Trade Week Analysis for 30/09/13

Last week: Many of the TS signals to start last week were choppy. This was no surprise to me though as the Indices were aligned for ‘risk on’ yet the signals were more towards ‘risk off’: E/U = -40, E/J= 110, U/J= 40, A/U= 30, Kiwi = 40 GBP/AUD= 50 E/U = -50.

The USD had fallen heavily the week before following FOMC and it did not recover much at all through the week. It did pull back to test the S/R levels of the weekly 200 EMA and weekly pivot but that’s about as far back up as it got. US 'debt ceiling' concern kept trading fairly quiet for the week with some drift towards ‘risk off’ but this negative sentiment never really got a good hold. I reviewed the indices yesterday and the article can be accessed through this link.

I mentioned during the week about ‘watching for Sue’! I've posted the explanation again here: We have a saying in our house....'watching for Sue'. Let me explain: A few years back we were down at my sister's house that was located in a small country town. My husband, brother in law and another bloke went down to the local pub where they spent a few too many hours, sitting in the corner booth of the charming country pub, looking out over fields and the local traffic. When the very jolly blokes eventually arrived back home and were asked why they were down at the pub for so long they replied that they were 'watching for Sue'. Implying they couldn't return home as they were watching out the window of the pub for Sue, the other blokes wife, to arrive by car for the evening BBQ. Sue did eventually arrive but not until much later! So, now, whenever we are waiting and watching out for an event that seems to be taking forever and an age to arrive we refer to it as 'watching for Sue'. These markets still have a 'watching for Sue' feel for me at the moment. Something seems to be building but it's taking its sweet sorry time to get here! So, I'll just keep doing my trading version of 'watching for Sue'! 

This week: Whilst last week was fairly quiet on the news front, this week is less so. In fact, there are a number of events that could trigger some momentum movement and might just result in ‘Sue’ arriving! These include:

• End of month and end of quarter trading on Monday. There are a number of stock and index levels to watch out for here but two stand out from the rest. The S&P500 and the Nikkei (discussed below).
• New month trading on Tuesday.
• US Government budget deadline for Tuesday.
• US Non Farm Payroll on Friday.
• Euro jitters with destabilising events in Italian politics.

Stocks and broader market sentiment:

Stock have come under continuing scrutiny this week as many indices continue to hold above long term highs in what many see as challenging conditions with very mixed global fundamentals. There haven’t been any new bearish signals on the S&P500 this week again though. In fact, there was another bullish signal with a weekly close above the key support of 1,685. The monthly candle does not close until Monday and I’ll be interested to see if price can hold above this key 1,685 to see out the month. The Japan Nikkei is another key index that I discussed during the week as it is trying to break above a major bear trend line that has held since 1991 (extent of my charts). I’ll be watching out for that too:

I still don’t see a confluence of technical signals pointing to any major bearish stock market and, thus, ‘risk’ reversal just yet but I am keeping an open mind. In fact, I actually see more bullish signals than bearish signals at the moment! Having said that though, a major bearish turning point could evolve if the EURX is categorically rejected again by the key resistance of the monthly 200 EMA. With all of this in mind then, I'm continuing to watch out for further clues as to any new momentum move, long or short! In particular I’m looking out for:

S&P500 daily chart: a break of the daily bull trend line. Price continued to trade above both the daily trend line and the key 1,685 level this week which is rather bullish.

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. The bullish Tenkan/Kijun cross has held although this cross, positioned in the Cloud, is deemed a ‘neutral’ signal.  Price held up out of the Cloud this week which is bullish.

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, but it is the ONLY bearish signal I have at the moment.

S&P500 monthly chart: a break of the monthly support trend line (see monthly chart). The monthly trend line remains intact at the moment. 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 but has not evolved as yet. 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 but it is currently printing a bullish candle and has only one trading day to go. 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 30^th: NZD: business confidence.  Check for impact of any US Congress Debt resolution.
• Tues 1^st:  Check for monthly candle close on all instruments. First day of trading month. CNY bank holiday & Manufact PMI. AUD retail sales & cash rate. GBP manufact PMI. USD manufact PMI.
• Wed 2^nd:  CNY bank holiday. AUD building approvals & trade balance. GBP construct PMI. EUR min bid rate & ECB press conf. USD non farm employment & Ben Bernanke speaks.
• Thurs 4^th: CNY bank holiday. EUR German bank holiday. GBP Services PMI. USD non manufact PMI & employment claims.
• Fri 5^th: CNY bank holiday. JPY monetary policy and press conference. USD NFP& unemployment rate.

