Trade Spotting: Trade Week Analysis for 11/11/13

Last week: There was little momentum to start the week as the markets awaited the ECB rate news and NFP. There were only two new TS signals this week and these were choppy: A/U= -30, AUD/JPY= -40.

There was an interesting sentiment shift on Friday that now seems to view early QE tapering as ‘good news’. Previously, thoughts of QE tapering would lift the USD, spook traders and be negative for stocks. The positive US data on Friday brought early QE tapering thoughts forward again yet, after some initial jitters, bullish stock momentum continued. This same risk appetite wasn't reflected in the FX markets though. I’m curious to see if this new sentiment and pattern continues.

This week:

There was mixed Chinese data released on Saturday. CPI and PPI were worse than expected and Industrial Production was slightly better. Traders will need to see if this feeds any further 'risk off' style sentiment into FX at market open.

The Euro and USD index charts are aligned for short Euro and long USD. I will be looking for FX signals in line with this momentum. See my post about this here.

Stocks and broader market sentiment:

S&P500 stocks struggled a bit during the week and the weekly candle ended up closing as a bullish coloured candle BUT in a bearish ‘Hanging Man’ style. This was after printing a bearish ‘Shooting Star’ as late as Thursday!

I don’t see a confluence of technical signals pointing to any major bearish stock market and, thus, ‘risk’ reversal just yet but I still see a few of warning signals, or flashing lights, so I am keeping an open mind:

Firstly, another possible bearish-style weekly S&P500 candle and,
Secondly, the recent EURX rejection of the monthly 200 EMA. A major bearish turning point could evolve if the EURX is categorically rejected by this key resistance level. This level has been rejected now and so I’m on the lookout for any continued bearish follow through and to see if this sentiment flows into the stock markets at all and,
Thirdly, the divergence between sentiment with stocks versus FX. Or, is this simply just a new market trading paradigm evolving?
Fourthly, the divergence between 'big cap' stocks versus 'small cap' stocks. Money seems to be moving out of small caps as the charts of the small cap ETFs, IWM & GWX, show compared to that of the large cap ETF, SPY. Both IWM and GWX have moved lower over the last two weeks whereas SPY has kept grinding higher. This may just be a 'gathering more steam phase' for small caps BUT it may also be a warning:

IWM: small cap ETF

GWX: small cap ETF

SPY: large cap ETF

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 held above the daily trend line, the key 1,685 level and the psychological S/R level of 1,700 again this week. It is worth noting that a 61.8% fib pull back of this latest bull move would see price back down near the key 1,685 level. The Elliott Wave indicator on my chart is suggesting that such a move is in store for the S&P500. It would not be unreasonable for price to pull back to test this 1,685 region and, in fact, I would see this as a more sustainable outcome for any continued bullish move. My TS system gave a ‘buy’ signal on Monday 21^st but this closed off after Thursday’s close. I do not have any new TS 'sell' or 'buy' signals on the S&P500 daily chart just yet. I am expecting a pull back at some stage and would prefer it sooner rather than later:

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. A bullish Tenkan/Kijun cross though evolved on Wednesday 23rd! This bullish cross is deemed a ‘strong’ signal as the cross was positioned above the Cloud. Price held above the Cloud all week which is still bullish.

EURX chart: The October candle pulled back to close the month out below the major S/R level of the monthly 200 EMA. Price has continued to fall below this S/R level and, also, that of the weekly support trend line. This seems to be a clear rejection and might prove to be a bearish turning point. Until recently, 'risk appetite' for the EURX has generally mirrored that for stocks. Recent divergence between them though may be the beginning of a new trading paradigm here or, I'm just putting this 'out there', it might be an early warning signal for stocks!

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’ holds 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, September and October candles closed above this key level and without testing this at. 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.

Some key events to watch out for include:

Mon 11^th: Check for impact of the mixed CNY w/e data. EUR French Bank Holiday. CAD/USD Bank Holiday(Veteran's Day).
Tue 12^th: AUD Business Confidence. GBP CPI.
Wed 13^th: NZD RBNZ Financial Stability report. GBP unemployment data. GBP BoE Inflation Report.
Thurs 14^th: NZD Retail Sales. USD FED Bernanke speaking. GBP Retail Sales. USD Trade Balance & Unemployment claims. USD Fed Chairman vote.
Fri 15^th: EUR ECOFIN meetings.

E/U: The E/U chopped sideways above a daily support trend line until Thursday’s ECB meeting. The Euro rate cut then saw this pair then fall heavily to close below the trend line. Price is still trading within a larger triangle on the monthly chart though. The October monthly candle of a reversal style ‘shooting star’ candle had pointed to lower prices this week and that is just what we got!

Price closed the week below the psychological 1.35 level and only just above the support of the 1.33 level and weekly 200 EMA. The 1.35 level is a strong S/R level and is also the region of the 50% fib pull back level of the last major down move.

Price is trading above the Ichimoku Cloud on the weekly charts but below the Cloud on the 4hr, daily and monthly charts. There has also been a new bearish Tenkan/Kijun cross on the daily chart. The weekly candle closed as a bearish candle.

I’m watching for any new TS signal and the 1.33 level.

E/J: Like for the E/U, the E/J chopped sideways above a weekly support trend line until Thursday’s ECB meeting. The Euro rate cut then saw this pair then fall heavily to close below the trend line. There is a ‘double top’ look to the daily chart and the break down through the daily support trend line and the 133 area might see further bearish momentum. This pair got a lift on Friday though from the bullish move on the U/J.

