Trade Week Analysis for 30/12/13

I am away at the moment and with poor internet thus this update is brief and I'm not able to load many charts.

Last week:  There were a few TS signals in the shorter trading Christmas Week. Some Euro related news on Friday caused big spikes that helped most of these. The TS signals were: A/U= -30, A/J= 90, GBP/AUD= 120 (spike), Cable: 150 (spike), EUR/USD= 140 (spike), EUR/AUD 180 (spike).

This week:
Quite a few pairs are at, or near, key breakout levels. These levels need to be monitored as we close out the month and year as they may provide good entry levels for some long trending trades. I'll be keeping an eye on these over the coming week.

The Nikkei actually closed the week above the key 16,000 level and I'll be watching closely to see where this index closes for the month. A December and year end close above 16,000 and, also, the major bear trend line would be a very bullish signal. This major trend line had been in place since March 1991, a period of over 22 years, and a change in trend here may have implications for other markets. Thus, I’m continuing to watch the ‘Holy Trinity alignment’ of the U/J, Nikkei and S&P500.

Stocks and broader market sentiment:

S&P500 stocks enjoyed another bullish week, printing new highs again and closing above the 1,800 level again:

This current 'high' on the monthly S&P500 chart, as I keep re-quoting below each week, looks very different to the print of the previous highs.

With 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: I’m watching for any break of the daily trend line but price is well above this at the moment. 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 a bearish 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.

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. This signal is still open at the moment although the Tenkan and Kijun lines are still fused together. I’ll be watching for any future cross.

EURX chart: The November monthly candle closed above the major S/R level of the monthly 200 EMA. This was the first monthly close above this S/R level in almost 2 ½ years! This was a major achievement for the index and I’ll be watching to see if price can hold above this major level. Price has held above this level again this week. This index is getting up close to a major triangle trend line here too. Price action may become choppy around this high and could easily be rejected but a break and close above this trend line would be bullish:

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, October and November candles closed above this key level and without testing this 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.

E/U: Price continued to trade just under the 1.37 level until Friday. It spiked higher to reach the 61.8% fib from the last major down move but retraced to close below the 1.38.

Price is trading above the Ichimoku Cloud on the 4hr, daily and weekly chart which is bullish.

The weekly candle closed as a bullish candle but with a long upper shadow.

It is worth remembering that price is only about 250 pips below the major monthly triangle trend line. I would expect price might become a bit more choppy when it gets close to this level.

• There is an open TS signal on this pair

E/J: This pair is still holding above a daily support trend line.

Price is still trading above the Cloud on the 4hr, daily, weekly and monthly charts. The November monthly candle closed above the Ichimoku Cloud and this was a very bullish development. The 78.6% fib level up around 150 might be the next target!

The weekly candle closed as a large bullish candle.

• I’m watching for any new TS signal.

A/U: Price struggled around the 0.89 lows from July and August but closed the week below this support level which is bearish. 

Weekly chart H&S pattern building? There is a possible bearish H&S pattern building up on the weekly chart. The theory behind these patterns is that the predicted bearish move below the 'neck line' is equivalent to the height of the 'Head' of the pattern. The neck line of this weekly H&S is at the 0.89 level. The height of the ‘Head’ on this weekly pattern is about 850 or so pips. Thus, the projected bearish move for this possible pattern would put price down near the 0.80 cent level. This is near the 61.8% fib pull back from the last major up move (2008-2011).

Price is still trading below the Cloud on the 4hr, daily and weekly chart and in the Cloud on the monthly chart.

The weekly candle closed as a bearish candle.

• I’m watching for any new TS signal and the 0.89 level.

A/J: Price drifted higher this week until it reached the top trend line of the daily chart’s descending channel.

Price is now trading above the Cloud on the 4hr and just below the Cloud on the daily chart so the choppiness might continue.

The weekly candle closed as a small bullish candle. 

• There is an open TS signal on this pair.  

G/U: The Cable continued along the monthly chart triangle bear trend but broke up higher during the week and gave a new TS signal.

A clean break out and up from the triangle pattern on the monthly chart would be a very bullish signal indeed. A possible target for any continued bullish movement might be the 61.8% fib level of this same move. This 61.8% fib level is about 1,900 pips away at the 1.82 area and might seem an impossible task but I’d advise you to look at the monthly chart of the E/J and U/J before you laugh too loud at me.  Price closed for the week above the trend line and rejection is looking less likely just at the moment. A December and year end close above this major trend line would be a rather bullish signal and might set up a rather good long term trade for next year!

