Trade Week Analysis for 13/01/14

Last week:  There were only 3 new TS signals last week in rather choppy trade: GBP/AUD=180, U/J= -20, EUR/AUD= -100. The AUD/NZD signal from the previous week eventually closed off after giving just 70 pips in slow trade.

It had just started to look like the USD might be getting some of its Mojo back, that was, until Friday! NFP brought some USD weakness and the big question now that most traders will be pondering is whether this weakness will continue. The USD index is holding above some key support for now but will this continue? I’ll continue watching the EURX and USDX for guidance here and I reviewed these indices yesterday. 

This week:

Many trading instruments are still choppy as they struggle to determine their next pathway and Friday’s NFP hasn't made this any clearer:

• E/U: trading under a major monthly trend line from a triangle pattern and bouncing off a more recent daily support following NFP on Friday.
• E/J: Chopping along and just above the recent bullish break of the 61.8% fib level from the 2008-2012 bear move.
• A/U: hovering near the 0.89 all week; the lowest value since mid 2010 but NFP and USD weakness on Friday helped to boost the Aussie. For how long though? Will Gold factor here much, if at all?
• Cable: still chopping between the monthly chart’s broken triangle bull trend line and the monthly 200 EMA.
• U/J: still chopping between the monthly 200 EMA and the 61.8% fib of the 2007-2012 down move.
• Kiwi: still chopping around and just above the major S/R level of 0.82 (check this on monthly chart).
• S&P500: Still above 1,800 this week.
• NASDAQ: is back above the 4,000 level for the first time since 2000. Price still closed above 4000 this week.
• DJIA: Price still closed above 16,000 for the week.
• Silver: back above $20 support after NFP.
• Gold: holding above $1,200 and NFP helped here. Gold is setting up with some bullish technical patterns.
• The Nikkei ended up closing for 2013 above the key 16,000 level and, also, above the major bear trend line so I see this as a rather bullish signal. This major trend line had been in place since March 1991, a period of over 22 years, and the apparent 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 and whether the recent alignment of the trio continues. There was a bit of a disconnect here this week.

Stocks and broader market sentiment:

S&P500 stocks closed above the 1,800 level again this week. The daily chart has a bit of a ‘Double Top’ look to it at the moment and I’ll be watching to see if this index can break above the recent high so as to avoid this bearish pattern. A respect of this resistance level though might point to some further bearish activity.

I'm still 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. I’m also watching out for the possible bearish ‘Double Top’ that could be forming up.  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 as although the Tenkan and Kijun lines were fused together, they are now back with bullish alignment.

EURX chart: The November and December monthly candles closed above the major S/R level of the monthly 200 EMA. November 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 and it has also held above the support trend line.

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, November and December 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.

TS Stocks: I have updated my Stocks:Jan page with a few tickers I think are worth watching.

Items to watch out for:

• Mon 13^th: JPY Bank Holiday. EUR: German Const. Court Ruling.
• Tue 14^th: NZD Business Confidence. GBP CPI. USD Retail Sales.
• Wed 15^th: USD PPI.
• Thurs 16^th: AUD Employment data. USD: CPI & Unemployment Claims, Philly Fed Manufact Index & Ben Bernanke speaks.
• Fri 17^th: GBP Retail Sales. USD Building permits & Consumer Sentiment. G7 meetings.    

E/U: The E/U chopped sideways this week just above the support trend line but under the key 1.365 S/R level until NFP on Friday. NFP brought USD weakness and this boosted the E/U helping it to bounce off this daily support and up through the 1.365 level.

Price is trading in the bottom of the Ichimoku Cloud on the 4hr but above on the daily and weekly chart which suggests some short term choppiness.

The weekly candle closed as a bullish coloured ‘inside’ candle suggesting some indecision.

This pair is still close to an important junction.  It is becoming squeezed between the resistance trend line of the monthly triangle pattern and the support trend line from the daily chart. It needs to figure out whether it will continue with a bullish attempt at the upper triangle trend line or not. It is worth noting that price is now only about 300 pips or so below this trend line. A breach of this daily support trend line though could see price head down to test the bull trend line of the weekly/monthly chart triangle pattern, some 550 pips away. I would expect price action to be choppy as it trades up under this region. USD strength may impact here though to determine the next direction of the E/U. A weaker USD might give this pair the momentum it needs to attempt a bullish break of the major triangle pattern but a strengthening USD might see the E/U slide to test the bottom levels of this triangle.

• I’m watching the daily support trend line and for a new TS signal!

E/J: Price chopped sideways this week under the psychological and whole number level of 143 but above the 61.8% fib level of the 2008-2012 down move. The question remains whether price action will continue with a bullish hold above this level or not.

Price is still trading above the Cloud on the daily, weekly and monthly charts but has slipped below the Cloud on the 4hr chart. The December monthly candle closed above the Ichimoku Cloud, following on from a similar bullish close with the November candle. The 78.6% fib level, at up around 150, might be the next target for any bullish continuation. Price could pull back and test of the 618% fib down at the 140.50 area first though.