Price is now trading in the Cloud on the daily chart and below on the 4 hr chart which suggests choppiness. It is still trading above the weekly Cloud and seems like it’s trying to emerge from the top of the monthly Cloud.

Last week’s bearish engulfing candle pointed to lower prices and this is what evolved. This week's candle closed as another bearish candle but with a long lower shadow suggesting some indecision. I still see the 140 level as a possible target though if any bullish sentiment returns.

I’m watching for any new TS signal and the 133 level.

A/U: The A/U chopped sideways, either side of the 0.95 level, for the most of the week which also happened to be just above the weekly and monthly pivot. USD strength on Friday following NFP though caused the Aussie to slide back below the 0.94 support level. The mixed Chinese data from the w/e may weigh heavy here too.

Price is trading above the Cloud on the daily but below the Cloud now on the 4hr chart suggesting choppiness. There have been new bearish Tenkan/Kijun crosses on the daily and 4hr charts though. The weekly candle closed as a bearish candle.

Further bearish movement holding back below the 0.94 would suggest much lower targets. As mentioned in previous posts: I don’t see much other support until down at 0.92 and 0.90 and, then, 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 and the 0.94 level.

A/J: Price has been very choppy again this week. I’m having trouble seeing any clear pattern with this pair at the moment so I’m leaving it be. The mixed Chinese data from the w/e may weigh heavy here as well.

Price is trading above the Cloud on the daily but below the Cloud on the 4hr chart suggesting choppiness. The weekly candle closed as an indecision style ‘Spinning Top’ candle.

The 50% fib pullback is in the 96 area and price bounced down from this last week. A 61.8% pullback to the last major swing high would be to about the 98 area and this might be a possible target for any continuing bullish moves.

I’m watching for any new TS signal.

G/U: The Cable bounced this week due to some positive GBP data but also struggled due to the USD strength. Price retraced to close back up above the broken 1.60 level and also back up to the broken daily support trend line. I had been expecting a retrace but it went further than I expected and back to the 61.8% fib level of the last down move!

The daily chart had been forming up with a ‘double top’ look to it during the week and now there is a possible ‘double bottom’ look to it as well at the 1.59 area.

Price is trading in the bottom edge of the Cloud on the 4hr and above the Cloud on the daily chart which suggests choppiness. The weekly candle closed as a bullish coloured ‘inside candle’. ‘Inside candles’ reflect indecision.

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 for any new TS signal.

Kiwi: NZD/USD: Price traded higher this week due to some positive NZD data but only made it back to the 61.8% fib level of the latest down move. The daily chart has a bit of a bearish ‘Head and Shoulder’ pattern look to it. The mixed Chinese data from the w/e may weigh heavy here too.

Price is now trading above the Ichimoku Cloud on the daily chart but below on the 4hr charts which suggests further choppiness. As with the A/U, there have been recent bearish Tenkan/Kijun crosses on the daily and 4hr charts. The weekly candle closed as a bearish coloured candle BUT with a bit of a bullish reversal ‘inverted hammer’ look to it though. So, some mixed technical signals here!

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 final level of support if this pair returns to being bearish.

I’m watching for any new TS signal and the daily chart H&S pattern.

The Yen: U/J: This pair was very choppy this week but it finally made a daily and weekly candle close up and out of the triangle pattern. I do believe, though, that whole planet has been watching this triangle pattern evolve and that everyone will be aware of the recent bullish break out!

Price is now trading above the Cloud on the 4hr and daily chart which is bullish. Price is also above the Cloud on the weekly chart and close to emerging out of the Ichimoku Cloud on the monthly chart. The weekly candle closed as a bullish candle but with a long lower shadow.

This pair still looks like it could be 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.

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

U/J and Nikkei: no breakdown on the weekly Nikkei just yet. It did dip below support but scampered back to close the week out above the trend line:

EUR/AUD: Price was choppy again this week and this pair still holds little appeal for me. The daily chart shows how price is still ranging in between the 1.4 and 1.5 levels.

The E/A is trading below the Cloud on the daily and on the 4hr chart which is bearish. The weekly candle closed as a bearish candle BUT with a long lower shadow and, thus, having a bit of a bullish reversal, ‘hammer’ look to it.

I’m watching for any new TS signal.

AUD/NZD: Price chopped lower this week with NZD strength. This pair holds no appeal for me at the moment. Note the Bollinger band squeeze on the 4hr chart!

Price is now trading below the Cloud on the daily chart and 4 hr time frame which is bearish. The weekly candle closed as a bearish candle.

I’m watching for any new TS signal.

GBP/AUD: This pair chopped higher this week with GBP strength but still holds no interest for me at the moment.

Price is trading in the Cloud on the daily chart and above the Cloud on the 4 hr chart suggesting choppiness. The weekly candle closed as a bullish engulfing candle.

I’m watching for any new TS signal.

Silver: Silver chopped sideways this week above the support of the $21.50 level until Friday. NFP helped to boost the USD and this put pressure on Silver. The $21.50 level is key support and was a turning point back in 2007.

Silver is now trading below the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts which is bearish. The weekly candle closed as a bearish candle.

The next major support level below $21.50 seems to be down at $20 and then $15, near the monthly 200 EMA.

I received a TS short signal on my last 4am candle.

Gold: As with Silver, Gold chopped sideways this week above the support of the $1,300 level until Friday. NFP helped to boost the USD and this put pressure on Gold too. As with Silver, last week’s bearish engulfing candle held clues as to price action here this week though!

The $1,300 level remains a key level 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 now trading below the Ichimoku Cloud on the 4hr, daily and weekly chart. It is in the bottom edge of the Cloud on the monthly chart. The weekly candle closed as a bearish candle.