E/U: I had been hoping for a pullback to the key 1.34 level but this hasn’t happened. Price drifted sideways this week along the 1.35 level and formed up into an ascending triangle pattern on the 4hr charts. This smaller triangle is still within a larger symmetrical triangle pattern on the monthly/weekly charts.  Price is trading above the Ichimoku Cloud on the daily and on the 4 hr chart which is bullish. It is also trading above the weekly Cloud but still just under the monthly Cloud. The weekly candle closed as a ‘hanging man’ candle. These candles can point to either a bearish reversal or simply indicate that price is at a key resistance level. It is worth noting that price closed above the psychological 1.35 level. Trend line breaks and momentum signals should offer guidance here.

• I’m watching for a new TS signal, the triangle trend lines and the 1.35 level.

E/J: Price drifted lower this week and formed up into a symmetrical triangle on the 4hr chart. It tried holding above the key 133 level but fell through to close the week below this support. Price is now trading above the Cloud on the daily but below on the 4 hr Ichimoku Cloud which suggests choppiness. It is trading above the weekly Cloud and is trying to emerge from the top of the monthly Cloud. The weekly candle closed as a bearish coloured ‘inside’ candle. I still see the 140 level as a possible target if any bullish sentiment prevails.  There will be an Interest rate announcement this week for the JPY. This could impact this pair so trading care is needed around that decision.

• I’m watching for any new TS signal, the 133 level and the triangle trend lines.

A/U: Price drifted lower this week and fell back below the 0.94 level. It also formed up into a symmetrical triangle on the 4hr chart but fell down through this triangle late on Friday and gave a new TS signal. Price is trading above the Cloud on the daily but is now below on the 4hr chart which suggests more choppiness. The weekly candle closed as a bearish candle.  

The A/U has dipped back below the 0.94 level and, whilst still above the 0.92 level, this might be viewed as a bearish signal. Further bearish movement back below the 0.92 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 still see that any continued bullish behaviour with the A/U could result in a 50% pullback to the last major swing high at 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. There will be an Interest rate announcement this week for the AUD. A rate hold for the AUD could see this pair bounce so trading care is needed around this decision.

• There is an open TS signal on this pair.

A/J: Price drifted lower this week and fell below a daily support trend line and the 93 S/R level. Price action formed up into a descending trading channel on the 4hr chart.  As with the A/U, price is trading above the Cloud on the daily but is now below on the 4hr chart which suggests more choppiness. The weekly candle closed as a bearish candle. The daily chart also has a bit of a bearish Head & Shoulder look to it.

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. There will be an Interest rate announcement this week for both the AUD and JPY. An AUD rate hold could see this pair bounce so trading care is needed around both of these decisions.

• There is an open TS signal on this pair.

G/U: Price chopped sideways this week along the 1.6 S/R level. Like with many other FX pairs, this action formed up into a symmetrical triangle but one that had more of a ‘Bull Flag’ look to it. Price broke out and up from this triangle on Friday but has not formed a TS signal just yet. Price is trading above the Cloud on the daily and on the 4hr time frame which is bullish. It is still also trading above the Cloud on the weekly chart too. The weekly candle closed as a bullish candle. Price is now only about 300 pips or so below a major, monthly chart, triangle trend line.

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 after the triangle breakout.

Kiwi: NZD/USD: Price drifted lower this week and fell through the support of a daily bull trend line and, also, below the 0.83 S/R level. The significance of this level can be seen on the weekly chart. The choppy action though looks like it is forming up into a bullish pattern of a broadening descending wedge. Price is now trading above the Ichimoku Cloud on the daily but is back in the Cloud on the 4hr chart which suggests further choppiness. The weekly candle closed as a bearish coloured ‘inside’ candle and below the key 0.83 level.

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 trend lines and the 0.83 level.

EUR/AUD: Price continued to chop sideways trading just under the 4hr 200 EMA for most of the week. Price broke out and up through this level on Friday though and gave a new TS signal. The E/A is trading in the Cloud on the daily but above on the 4hr charts which suggests further choppiness. The weekly candle closed as a bullish coloured candle but, with a long lower shadow giving it a bit of a bearish ‘hanging man’ look. There will be an Interest rate announcement this week with the AUD. A rate hold could impact this pair so trading care is needed around that decision

• There is an open TS signal on this pair.