The weekly candle closed as a bearish coloured ‘spinning top’ candle suggesting some indecision.

• I’m watching for a new TS signal.

A/U: The Aussie drifted lower earlier last week on the back of USD strength and it moved back below the 0.89 level. USD weakness with Friday's NFP saw this pair rally back up to test the 0.90 level. The question everyone would ask here, though, is 'for how long' given the RBA’s desire to see and 'talk' this pair lower. Gold may also prove to be a factor here for the Aussie! Bullish momentum on Gold, if it continues, just might help to support the Aussie. The Aussie and Gold have been correlated more often than not over the last year as the chart below shows:

      

Weekly chart H&S pattern building? There is a possible bearish H&S pattern now 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). This pattern could take a while to evolve. The left hand shoulder took about 10 weeks to form up so it is feasible that the right hand shoulder could take a similar length of time to form as well. So, this is a work in progress, if at all!

Price is trading below the Cloud on the daily and weekly chart and in the Cloud on the monthly chart. Price has moved up above the Cloud on the 4hr chart again though after being quite choppy.

The weekly candle closed as another bullish candle; the second such candle after 10 bearish weeks! 

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

                  

A/J: Price chopped sideways this week under the bear trend line of the daily chart’s descending trading channel.

Price is back to trading just above the Cloud on the 4hr and the daily chart suggesting some bullish potential.

The weekly candle closed as a small bearish coloured ‘inside’ candle suggesting some indecision here though. 

• I’m watching for any new TS signal and the daily chart trading channel trend lines.

G/U: The Cable spent another week, the fifth week now, bound by the support of the major triangle trend line below price and the resistance of the monthly 200 EMA above price. It bounced up off the major monthly chart triangle trend line early in the week and continued to grind higher in a move that gave over 120 pips. The latter part of the week saw some choppy action though as both GBP and USD weakness set in. The resistance of the monthly 200 EMA, still above current price, may have contributed to this choppiness as well.

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 1,800 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.  Now, price could just as easily be rejected by the resistance of this monthly triangle trend line again and make a prompt move back down. This is what happened last December but the current Cable action seems a bit bullish and like it wants to make another attempt at this key S/R level. Thus, I’m watching for any reaction here and will trade with the next momentum move, either up or down!

Price is now trading above the Cloud on the 4hr, daily and weekly charts suggesting a bullish shift. Also, the weekly candle closed as an, almost, bullish engulfing candle. There is some important data due out this week for the GBP (Tue & Fri) and any further softness there might see choppy price actions continue, especially if the USD continues with any weakness. A good print with this GBP data though, along with any continued USD weakness, might give this pair the kick start it needs to get up and over the resistance of the monthly 200 EMA.

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, the monthly 200 EMA and the triangle trend line.

Kiwi: NZD/USD:  Price chopped up and down again this week under the bear trend line of the daily chart’s descending channel pattern until Friday. USD weakness on Friday saw this pair rally to just under both of the top of the daily trading channel and the 0.83 level.

Price is trading near the top edge of the Ichimoku Cloud on the daily chart but above on the 4hr chart which suggests further choppiness.

The weekly candle closed as a small bullish candle.

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, the 0.83 level and the top of the trading channel.

EUR/AUD:  The EUR/AUD was very choppy this week as it traded under the resistance of the monthly 200 EMA. Any continued USD weakness might see this choppiness continue as both the AUD and EUR might gather some relative strength.

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 for now but this key level may end up being tested again before any possible bullish continuation.

The E/A is still trading above the Cloud on the daily and weekly charts but is below the Cloud on the 4hr chart suggesting some further choppiness might be ahead.

The weekly candle closed as a bullish reversal ‘inverted hammer’ candle after last week’s bearish engulfing.

• I’m watching for any new TS signal, the 1.50 level and the ‘double top’.

The Yen: U/J: The U/J broke out and up from a Bull Flag pattern this week but didn't venture too far from there. The 61.8% fib (105.5) of the 2007-2012 down move is just above price and is proving to be a major barrier to bullish continuation for the time being. USD weakness on Friday saw the U/J pull back further to test the whole number support of the 104 level. The monthly pivot is there too. The previous bullish breakthrough of the monthly 200 EMA was a significant move and price may fall further to test this key level. A break of this level could then see price fall further to test the psychological 100 level.

Price is still trading above the Cloud on the daily, weekly and monthly charts but has slipped below the Cloud on the 4hr chart. November was the first monthly close above the Ichimoku Cloud since mid 2007! A look at the monthly Cloud chart shows how a test of the monthly 200 EMA, and even the top edge of the Cloud, would seem quite reasonable even if there was to be bullish continuation.

The weekly candle closed as a bearish candle; the second bearish candle after nine bullish weeks so a pause might seem reasonable.

