Trade Week Analysis for 14/10/13

Last week:  Trading from 4 hr and longer term charts when the market are jittery and waiting on US Government news has proved challenging over the last few weeks. Yet again there were only a few TS signals and, in another low momentum week, these were choppy: E/U -20, G/U -50, E/J 120, U/J -20 and A/N -50.

This week:

Monday is a holiday for the US, Canada and Japan so caution will be needed when trading with lighter volumes.

There is a lot of Chinese data scheduled for the week ahead. Such news has the potential to swing momentum and will need watching. Saturday saw the release of much weaker than expected Chinese Trade Balance data and the impact from this on general ‘risk appetite’ will need to be monitored at market open on Monday. You can read more about this here.

There has been increasing chatter about a potential resolution to the US Government shutdown evolving at some stage during next week. The impact from any such news will need to be monitored. Optimism about a possible breakthrough on Friday sent equities rallying, but the USD stalled and currencies remained fairly flat so it would be anyone's guess about how any final resolution will be interpreted by the broader market.

The Euro index is moving up and is just under a major resistance level. A make or break of this level could be a determinant for risk appetite in coming sessions. I reviewed the index yesterday and the write up can be found through the link here.

Silver has closed below the Ichimoku Cloud on 4hr, daily, weekly and monthly charts now and this is a hugely bearish development. The only bright spot for Silver might be a new, albeit weak, bullish Tenkan-Kijun cross on the weekly chat so this is an instrument to watch this week for sure.

Stocks and broader market sentiment:

The daily support trend line on the S&P500 was broken this week but price quickly recovered back above this. This was followed by another bullish weekly candle close above the key support levels of 1,685 and the psychological 1,700 level. So whilst there were some bearish moves this 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. Price has moved up to test this key level now and so things are ramping up here for sure! 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 did break the daily trend line this week but this break was rather short lived. Price quickly recovered and scampered back above the key 1,685 level and also the 1,700 level which seems rather bullish.

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There was a new bearish Tenkan/Kijun cross this week although this cross, positioned above the Cloud, is deemed a ‘weak’ signal.  Price had a brief dip into the Cloud this week but closed the week above the Cloud 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, more significantly now, price is attempting to break up through a major S/R level in the monthly 200 EMA. A break and hold above this key S/R level would be quite bullish. A rejection of this level could prove to be a bearish turning point though.

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 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 and 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 lower region as well before any continued move upwards. It is worth noting that even with the markets being spooked a bit this month price has still only pulled back to the 1,646 level!

Some key events to watch out for include:

• Sat 12^th: IMF meetings. CNY Trade Balance.
• Mon 14^th: watch for any reaction to w/e CNY trade balance/IMF/G20/BoJ /US Government news.  JPY/CAD/USA Bank holiday. CNY CPI.
• Tue 15^th: RBA minutes. GBP CPI/PPI. EUR German economic sentiment.
• Wed 16^th: NZD CPI. GBP employment data.
• Thurs 17^th: GBP retail sales. USD unemployment claims & Philly manufact index.
• Fri 18^th: AUD RBA. CNY GDP/Indust prod. BoJ news.

E/U: Price drifted sideways this week above the 1.35 level and within an ascending triangle pattern on the 4hr charts. This smaller triangle was still within a much larger symmetrical triangle pattern on the monthly/weekly charts. Price broke down from this ascending triangle on Wednesday and gave a new TS signal that failed when it found support at the 1.35 level. Price rallied a bit on Friday and gave another TS signal. Price is trading above the Ichimoku Cloud on the daily but now just below the Cloud on the 4 hr chart which suggests choppiness. The weekly candle closed as an indecision style ‘spinning top’ candle.

The 1.365 level above current price might be a good gauge here. A quick glance at the monthly chart reveals the importance of this level. I would want to see a break, close and hold above this level, along with a new/continuing TS signal, to be confident of any sustainable bullish momentum here.

• There is an open TS signal on this pair. I'm also watching the 1.365 level.

E/J: Price broke down from the symmetrical triangle pattern this week but didn't fall too far as it found support at the 131 level. Price rallied later in the week and produced a new TS signal that has yielded up to 120 pips. Price is now trading above the Cloud on the daily and on the 4 hr Ichimoku Cloud which is bullish. 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 bullish 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. 