The Yen: U/J: This pair chopped downwards this week within the symmetrical triangle on the daily chart. Price is also trading under a smaller bear trend line on the 4hr chart. Any bullish break up and out of the larger daily triangle would be near the psychological 100 level and the top edge of the monthly Ichimoku Cloud and that is significant. Price is now trading above the Cloud on the daily but below the Cloud on the 4 hr frame which suggests further choppiness. Price is also struggling to break out of the Ichimoku Cloud on the monthly chart. The weekly candle closed as a bearish candle. This pair still looks like it is simply poised and gathering steam before it makes another attempt at breaking through the monthly 200 EMA resistance area.  There will be an Interest rate announcement this week for the JPY so trading care is needed around that decision.

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

AUD/NZD: This pair bounced off the ‘double bottom’ level of 1.12 this week giving a move that netted 180 pips but, sadly, no clean TS signal.  The 1.12 level is a major S/R level as can be seen on the monthly chart. This rally stalled though once price got back up to near the resistance region of the monthly pivot, 4 hr 200 EMA and the S/R level of 1.145. This area was also the 61.8% fib pullback from the last down move too so there were lots of road blocks to price here.

The daily chart has a bit of a bearish Head and Shoulder look to it with the neck line sloping the correct way for a bearish move. This neckline would be around the vicinity of the S/R level of 1.12 so this area is crucial over coming sessions. A respect of this support at 1.12 would give this chart a ‘triple bottom’ appearance though. Price is trading below the Cloud on the daily and on the 4 hr time frame which is bearish. An interesting observation though is that the weekly candle closed as a bullish coloured ‘inverted hammer’ candle. These patterns suggest a potential bullish reversal or may simply reflect that price is at a support level. Either way, it's still interesting!

There will be an Interest rate announcement this week for the AUD. A rate hold could see this pair bounce so trading care is needed around that decision.

• I’m still watching the ‘triple bottom’ area of 1.12.

GBP/AUD: Price broke out and up from the ‘Bull Flag’ pattern this week in a move that gave over 130 pips. The associated TS signal only gave 50 pips though before reversing. There was another rally on Friday again and this triggered yet another TS signal but on my 11pm candle.

Price looks like it wants to make another attempt at taking on the 1.75 S/R level. It failed to break up through this key resistance back last month though. Price is trading above the Cloud on the daily and on the 4 hr chart which is bullish. It is worth noting that price is above the Cloud on the weekly chart too but has just entered a rather thick Cloud on the monthly chart.

The weekly candle closed as a large bullish candle. The weekly chart definitely has more of a ‘Bull Flag’ look to it and the monthly chart clearly shows how the 1.75 S/R level has helped this ‘Flag’ to form up. There will be an Interest rate announcement this week for the AUD and this could impact this pair so trading care is needed around that decision.

• There is an open TS signal on this pair.

Swissie: This is sitting right on top of a major weekly support trend line. It is now below the Ichimoku Cloud on the 4hr, daily, weekly and current monthly time frame which is very bearish indeed! The weekly candle was a bit of an indecision style 'spinning top' though which isn't surprising given it's looking over the edge of a rather big cliff!

• I'm watching the support trend line.

Silver: Silver chopped sideways this week above key $21.50 support and is still trading within what looks like a bullish ‘broadening descending wedge'. Panning out to the daily chart has this wedge forming up the ‘handle’ of what looks like a possible bullish ‘Cup & Handle’! Now, I’ve seen these patterns before and they have not evolved so I’m not getting too excited BUT I’ll be on the lookout for any trend line breaks here.

Price closed the week above support at $21.50. This level looked like it was only recent support on the daily chart but I do note on the monthly chart that it was a turning point back in 2007 so, it may offer some support to price. Thus, if any TS ‘short’ signal evolves I’d want to see a break, close and hold below this level before trading.

Silver is trading in the Ichimoku Cloud on the daily chart but below on the 4hr, monthly and weekly charts so might continue to be choppy. The next major support level below $20 seems to be down at $15, near the monthly 200 EMA. The weekly candle closed as an indecision style ‘spinning top’ candle.

Gold: Gold, like Silver, chopped sideways this week and is also still trading within what looks like a bullish ‘broadening descending wedge'. I don’t see the same, clear cut, ‘Cup & Handle’ pattern here as with Silver though.

Price is still just above the key $1,300 level for the time being which is bullish. 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 now trading in the Ichimoku Cloud on the 4hr, daily and monthly chart but below on the weekly chart so, whilst choppy, it is starting to look more bullish here. The weekly candle closed as a small but bullish engulfing candle. This weekly candle also had a long lower shadow giving it a bit of a bullish, reversal-style ‘hammer’ look to it.