Trade Week Analysis for 18/11/13

Last week:  There were a few TS signals last week and they were quite productive: Silver: 90 pips, Gold 220 pips, two signals on the E/J=75 & currently 100, Cable= 70, U/J =50 and AUD/JPY=80.

Context: I've had a little more time drafting this review and, hence, it is embellished a bit here and there. Our Gen Y son has finished exams and is celebrating here with 15 or so friends. As a result, my husband, myself and the slightly traumatised dog are bunkered in the front of the house whilst listening to teens singing and this thumping through the rooms and even vibrating through the floorboards! 

This week:

It seems that thoughts of early US QE tapering faded this week. This has held the USD in check, boosted stocks and hinted at some more possible ‘risk on’ momentum. I’m watching to see if this sentiment continues and if the 'Bernanke Put' remains in place. I've got a lot to thank Mr Bernanke for, as I'm sure many others do as well. Our family has had a bit of fun this weekend deciding which Italian village to ski in next Christmas, all thanks to Ben and his Put.

I’m also watching to see if the renewed positive correlation between the U/J and Nikkei continues and if the positive correlation between the Nikkei and S&P500 continues. There seems to be a new and Holy Trinity alignment among the three of them.

NB: My Go Markets MT4 charts show a late plunge on the Kiwi. I'm not sure this is accurate though.

Stocks and broader market sentiment:

S&P500 stocks had a strong week and printed new ‘highs’. The daily support trend line, the key support level of 1,685 and the psychological 1,700 level all held for the week again. The index seems like it is now aiming for another psychological level in the 1,800 mark.

I still don’t see a confluence of technical signals pointing to any major bearish stock market and, thus, ‘risk’ reversal just yet. I did mention a few warning signals last week but these seem to have faded. I'll explain this here:

1. Firstly, the bearish weekly S&P500 candle of 2 weeks ago was replaced by a bullish candle last week. 
2. Secondly, the recent EURX rejection of the monthly 200 EMA. This index has retraced to trade back up near this zone now. Rejection may still evolve but it hasn't just yet!
3. Thirdly, the divergence of sentiment between stocks versus FX. This divergence faded a bit last week. Stocks continued on their bullish pathway and, late last week, there seemed to be a shift in sentiment with FX to possibly journey back along the same path. I do see some traders preparing for big 'risk off' moves though. I'm not making any prediction here. I'm simply stating what seems to be building back up. I'm a trend follower and will wait for a momentum move to develop but....the question I'd like to ask other traders though is this!
4. Fourthly, the divergence between 'big cap' stocks versus 'small cap' stocks of the previous week faded last week. The small cap indices, GWX and IWM, put in bullish candles this week along with the larger cap SPY.

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: Price held above the daily trend line, the key 1,685 level and the psychological S/R level of 1,700 again this week. The index seems to have the 1,800 level in its sights! It is worth noting that a 78.6% 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 during last week after the Wednesday 13^th November candle close. I was away last week and have only just noted this signal now though.

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 back on Wednesday 23^rd October! This bullish cross was deemed a ‘strong’ signal as the cross was positioned above the Cloud and this signal has delivered a strong performance. 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 is still below this S/R level and, also, that of the weekly support trend line BUT it has retraced back up quite a bit this week. I’m watching to see if this S/R zone is simply being tested before further falls or, whether, the index continues on with this bullish momentum. My FX Indices Review can be found here.

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 18^th: nil
• Tue 19^th: AUD RBA minutes, EUR Economic Sentiment, USD Ben Bernanke speaks.
• Wed 20^th: GBP Bank Rate votes. USD CPI, retail sales, existing home sales & FOMC minutes.
• Thurs 21^st: CNY PMI. JPY BoJ statement & conference. EUR PMI. AUD RBA Stevens speaks. USD PPI, unemployment claims & Philly Fed manufact index.
• Fri 22^nd: EUR German IFo Business Climate.

E/U: The E/U chopped sideways above the support of the weekly 200 EMA. It drifted up towards the 1.35 level on Thursday but closed the week below this key psychological S/R level. 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 shaped up to trade within a smaller triangle on the 4hr charts this week and price broke out and up from this pattern on Friday. There was not a lot of momentum with this break though given the 1.35 S/R level was in its path. The E/U is still also trading within a larger triangle on the monthly chart. Price held below a broken daily bull trend line but has retraced back up to this level this week.

Price is trading above the Ichimoku Cloud on the weekly and daily charts, in the Cloud on the 4hr chart and below the Cloud on the monthly chart. There was a bearish Tenkan/Kijun cross on the daily chart recently but there has also just been a bullish cross on the 4hr chart. The weekly candle closed as a bullish engulfing candle. Just FYI here: A lot of traders will be 'shorting' this pair from 1.35. I don't try to pick tops or bottoms. I'm a trend follower and will wait for a momentum shift, up or down, knowing I'll miss the first bit of any move. That's ok by me.