A/U: Price was very choppy this week but managed to hold out mostly 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 small bullish candle.

   

The A/U has closed the week above the 0.94 level. I still consider 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 chopped around within a broadening descending wedge to start the week but eventually broke free of this. It eventually got moving with some bullish momentum but this choppy action meant that no clean TS signal was given. Price is trading above the Cloud on the daily and on the 4hr chart which is bullish. 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 lower this week and fell to test the daily support trend line. This move produced a new TS signal that failed though as the trend line support proved too strong. I have relaxed this support trend line now to capture all 4hr movement from this week. Price is trading above the Cloud on the daily but below on the 4hr time frame which suggests choppiness. The weekly candle closed as a bearish 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 the daily trend line and for any new TS signal. 

Kiwi: NZD/USD: Price continued to drift sideways this week along the 0.83 level and in a triangle. It broke up and out of this triangle but didn’t produce a new TS signal so I have redrawn this triangle. The 0.835 level seems to be significant of late too so I have drawn that in as well. Price is trading above the Ichimoku Cloud on the daily and now on the 4hr chart too which is bullish. The weekly candle closed as a Doji candle but above the 0.83.

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 and 0.835 levels and for a new TS signal.

EUR/AUD: Price has again been very choppy this week and holds no appeal for me at all. The E/A is trading below the Cloud on the daily and on the 4hr charts which is bearish. The weekly candle closed as a bearish candle.

• I’m watching for any new TS signal.

The Yen: U/J: Price started the week hovering around the support on the 97 level.  It drifted up wards from midweek and then broke up through a daily bear trend line. Price is now trading in the top edge of the Cloud on the daily and above on the 4 hr frame which suggests choppiness but with a bullish bias. Price is also still struggling to break up and out of the Ichimoku Cloud on the monthly chart. The weekly candle closed as a ‘bullish engulfing’ 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.  I still 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: Price has been choppy this week.  The 1.12 has formed a triple bottom level. 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.

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. Price is trading below the Cloud on the daily but 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 but with a long upper shadow.

• I’m still watching the 1.12 and the 1.145 levels for reaction.

GBP/AUD: This pair has been choppy again this week and also held no appeal for me although last week’s bearish engulfing candle accurately pointed to price action for this week. Price is trading in the bottom edge of the Cloud on the daily and below on the 4 hr chart which suggests further choppiness but with a bearish bias. The weekly candle closed as a bearish candle. The weekly chart still has a ‘Bull Flag’ look to it though 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 was choppy this week and closed below key $21.50 support. I have adjusted the trend lines here but it is still trading within what looks like a bullish ‘descending wedge’. I can still see a possible bullish 'Cup' n' Handle' on the daily chart as well. The $21.50 level is key support and was a turning point back in 2007. Thus, if any new TS ‘short’ signal evolves I’d want to see a break, close and hold below this level before trading.

Silver is now trading below the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts which is very bearish! The next major support level below $20 seems to be down at $15, near the monthly 200 EMA. The weekly candle closed as a bearish candle.

Many traders would be looking to short Silver now from this broken $21.50 level BUT any continued falls with the USD could help to support commodities. Silver and Gold might lose their appeal though even if the USD falls as traders look to dividend paying instruments to trade. A tough one for sure!

Gold: Gold drifted lower this week and fell below the key support of $1,300. It is still trading within what looks like a bullish ‘broadening descending wedge though. Here, again, last week’s bearish engulfing candle was an accurate predictor of this week’s price action.

The $1,300 level is a key level to have broken as it 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, daily and weekly charts and at the bottom edge of the Cloud on the monthly chart so is looking very bearish. The weekly candle closed as a bearish candle. The monthly Cloud may offer some support but if this breaks then that would seem to be a very bearish technical signal indeed!

Many traders would see a break of the $1,300 level as significant and a good level to now short from. As mentioned with Silver above this is a tough one to judge. Any continued falls with the USD might help to boost Gold (and other commodities) BUT there also seems to be a preference for interest/dividend bearing instruments with recent bouts of  falling USD and risk appetite.