Last week: It was another good week for my trend trading system although somewhat frustrating for me as I missed catching many of these because I was away. There were new TC signals on the A/J = 120 (closed), GBP/AUD = 420 (closed), EUR/AUD = 170 (closed), GBP/NZD = 430 (closed), GBP/USD = 90 (closed), GBP/JPY = -100 (closed) and the Kiwi = 50 (closed).
This TC pip haul tallies well over 1,000 pips and that’s even allowing for a loss on the GBP/JPY that I has said wasn’t worth taking if price held above 184…which it did. Even more exciting than this haul is the fact that the increased frequency and success rate of my trading system might just be a sign that trending markets could be about to return! This would be welcome relief after many months of choppy market action and few TC 4hr-chart signals.
Looking back, I’m wondering if these months of market chop were somewhat akin to the calm or lull before a storm? The last couple of weeks with increased signals may just be that first whisper of wind before the weather turns. This would suggest a storm, or big market move, could be building which would not surprise me either. There is a market saying that the best trends come out of sideways markets and if you look at the US$ and EUR$ indices they have been trading sideways for well over 6 months! Now whether any new major market move is risk on or risk off remains to be seen, but, my suggestion is to be prepared and to keep an open mind about direction.
This week:
Thursday is a busy day next week with three Central Banks reporting Interest Rate updates: SNB (CHF), RBNZ (NZD) and the BoE (GBP).
There is Chinese Manufacturing data released next Saturday 12th after the markets close and so traders will need to watch for any impact at the following market open on Monday 14th.
Bullish engulfing candles: there have been quite a few bullish ‘engulfing’ candles printed for last week. These were seen on the: E/U, E/J, A/U, A/J, NZD/USD, Silver and Gold.
Indecision style candles: indecision-style weekly candles were printed on the S&P500, Russell 2000, Copper, Oil, GBP/USD, GBP/JPY, USD/CAD and the EUR/AUD.
EUR/USD: I wrote last week asking whether this pair was getting ready to Rock or Roll. So far, we’ve had the ‘Rock’ response but will this continue?
Gold/Silver: both have printed bullish engulfing candles off trend line support. Keep an eye out for any follow-through, especially if the US$ weakens at all.
The US$ index has retreated from the key 100 level and a bearish ‘Double Top’ is threatening to usurp the Bull Flag breakout. This remains a critical juncture for the US$ and a review of the FX indices can be found through this link.
Stocks and broader market sentiment:
US stocks got a ‘double whammy’ boost on Friday following a strong US jobs and wages NFP report and a promise from the ECB President, Mario Draghi, of what seems to have been perceived as a commitment for endless stimulus. The ECB President stated that the risk of deflation was ‘firmly off the table’ as there was no limit to the tools the ECB would use to fight this phenomenon. He really is living up to his mantra of ‘Super Mario’!
I keep an eye on a lot of different perspectives of the S&P500 but two charts are standing out for me this week. The first is that of the ‘Death Cross‘ chart. The previous Death Cross in Aug 2011 was fairly short lived and was subsequently followed by a strong rally. The current Death Cross is shaping up with a very similar pattern and has me wondering if this is more of a bullish signal than one for concern!
The second is the chart of the AUD/JPY. The A/J is often described as a proxy ‘risk barometer’ for stocks as it displays a high degree of positive correlation with the S&P500 as the following chart reveals. The A/J has just broken above the strong S/R level of 89 and, if this level holds, it would suggest that there could be more upside with stocks!
Thus, I continue to watch out for further clues as to any new momentum move, long or short though! In particular I’m looking out for:
S&P500 daily chart: The index had a strong day on Friday and closed just below the psychological 2,100 level.
S&P500 weekly: this still has a bit of a Bull Flag appearance and traders need to keep watch of the 2,135 level for any breakout or respect. The weekly candle closed as a bullish coloured Doji.
Ichimoku S&P500 daily chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There has been a recent bullish Tenkan/Kijun cross and price is above the Cloud and key 2,000 level but just below the 2,100 level:
Ichimoku S&P500 weekly chart: the weekly candle closed as a bullish coloured Doji candle and just above the weekly Cloud. I would want to see a sustained bearish move below the Cloud to support bearish sentiment. Note how the weekly Cloud remains aligned along the key 2,000 level. It is difficult to see but there has been a recent bullish Tenkan/Kijun cross here:
S&P500 monthly chart: a break of the monthly support trend line. The monthly trend line remains intact for now but a break of this support level would suggest to me of a more severe pull back. Bearish divergence on the monthly chart had warned of recent weakness and I, like the Elliott Wave indicator, had been looking for a test of the 1,600 region but this might not evolve.
Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and does have a bit of a potential bearish H&S brewing but any new close and hold back above $1,220 would void this. The weekly candle closed as a bearish coloured ‘Inside’ candle reflecting some indecision.
VIX Index: The ‘Fear’ index is down near the 14 level and has printed a small bearish weekly candle but with a long upper shadow.
Copper: closed with a bearish coloured Doji but still above the key 2.0 level and still within the potential bullish descending wedge.
Oil: I’m now seeing a ‘Quadruple Bottom’ here! The $40 level remains as key support despite the bearish coloured ‘Spinning Top’ candle.
