once by a monthly candle since the bullish break and I would expect a significant level such as this to be tested more than this. The August candle has closed above this key level without testing it at all throughout the month. Also, the previous candle close highs from back in 2000 and 2007 were down near the 1577/1580 area so it is entirely feasible that price may test this region again as well before any continued move upwards.

Dark Cloud Cover possibility: There is possible bearish ‘Dark Cloud Cover’ formation that might be setting up here on the monthly S&P500 chart. I have to admit that I haven’t seen many of these patterns follow through but, it bears noting just the same. The September candle close will need to be seen here before this pattern can be confirmed. The very new September candle is currently printing a bullish candle which, at the moment, would not support this pattern. This is just another charting factor to watch out for! I have posted a picture to show the details of this bearish pattern and, also, an enlarged snap of the recent S&P500 monthly candles. The last two candles for July and August only show a small gap but, it is still a gap.

Some key events to watch out for include:

• Mon 9^th Sept: watch for reaction to Aussie election result, Syrian related news and G20 meetings. Also, Chinese trade balance data was released on Sunday and was very positive so look for impact due to this data. AUD: job ads. CNY: PMI & CPI.
• Tues 10^th Sept: no red flag data.
•  Wed 11^th Sept: GBP claimant count change,
• Thurs 12^th Sept: NZD cash rate, AUD employment change, GBP inflation report hearings, USD unemployment claims.
• Fri 13^th Sept: USD retails sales, PPI & consumer sentiment.

NB: Ichimoku Cloud charting discrepancies between my Admiral platform and that of Go Markets have recently been brought to my attention. Go Markets Cloud charts seem to mirror that of other platforms more closely so I am deferring to them where possible. My USDX and EURX indices are only available on my Admiral platform though.

E/U: Price is still trading within two symmetrical triangles on the monthly/weekly charts. Price traded down from the psychological 1.32 level this week but got a late bounce on Friday after NFP. The bearish engulfing candle from the previous week had pointed to such a decline. This bounce was more due to the falling USD than to rising sentiment with the Euro though. The weekly support trend line is still intact and well below current price action. Price is trading above the Ichimoku Cloud on the daily but below on the 4 hr chart which suggests choppiness. The weekly candle closed as a bullish, reversal-style ‘hammer’ candle but still below the weekly 200 EMA and 1.32 level.

• I’m watching for any new TS signal and the 1.32 level.

E/J: Price trended back up to start this week within the symmetrical triangle. Price bounced back down from the upper trend line though and gave a new TS signal to short. This gave 90 pips before bouncing again off the bottom trend line during NFP. Price is now trading just above the Cloud on the daily and in the 4 hr Ichimoku Cloud which suggests choppiness. The weekly candle closed with a bit of a bullish ‘inverted hammer’ look to it but, given that price action has been so choppy and sideways of late, I’m not sure that you can read too much into this candle. I still see the 140 level as a possible target if any bullish sentiment prevails.

• There is an open TS signal on this pair BUT, with any continued bounce in the Euro/fall in USD, I’m still watching the 130 level and for a new TS signal to ‘long’.

A/U: Price rallied from market open this week on the back of some positive data and seems to have formed the ‘double bottom’ that I mentioned last week. The August ‘inverted hammer’ candle pointed to this possibility of a bullish reversal and that has played out so far. Price broke up through a daily bear trend line and made it back up as far as the previous S/R level of 0.92. Price is trading in the Cloud on the daily and above on the 4hr chart which suggests choppiness but with a bullish bias. The weekly candle closed as a large bullish candle.

Aussie election impact: I noted during the week that any majority election result might be bullish for the AUD. This follows on from a hung parliament, leadership challenges and a lengthy electoral campaign. Thus, any clear result, no matter which party pins, might signal relief and, thus, support the AUD.  Well, we have had a decisive win for the Coalition so it will be interesting to see how this translates, if at all, into any AUD momentum. 

Chinese Trade Balance data: this very positive result was released on Sunday. Positive Chinese data often boosts the AUD so look for any bullish follow through with the A/U due to this data as well!

The A/U is currently sitting under the 0.92. A break, close and hold above the 0.92 would be quite bullish. A 50% pullback to the last major swing high would be to about the 0.97 area. This is also the region of the daily and weekly 200 EMA so might be a possible target. 

Further bearish movement below this level would suggest much lower targets though.  As mentioned in previous posts: I don’t see much other 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.