• I’m watching for any new TS signal and the 1.35 level.

E/J: Price drifted higher this week and seems to have benefited from U/J strength. There was a ‘double top’ look to the daily chart but price is now up trading in a possible ‘triple top’ zone. There is also a ‘double bottom’ look to the daily chart!

The E/J has closed the week back above the major S/R level of 135 and I’ll be watching to see if price can hold above this key level.

Price is now trading above the Cloud on the 4hr, daily and weekly charts and is trying to emerge from the top of the monthly Cloud.

The weekly candle closed as a bullish engulfing candle. I still see the 140 level as a possible target though if any bullish sentiment returns.  

• There is an open TS signal on this pair.

A/U: The A/U drifted down to test the 0.93 level this week. This happened to be the region of the neck line of the daily chart Head and Shoulder pattern. Price has bounced off this ‘neck line’ region and looks very close to forming a new TS signal.

Price is trading above the Cloud on the daily but below the Cloud now on the 4hr chart suggesting choppiness. The weekly candle was bearish but closed with a bit of a bullish ‘hammer‘ look to it.

Further bearish movement back below the 0.93 and the H&S neck line would suggest much lower targets though. 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, the H&S pattern and the 0.93 level.

A/J: Price chopped sideways again at the start of the week but then trended up forming a new TS signal.

Price is now trading above the Cloud on the daily and the 4hr chart which is bullish. The weekly candle closed as an, essentially, bullish engulfing candle. 

The 50% fib pullback of the last major down move is in the 96 region. A 61.8% pullback would be to about the 98 area and these might be possible targets for any continuing bullish moves.

• There is an open TS signal on this pair.

G/U: The Cable drifted lower with USD strength this week and tested a recent support zone. Price bounced back up from there though and also back up above the 1.60 level. The daily chart had been forming up with a ‘double top’ look to it during the week and now a ‘triple bottom’ seems to have evolved.

The Cable is back to trading less than 300 pips below a major trend line of a triangle pattern on the monthly chart. The daily chart show the Cable to be trading in a sort of a 'Bull Flag' pattern as it gathers momentum to possibly consider another attempt to try and break up through this trend line.

Price is trading above the Cloud on the 4hr and daily charts which is bullish. The weekly candle closed as a bullish candle.

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.

Kiwi: NZD/USD: The Kiwi also drifted lower with USD strength this week and back down to test a recent support zone of the neck line of the daily chart’s bearish ‘Head and Shoulder’ pattern. It bounced up from this support mid week but had a late plunge on Friday. I’m not sure of reasons for this late fall.

Price is now trading above the Ichimoku Cloud on the daily chart but below on the 4hr charts which suggests further choppiness. The weekly candle closed as a bearish coloured ‘spinning top’ 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 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.

EUR/AUD: Price drifted higher this week as the AUD lost ground but the EUR held fairly steady. This pair still holds little appeal for me though. The daily chart shows how price is still ranging in between the 1.4 and 1.5 levels.

The E/A is trading above the Cloud on the 4 hr but in the bottom edge of the Cloud on the daily chart suggesting further choppiness. The weekly candle closed as a bullish engulfing candle.

• I’m watching for any new TS signal.

The Yen: U/J: The U/J held the week up and out of the daily triangle following the previous week's bullish break from this pattern.

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

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 on the weekly chart though. Price now seems to have broken up and out of the ‘Handle’ of this bullish pattern. I reading about some who are ready to short this pair so, further bullish momentum might prove to be a bit of a battle.

• There is an open TS signal on this pair.

Nikkei: The Nikkei closed the week above the 15,000 and, also, above a major bear trend line that has been in play for over 20 years. Now, the real proof will be to see whether this index can hold this break above the trend line at the end of the month.

Nikkei and U/J: (U/J: black. Nikkei: green). The Nikkei and U/J are trading with positive correlation:

Nikkei and S&P500: (S&P500: green. Nikkei: black). Note how both of these stock indices are now back trading with positive correlation after some recent divergence. Will it last?

AUD/NZD: Price chopped lower this week and headed back to test a previous ‘double bottom’ zone of support. This is best seen on the daily chart time frame and is now forming up as a possible ‘triple bottom’ zone. This support zone is the 78.6% fib pull back level of the last major bull move from Dec 2005 to March 2011. This pair still holds little appeal for me at the moment.

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

• I’m watching for any new TS signal and the triple bottom zone.

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

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

• I’m watching for any new TS signal.

Silver: Silver drifted lower this week following the break of $21.50 support last week. 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.

Gold: As with Silver, Gold drifted lower this week following the break of $1,300 support last week. Price found some support though from the bottom trend line of a weekly chart triangle pattern.

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 still in the bottom edge of the Cloud on the monthly chart. It's not all doom and gloom just yet though: There was a bullish Tenkan/Kijun cross during the latter part of the week though on the 4hr chart AND the weekly candle closed as a bullish coloured Doji candle suggesting a possible bullish reversal.