Trade Week Analysis for 16/09/13

Last week: There were only a couple of decent TS signals last week:  E/U= 120, the Kiwi continuing on for 280 pips and the E/A continued on for up to 440 pips. A few others new signals were choppy and for little or no gain; E/A=0, U/J = -30 and +50, G/A= 50.

The best trading results came off straight technical moves from broken key S/R levels though. The A/U moved almost 150 pips after breaking the 0.92, the E/J made 100 pips after breaking a triangle trend line, the A/J made 180 pips after clearing the daily 200 EMA and the G/U continued on up to 300 pips after last week’s breaking out and up from the descending wedge pattern. Silver and Gold also had plunges after breaking down from their bearish H&S patterns: Silver dipped $1.80 (180) from the neckline and Gold dipped $60 (600). All of these levels were flagged in last weekend’s post so there were pips for all sorts of traders.  The above trends fell mostly into a traditional ‘risk on’ category. This is not surprising given the USD was trading under the Ichimoku Cloud for most of the week. Charting choppiness can probably be put down to the fact that the Euro index was trading WITHIN the Cloud for most of the week. The USD and Euro indices were reviewed yesterday and this write up can be access through this link.

Last week saw the USD continue to slide back down after topping resistance the week before at the 82.59 level. The USD fell through another key S/R level of 81.70 and is back to trading just above the major weekly support trend line. The Euro broke up to start the week but, then, spent much of the week trying to get up and over the monthly pivot. Stocks went back to rallying along with a falling USD and the S&P500 index tested the key trend line of 1,685 on Thursday. They spent the rest of the week hovering around that level but, quite significantly, closed the week just above this @ 1,688.

This week: FOMC might shape trends this week as the tensions around the Syrian conflict seem to have faded a bit with the latest weapons deal. The critical thing to watch for now is how FOMC, or any major news, will impact the USD. I believe that traders need to watch the USD to help to shape an understanding of the type of evolving market condition. I’m thinking that there are three possible outcomes here this week:

• A ‘fear’ driven USD rally ( due to any renewed Syrian concern or market jitters): would most likely see a typical ‘risk off’ type of move with stocks, commodities and the A/U, E/U, Kiwi etc falling. Gold could benefit here though.
• 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 scenario.
• USD slides on lack of QE tapering clarity: a possible return to conventional ‘risk on’ correlation with a lower USD, higher AUD/EUR/NZD etc and stocks and Gold/Silver/Commodities.

Stocks and broader market sentiment:

There haven’t been any new bearish signals on the S&P500 again 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. Price continued to bounce this week and rallied to test the 1,685 level. Price closed the week above this key level, albeit only just, but this is still a rather bullish close.

The possible bearish ‘Head and Shoulder’ pattern is still printing. 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 continued hold above this key resistance level would void the pattern. We have now had a weekly close above this level and I’ll be watching out for a monthly close above this too. The 'neck line' 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. It looks like another cross, a bullish cross, could be trying to form up here now though! Price rallied and held up out of the Cloud this week.

EURX monthly chart: a break of the monthly support trend line (see monthly chart). This support trend line is still broken and continues to be a bearish signal.

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 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 a possible bearish ‘Dark Cloud Cover’ formation that might be setting up here on the monthly 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 and it is currently printing a bullish candle. Just another thing to watch out for! I have posted an image 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.

BTW: Aussie stock market indices have had a bullish close for the week too and their charts are here.

Some key events to watch out for include:

• Mon 16^th Sept:  JPY Bank holiday. Watch for any positive reaction to the Syrian weapons deal that was brokered over the w/e.
• Tues 17^th Sept:  AUD RBA minutes. GBP CPI. EUR economic sentiment. USD CPI.
• Wed 18^th Sept:  GBP asset purchase votes. AUD building permits. USD FOMC.
• Thurs 19^th Sept: NZD GDP.GBP retail sales. JPY BoJ speech. CNY bank holiday. USD unemployment claims, existing home sales and Philly Fed manufact. Index.
• Fri 20^th Sept:  CNY bank holiday. JPY BoJ speech.

E/U: Price is still trading within two symmetrical triangles on the monthly/weekly charts. Price rallied from market open last week on the back of some positive Chinese data. It passed up through the psychological 1.32 barrier and, then, up through the monthly pivot and weekly 200 EMA. This move also gave a TS signal that delivered up to 120 pips. Price is trading above the Ichimoku Cloud on the daily and on the 4 hr chart which is bullish. The weekly candle closed as a bullish engulfing candle.

• I’m watching for any new TS signal and the weekly 200 EMA.

E/J: Like the E/U, price rallied from market open on the back of positive data. It broke up and out of the symmetrical triangle and, although not producing a clean TS signal, this clear technical break delivered up to 100 pips. Price has subsequently pulled back to the triangle trend line break. The weekly chart shows a candle close right on this triangle trend line. Price is now trading above the Cloud on the daily and the 4 hr Ichimoku Cloud which is bullish. The weekly candle closed as a bullish candle, albeit with a long upper shadow. I still see the 140 level as a possible target if any bullish sentiment prevails.

• I’m watching for a new TS signal.

A/U: Price rallied again from market open this week on the back of positive weekend data and broke up through the 0.92 level. Like the E/J, this move didn't produce a clean TS signal but, this clear technical break from the 0.92 level, delivered up to 150 pips. Price is trading in the Cloud on the daily and above on the 4hr chart which suggests choppiness. I do note, however, that there has been a bearish Tenkan/Kijun cross on the 4hr Cloud chart. Price has tried to break up and out of the daily Ichimoku Cloud but, so far, without success. The weekly candle closed as a bullish coloured candle BUT with a bearish, reversal style, ‘shooting star’ look to it.