• I’m watching the 0.92 level.

A/J: Price rallied hard this week and traded up to the daily 200 EMA. In doing so it broke through the 89 S/R level and through a daily chart bear trend line. The 89 area 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 now trading in the Cloud on the daily and above on the 4hr time frame which suggests choppiness, but, with a bullish bias. The weekly candle closed as a large bullish candle.

Aussie election impact: the same bullish potential rests here with the A/J.

Chinese Trade Balance data: this very positive result was released on Sunday. Positive Chinese data often boosts the AUD so look for any bullish follow through with the A/J due to this data as well!

Price is currently struggling a bit under the daily 200 EMA but forming up into a possible ‘Bull Flag’ pattern on the 4hr chart. A break, close and hold above the daily 200 EMA would be quite bullish though. A 61.8% pullback from the last major swing high would be to about the 98 area. The 50% fib pullback is in the 96 area. These might be targets for any new bullish moves.

• I’m watching the daily 200 EMA and the flag pattern trend lines.

G/U: Price has chopped upwards this week as it broke out of a descending wedge pattern. Note the spikes though! 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.

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.

Kiwi: NZD/USD: Price bounced up off the monthly chart support trend line to start the week. It chopped up through the weekly 200 EMA and continued to move up from there. It closed the week trading just under the major S/R level of 0.80. The significance of this level can be seen from the daily and weekly chart. Price is now trading above the Ichimoku Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed as a large 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.

Chinese Trade Balance data: this very positive result was released on Sunday. Positive Chinese data often boosts the NZD so look for any bullish follow through with the Kiwi due to this data as well!

I’m watching the 0.80 level and the monthly chart support trend line. There is an open TS signal on this pair.

EUR/AUD: Last week’s reversal ‘shooting star’ pattern was sure on the money! The bullish AUD sentiment meant that price broke down from the ascending triangle pattern early in the trading week. This bearish move produced a new TS signal that gave up to 440 pips and is still going! The E/A is trading in the Cloud on the daily and below on the 4hr time frame which suggests choppiness but with a bearish bias. The weekly candle closed as a large bearish candle.

BTW: The Aussie election result may impact on price action here too. As might the positive Chinese trade balance data.

• There is an open TS signal on this pair.

The Yen: U/J: This pair broke out from trading within a symmetrical triangle pattern this week and gave a new TS signal that has since closed. Price rallied to the S/R and psychological level of 100 but bounced back down to the 50% fib pullback level and 4hr 200 EMA. Any close and hold back above 100 would be quite bullish. Price is now trading above the Cloud on the 4hr but back in the Cloud on the daily time frame which suggests choppiness. Price is also trading near the top edge of the Cloud on the monthly chart although this can form up some tough resistance! The weekly candle closed with a bit of a bearish, reversal-style ‘shooting star’ look to it after a short uptrend.

• I’m watching the 100 level and the top of the monthly Ichimoku Cloud.

AUD/NZD: I'm watching the daily chart here as it seems to be trading in either a 'Bear Flag' of forming up into a reversal pattern. Trend line breaks will help here:

Silver: Price has continued to struggle here this week with the rally in the USD. The weekly candle closed as a small but bullish candle. The current chart looks to be forming a bearish ‘Head and Shoulder’ pattern but a bounce after NFP might have undermined this. Friday’s candle was actually a bullish engulfing candle.

Silver is trading in the Ichimoku Cloud on the 4hr, above on the daily chart but below on the monthly and weekly charts so might be choppy. The next major support level below $20 seems to be down at $15, near the monthly 200 EMA.

Gold: Gold traded this week much the same as Silver. Price has continued to struggle here this week with the rally in the USD. The weekly candle closed as an indecision style Doji candle. The current chart looks to be forming a bearish ‘Head and Shoulder’ pattern too but, like with Silver, the bounce after NFP might have undermined this. Friday’s candle actually formed up a bullish reversal-style ‘tram tracks’ pattern on the daily chart.

Price is still above the key $1,300 level for the time being. 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.

Gold is trading below the Ichimoku Cloud on the 4hr and the weekly chart, above on the daily and back in the Cloud on the monthly so it might also be prone to some further choppiness. As with Silver, any further bullish moves with the USD might cause some problems for Gold. An exception would be though if the USD rally was more due to ‘flight to safety’ sentiment amid continued Syrian concern. Gold might possibly rise in this ‘fear’ related scenario too.