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

The Yen: U/J: The U/J traded higher this week, along with stocks and the Nikkei. Price broke out from a 'Bull Flag' pattern on the 4hr chart earlier during the week but this move, sadly, didn't trigger a new TS signal. Price has now moved over 600 pips from the daily chart triangle breakout. This triangle was also the ‘Handle’ of the weekly chart ‘Cup ’n’ Handle’ pattern. Price had struggled to get up and over the resistance of the monthly 200 EMA but this level seems to have been cleared now.

Price is still trading above the Cloud on the 4hr, daily, weekly and monthly charts which is bullish. This is a major bullish development for the U/J as November was the first monthly close above the Ichimoku Cloud since mid 2007!

The weekly candle closed as a bullish candle.

Weekly Chart Bullish Cup’ n’ Handle pattern: The bullish break out from the ‘Cup ’n’ Handle’ pattern on the weekly chart has given over 600 pips so far. The ‘Handle’ of this pattern is the same as the triangle or ‘Bull Flag’ that was watched on the daily chart. The theory behind these patterns is that the height of the ‘Cup’ pattern is equivalent to the expected bullish move from the ‘handle’ breakout. The height of the Cup for the U/J weekly chart is around 2,400 pips. The interesting point here is that a 2,400 pip bullish move up from the ‘Handle’ would put price up near the 124 level. This level is the last major swing high for the U/J from back in 2007 and represents the 100% fib pullback for the move down in 2007 to the lows of 2012. Possible targets along the way include the 61.8% fib retrace level at the 105.5 region and the 78.6% fib up near the 112 region.

• I’m watching the monthly 200 EMA but, also, keeping an eye on the 100 level.   

Nikkei: The Nikkei closed for November above the 15,000 level and, also, above a major bear trend line that has been in play for over 20 years. This is a significant trend line break for this index. Price held above both of these levels again this week.  Price has now also closed the week above the other hurdle of the 16,000 level. The monthly chart shows how this was setting up as a bit of a double top pattern. I had thought that price might pull back to test the 15,000 before any possible continuation but that might have passed. A close above the 16,000 level for December and the year end would send a rather bullish signal.

Note how the 15,000 level is near the 38.2% fib retrace level of this huge down move. The 61.8% fib level is back up near the whole number 20,000 level and would be an obvious target for any continued bullish momentum.    

Nikkei and S&P500: (S&P500: green. Nikkei: black).  Note how both of these stock indices are back trading with positive correlation after some recent divergence. Any continued positive correlation would be interesting especially if the bullish breakout on the Nikkei holds. This might then have implications for the S&P500.     

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

UJ and S&P500: The U/J and S&P500 have been trading with positive correlation for much of 2013. I’ll be interested to see if this correlation holds and, then, if the bullish Cup ’n’ Handle pattern on the U/J continues as this would suggest further bullish momentum for the S&P500:

AUD/NZD: This pair chopped sideways this week and has printed another bullish weekly candle. That makes two bullish candles after 7 weeks of bearish candles.

Price is still trading below the Cloud on the the daily, weekly and monthly charts which is bearish but it is trying to move up and out from the top edge of the Cloud on the 4hr chart. The bullish Tenakn/Kijun cross noted on the 4hr chart of last week is still open. Thus, the long awaited reversal might be starting here. I had thought that this pair might take a trip down to the previous 2005 lows of 1.04 but I’m keeping an open mind and on the lookout for any further reversal signals.

• I’m watching for any new TS signal. 

GBP/AUD: This pair has continued to chop higher this week and it gave a new TS signal.

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

A continued hold above the 1.75 level would be very bullish. The monthly chart shows how this pair has had a major move down starting back in 2007 and only bottomed out in April 2013. The 61.8% fib retrace level of this down move is back up at the 2.1 area and this is also the region of the monthly 200 EMA, just for added confluence. This 61.8% fib area might be a possible target for any continued bullish momentum.

• There is an open TS signal on this pair.

EUR/AUD:  Price traded along the monthly 200 EMA again this week but managed to close the week out just above this S/R level. The EUR/AUD has not traded above the monthly 200 EMA since back in 2009 and, thus, it is no wonder that price has been choppy around this region and, also, this is quite an achievement!

The monthly chart shows how this pair made a big move down from 2008 to 2012. The 61.8% fib retrace level of this big down move is back up at the 1.75 region. The monthly chart shows how the 1.75 is also a major S/R level for this pair and would be a possible target for any continued bullish movement. Price seems to be respecting the 1.50 S/R level and I’m on the lookout for bullish continuation.  Price closed for the week  just above the monthly 200 EMA BUT this level may be a bit of a magnet and, thus, a possible barrier to bullish continuation. I would not be surprised to see even the 1.5 level tested again before any possible bullish continuation.

The E/A is still trading above the Cloud on the 4 hr (still only just!), daily and weekly charts which is bullish. The weekly candle closed as a bullish candle.

• There is an open TS signal on this pair.