The A/U is currently holding above the 0.92 level though and this break, close and hold above the 0.92 can be viewed as quite a bullish signal. 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 for any continuing bullish moves. 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 and for a new TS signal.

A/J: Price rallied hard this week and broke out of a bull flag pattern and traded up through the daily 200 EMA. As with the A/U, this move didn't produce a clean TS signal but, this clear technical break above the daily 200 EMA, delivered up to 180 pips! Also like the A/U, price is trading in the Cloud on the daily and above on the 4hr chart which suggests choppiness and there has also been a bearish Tenkan/Kijun cross on the 4hr Cloud chart. Price has tried to break up and out of the daily Ichimoku Cloud here too but also without success. The weekly candle closed as a bearish, pin bar reversal- style Doji candle. I do also note a bit of a wonky, bearish 'Head and Shoulder' pattern on the 4 hr chart. As with the H&S patterns on Gold and Silver, this one has the neck line sloping the wrong way too but, it didn't stop those from forming up on the metals.

Price closed the week sitting slightly above the daily 200 which may be viewed as a mildly bullish signal. A 61.8% pullback to 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 continuing bullish moves.

• I’m watching the daily 200 EMA, the H&S, and for any new TS signal.

G/U: Price continued upwards last week after breaking out from a descending wedge pattern the previous week. Price is trading above the Cloud on the daily and on the 4hr time frame which is bullish. It has also now closed above the Cloud on the weekly chart too. The weekly candle closed as a large bullish candle. Price is now only 400 pips or so below a major, monthly chart, triangle trend line. The G/U is trading out of the Bollinger bands on the daily and weekly charts so care is needed trading here.

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. I have had a new TS signal to LONG here though. This came through on my Saturday 3am candle just before market close.

Kiwi: NZD/USD: Price continued to rally this week in the open TS ‘long’ signal and managed to break up and over 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 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. 

• There is an open TS signal on this pair that has yielded up to 280 pips.

EUR/AUD: Price chopped sideways this week as both the AUD and EUR traded with some bullish momentum. Price action is trading in a descending channel on the 4hr chart giving this pair a bit of a possible ‘bear flag’ look there or, it could be viewed as a bottoming pattern. Trend line breaks might help offer guidance here.  Price had broken down through a support trend line the week before and this trend line had been in play for 5 weeks. Panning out to the daily chart then though gives this trend line break a bit of a ‘bull flag’ look! Again, trend line breaks will help offer guidance here as will any new momentum signals but, the key thing is, you need to be flexible and to trade what you see.

The E/A is trading in the Cloud on the daily and just below on the 4hr time frame which suggests choppiness. The weekly candle closed as a small, but bullish, candle. The previous TS signal closed this week after delivering up to 440 pips. A further new signal this week failed though.

• I’m watching for trend line breaks and for any new TS signal.

The Yen: U/J: This pair has chopped around this week either side of the S/R and psychological level of 100. There were a couple of TS signals that did little though. Any close and hold back above 100 would be quite bullish. Price is now trading above the Cloud on the daily but back in the top edge of the Cloud on the 4 hr frame which suggests further choppiness. Price is also struggling to break out of the Cloud on the monthly chart. The weekly candle closed as a small bearish candle but with a bit of a bearish, reversal-style, ‘shooting star’ look to it after the recent run up. This pair still looks like it is simply poised and gathering steam before it makes another attempt at trying to break through the monthly 200 EMA resistance area.

• I’m still watching the 100 level, trend lines and the top of the monthly Ichimoku Cloud.

AUD/NZD: This pair broke down from a daily chart trading channel last week in what looks like a continuation ‘Bear Flag’ move. This break gave a new TS signal as well. Price is trading below the Cloud on the daily and on the 4 hr frame which is bearish.

• There is an open TS signal to short.

GBP/AUD: This chart looks rather similar to that of the EUR/AUD. Price has recently broken down through a five week daily support trend line after having bounced back down from the 1.75 level. It was subsequently trading in a 'Bull Flag' like pattern and made a bullish break up and out of from this flag last week but, sadly, this move did not produce a clean TS signal. Price is trading above the Cloud on the daily but in the Cloud on the 4 hr chart which suggests further choppiness.

• I’m watching for any new TS signal.

Silver: Silver had a bad week as Syrian tensions eased and with continued positive US data. The lack of any fear seemed to offset any possible appeal gained from the falls with the USD. The H&S pattern evolved and delivered a fall of up to 180 ($1.80). The weaker US data on Friday though gave both Silver and Gold a bit of a late boost. This may have been as thoughts of continuing QE might have resurfaced. The weekly candle closed as a bearish engulfing candle.

Silver is trading above the Ichimoku Cloud on the daily chart but below on the 4hr, 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.

I would be very careful trading Silver until after FOMC. FOMC may trigger USD moves that could impact here on this metal.

Gold: Gold, like Silver, had a bad week and most likely for the same reasons. The H&S pattern evolved here too and delivered a fall of up to 600 ($60). I had noted during the week that a potential first target for this ‘H&S’ fall might be down to the key psychological $1,300 level. Price actually bounced back up from this region after reaching down to $1,304.58! The weekly candle closed as a large bearish candle but Friday’s candle closed as a bullish, reversal-style ‘hammer’ candle. This candle evolved after some weaker than expected US data and that may have got the markets thinking about continuing QE.  

So, 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 any renewed Syrian concern. Gold might possibly rise in this ‘fear’ related scenario. I would be very careful trading Gold until after FOMC. FOMC may trigger USD moves that could impact here on Gold.