Weekly Chart Bullish Cup’ n’ Handle pattern: The bullish break out from the ‘Cup ’n’ Handle’ pattern on the weekly chart has peaked at 600 pips for the time being. 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 and the 61.8% fib level.

Nikkei: The Nikkei closed for 2013 above the 16,000 level and, also, above a major bear trend line that had been in play for over 20 years. This is a significant development for this index and is a rather bullish signal. 

Price closed back below 16,000 last week but I would expect this index to be choppy as it attempts a major change in direction.

The 61.8% fib level is up near the whole number 20,000 level and would be an obvious target for any continued bullish momentum.

UJ and S&P500: The U/J and S&P500 have been trading with positive correlation for much of 2013. These two diverged a bit last week and I'll be watching to see if this divergence holds.

Nikkei and U/J: (U/J: black. Nikkei: green). These are still trading in sync and both pulled back a bit last week.

Nikkei and S&P500: (S&P500: green. Nikkei: black).  A bit of divergence crept in here last week.

AUD/NZD: The A/N pair chopped lower this week but stalled at the December low near the 1.075 level. I’ll be watching to see if this is just another pause before further bearish action or the start of the long awaited reversal! This move triggered a new TS signal but any continued USD weakness might see both the AUD and NZD lift which could promote some choppiness here.

Price is still trading below the Cloud on the 4hr, daily, weekly and monthly charts which is bearish. I had thought that this pair might take a trip down to the previous 2005 lows of 1.04 and I’m still watching out for this possibility.

The weekly candle closed as a bullish coloured Doji candle suggesting some indecision.

• There is an open TS signal on this pair but I’m also watching the 1.075 ‘double bottom’ level. 

GBP/AUD: The G/A pair chopped higher this week as it held above a daily support trend line and looked like it might be heading back to test the 38.2% fib level of the 2007-2013 move.  Some weak GBP data on Friday, along with AUD strength after NFP, saw this daily support broken and a possible bearish ‘Head and Shoulder ‘pattern form up on the daily chart.

Price is still trading above the Cloud on the daily and weekly charts and below the Cloud on the 4hr chart suggesting that some further choppiness might be in store.

The weekly candle closed as a ‘long legged Doji’ candle suggesting some indecision.

The continued hold above the 1.75 level is still rather bullish though. 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.

• I’m watching for any new TS signal, the daily support trend line, the 38.2% fib level and the daily H&S pattern.

Silver and Gold: Both metals traded higher after NFP and any continued USD weakness might help these to gather some bullish momentum. I’ve been tracking some Gold and Silver stocks lately and there may be some good opportunities building here.

Silver: Silver has, essentially, been chopping along between the boundaries of the $19 and $20 levels for the last seven weeks. Last week was no different. Fluctuating USD strength meant this pair chopped around again last week but finished back above the support of the $20 level. NFP brought some USD weakness that triggered a new TS signal after my Sat 1 am candle.

The daily chart shows Silver edging closer towards a bear trend line of a triangle pattern. The base of this triangle is formed up by the 78.6% fib retrace level of the 2008-2011 bull move. The monthly chart shows an even larger triangle pattern with a longer term bear trend line. There seems to be the option of two bases for this monthly triangle though; the same 78.6% fib level or an even lower base down at $15.

Silver is still trading below the Ichimoku Cloud on the daily, weekly and monthly charts but above the Cloud on the 4hr chart. It is nudging up closer to the daily Cloud now though.

The weekly candle closed as another Doji candle but this time it was bearish coloured.

The major support levels below $21.50 and $20 seem to be down at $15, near the monthly 200 EMA.

Gold: Gold traded lower to start the week on some USD strength but held above last week’s bullish break out of daily chart triangle pattern. As with Silver, Friday’s NFP data helped to boost Gold and this triggered a new TS signal after my Sat 5 am candle. There is also a larger triangle still containing price on the weekly chart. This triangle has the same base support that the daily chart triangle pattern had.

I'm also now seeing a possible bullish 'Inverse Head and Shoulder' pattern forming up here on the daily chart. The 'neck line' of this possible pattern seems to be near the region of the monthly pivot and @ $1255.  I'm keeping an eye on this!

The monthly chart shows how the December candle tested the June low of $1,180 which was just above the 61.8% fib pull back level of the 2008-2011 bull move.  A break of this $1180 level would be quite bearish. The next major support after this 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 daily, weekly and monthly charts but is still back above the Cloud on the 4hr chart. It is nudging up closer to the daily Cloud now though. It is worth remembering that the November candle was the first monthly candle close below the Ichimoku Cloud since January 2002, a period of almost 12 years! The bottom of the monthly Cloud is in the region of $1,280 ~ 1,300. A break back above the $1,300 and into the Cloud might signal a bullish reversal. Patience is required to wait and see if this is the beginning of a reversal or just a test of the Cloud before continued bearish follow through.

The weekly candle closed as a bullish candle.