Trade Week Analysis for 07/10/13

Last week: There were only a few TS signals in a low momentum week and these were choppy: AUD/NZD= 80, A/U= -50, E/A= -50.

For all of the concern surrounding the US Government closure and the turmoil with Italian politics various stock indices are holding up above support. The S&P500 index managed to close above the major support level of 1,685 and the Aussie stock market closed above 5,200 support too. There are, of course, no guarantees that such highs will continue to hold but it is rather noteworthy (read: 'amazing'!) given the current global dynamic.

This week:

Watch out for knee-jerk reaction to any resolution of the US Government shutdown impasse.

Stocks and broader market sentiment:

The S&P500 has managed another bullish weekly close above the support of 1,685 although price did drop below this key level a few times during the week. 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. 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, 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 the daily trend line and price closed for the week above the the key 1,685 level. I do concede that price action is getting closer to the daily support trend line though:

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 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 and September candles closed above this key level without testing it at all. 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: The ‘Dark Cloud Cover’ formation was voided by the bullish candle close for September.

BTW: I have started a new monthly thread for stocks and this can be found here @ Stocks:Oct.

Some key events to watch out for include:

• Mon 7^th: AUD Bank holiday.
• Tue 8^th: NZD business confidence. USD trade balance.
• Wed 9^th: GBP manufact prod. USD unemployment & NFP change
• Thurs 10^th: AUD employment data. GBP cash rate. USD unemployment claims.
• Fri 11^th: USD: retails sales & PPI & consumer sentiment.
• Sat 12^th: IMF meetings. CNY Trade Balance.

E/U: I’d kept hoping for a pullback to the key 1.34 level but this still hasn't happened. Price drifted sideways this week above the 1.35 level and within an ascending triangle pattern on the 4hr charts. This smaller triangle is still within a much larger symmetrical triangle pattern on the monthly/weekly charts. Price broke out and up from this ascending triangle on Thursday and gave about 80 pips before hitting up against another previous S/R level of 1.365. I have drawn in this 1.365 level and, if you cast your eye across the monthly and weekly charts, you can see that this level has been quite a reaction zone over recent times. 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 bullish engulfing candle but with a long upper shadow.

• I’m watching for a new TS signal and the 1.35 & 1.365 levels.

E/J: Price chopped sideways this week and is forming up in a symmetrical triangle pattern. 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 close to emerging from the top of the monthly Cloud. The weekly candle closed as a small bullish candle but with a long upper shadow. I still see the 140 level as a possible target if any bullish sentiment prevails.  

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

A/U: Price broke out and up from the triangle on the 4hr chart but struggled to get going much higher above the 0.94 level. Price is trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed as a bullish engulfing candle.

   

The A/U has closed back above the 0.94 level. I still see that any continued bullish behaviour with the A/U could see 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. 

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’m watching for any new TS signal.

A/J: Price drifted lower this week in a broadening descending wedge on the 4hr chart. Price broke out and up from this wedge pattern late on Friday though. Price is trading above the Cloud on the daily but is below on the 4hr chart which suggests more choppiness. The weekly candle closed as a bullish candle.

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 for any new TS signal.

G/U: Price drifted higher to start the week confirming more of a ‘Bull flag’ break than a ‘double top’. The daily support trend line came under pressure on Friday though and price closed below this support trend line. This move also produced a new TS signal which has yielded almost 100 pips. Price is trading above the Cloud on the daily but is now below on the 4hr time frame which suggests choppiness. The weekly candle closed as a bearish coloured ‘inside’ candle suggesting indecision. Price is now about 450 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.
• There is an open TS signal on this pair.

EUR/AUD: Price has been very choppy this week and held no appeal for me at all. It has struggled under the resistance of the 1.5 level. The E/A is trading below the Cloud on the daily and just below on the 4hr charts which is bearish. The weekly candle closed as a bearish candle.

• I’m watching for any new TS signal.

Kiwi: NZD/USD: Price drifted sideways this week along the 0.83 level and in a sort of broadening descending wedge. Price made a mediocre break out and up from this wedge and closed the week above the 0.83 S/R level. Price is now trading above the Ichimoku Cloud on the daily but in the top edge of the Cloud on the 4hr chart which suggests further choppiness. 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 the 0.83 level.

The Yen: U/J: This pair chopped downwards this week within the symmetrical triangle on the daily chart. Price broke down and out from this triangle on Wednesday but found some support in the 97 level. Price is now trading below the Cloud on the daily and on the 4 hr frame which is bearish. Price is also struggling to break out of the Ichimoku Cloud on the monthly chart. The weekly candle closed as a ‘spinning top’ candle reflecting some indecision. This is hardly surprising given the US Government shutdown situation though. 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.  I do see what looks like a possible bullish ‘Cup ’n’ Handle’ pattern setting up on the weekly chart though.

• I’m watching the 97 level.

AUD/NZD: Last week’s bullish ‘inverted hammer’ weekly candle gave clues to how this pair might start the week. This pair bounced off the ‘double bottom’ level of 1.12 again this week giving a move that netted 150 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 level represents the 78.6% pull back of the last move up from the swing low back in 2005 to the swing high of 2011. Thus, it is major support. In ‘carbon copy’ form as for last week, the rally stalled though once price got back up to near the resistance region of the monthly pivot and 4 hr 200 EMA.

The daily chart still 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 close and hold above the previous S/R level of 1.145 would most likely void this H&S pattern. Continued respect of this support at 1.12 so far has given this chart a ‘triple bottom’ appearance. Price is trading below the Cloud on the daily but is now above the Cloud on the 4 hr time frame which suggests choppiness but with a bullish bias. The weekly candle closed as a bullish candle.

• I’m still watching the ‘triple bottom’ area of 1.12 and the 1.145 level.

GBP/AUD: This pair was very choppy this week as it traded under major resistance of 1.75 and also held no appeal for me. 

Price looks like it wants to make another attempt at taking on the 1.75 S/R level again. It failed to break up through this key resistance back last month though. Price is trading in the Cloud on the daily and below on the 4 hr chart which suggests further choppiness. The weekly candle closed as a bearish engulfing 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.

• I’m watching for any new TS signal and the 1.75 level. 

Silver: Silver chopped sideways this week and closed above key $21.50 support again but after a brief dip below this mid week. It is still trading within what looks like a bullish ‘broadening descending wedge’ but is edging closer to the upper trend line of this pattern. 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 a bit of a bullish reversal style ‘hammer’ candle.

Gold: Gold, like Silver chopped sideways this week and closed above the $1,300 level after a brief dip below. It is 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 above the key $1,300 level for the time being, albeit only just, 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 trading in the Ichimoku Cloud on the daily and monthly chart but below on the 4hr and weekly chart so might be choppy. The weekly candle closed as a bearish engulfing candle.