Trading Calendar Items to watch out for:
- Mon 7th: Eurogroup meetings. JPY BoJ Gov Kuroda speaks. GBP BoE Gov Carney speaks.
- Tue 8th: AUD NAB Business Confidence. CNY Trade Balance. GBP Manufacturing Production. ECOFIN meetings. CAD Building Permits & BoC Gov Poloz speaks.
- Wed 9th: CNY CPI &PPI.
- Thurs 10th: NZD RBNZ Interest Rate Statement & Conference. AUD Unemployment data. CHF SNB Interest Rate Statement & Press Conference. GBP BoE Interest Rate Announcement. USD Weekly Unemployment Claims.
- Fri 11th: EUR Targeted LTRO. USD Core Retail Sales, PPI, Retail Sales & Prelim UoM Consumer Sentiment.
- Sat 12th: CNY Industrial Production.
Forex:
E/U: The E/U chopped sideways above the key 1.045 recent low until Thursday’s ECB meeting. Disappointment with the extent of the easing package triggered a rally on this pair as SHORTs scrambled out of their positions. The surprise here though is that this pair continued to hold up well despite the strong US jobs and wages result with NFP on Friday. Many were suggesting this was just a temporary ‘short squeeze’ but I’m keeping an open mind!
I wrote an article on the E/U on Friday about the levels to monitor if any bullish momentum continues here, temporary or otherwise, and this can be found through the following link. The levels I noted within this article are reproduced below and remain valid. They include the:
- 1.12 level: this is a major S/R level from the monthly chart as it is the 61.8% fib of the 2000-2007 swing high move. This also happens to be near the recent Bear Flag trend line and so would be an obvious target for any continuation move. It also happens to be the 61.8% fib of the recent daily chart-based swing low move.
- 1.18 level: this is major long term S/R level (seen on the monthly chart)
- 1.225 level: this is near the 50% fib of the recent weekly chart swing low move and also near the monthly chart’s triangle trend line.
- 1.26 region: this is near the 61.8% fib of the weekly chart’s swing low move.
Obviously, the bearish threshold remains as the recent bottom near 1.045 and the longer term support near 1.040.
Price is trading above the Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bullish engulfing candle.
- I’m watching for any new TC signal on this pair and the 1.12 level.
E/J: The E/J rallied up and out of a recent trading channel with the ECB news and headed back to the previous S/R level of 134 where it remained until the end of the week.
I have adjusted the triangle trend lines here to capture this news-inspired price action but note the move is still worth a potential 2,000 pips. I also note that price is now just under this modified triangle trend line.
I’m still seeing the monthly Cloud’s bearish Tenkan/Kijun cross and note that these crosses have been few and far between so they are worth keeping an eye on! However, I am not also noticing how this recent cross has not been accompanied by any ADX move above 20 and, so, there seems to be a point of difference here with this particular cross:
Price is trading above the Cloud on the 4hr chart, below the Cloud on the daily (just) & weekly charts but above the Cloud on the monthly chart.
The weekly candle closed as a bullish, essentially ‘engulfing’, candle.
- I’m watching for any new TC signal on this pair, the revised triangle trend lines and the 134 level.
A/U: The A/U got a boost last week when AUD Interest Rates were kept on hold and some upbeat AUD GDP data was received. Price rallied up to test a recent daily-chart wedge trend line but remained near there until the end of the week.
The previous S/R level of 0.74 is just above current price and will be the level to watch next week. I wrote a post last week identifying potential targets on the A/U if bullish momentum continues and this article can be found through the following link. These levels remain valid and include:
- 0.74
- 0.753
- 0.77
- 0.88
- 0.92
- 0.95
- 1.00
Price is trading above the 4hr and daily Clouds but below the Cloud on the weekly and monthly charts.
Traders need to watch out for AUD NAB Business Confidence data on Tuesday and Employment data on Thursday.
The weekly candle closed as a bullish engulfing candle.
- I’m watching for any new TC signal on this pair, the daily chart’s wedge trend lines and the 0.74 level.
A/J: The A/J broke above the key 89 level last week and triggered a new TC signal that gave 120 pips before closing off.
The 89 level is the one to keep in focus though as this is a major demarcation zone on the weekly and monthly charts. I’m still looking/hoping for a test of this level before any further continuation although a new TC ‘LONG’ signal looks to be trying to form. As previously mentioned, any hold above 89 would suggest bullish continuation and would be a strong vote of confidence for stocks as well!
Price is trading above the Cloud on the 4hr and daily charts, below the Cloud on the weekly and in the bottom edge of the Cloud on the monthly chart.
Traders need to watch out for the BoJ Gov Kuroda speech on Monday, AUD NAB Business Confidence data on Tuesday and Employment data on Thursday.
As with the A/U, the weekly candle closed as a bullish engulfing candle.
- I’m watching for any new TC signal on this pair and the 89 level.
G/U: The Cable dropped below 1.50 support last week following Wednesday’s weaker than expected Construction PMI data and this move triggered a new TC signal that gave just 90 pips before closing off. However, whilst the break of this threshold looked bearish, the Cable bounced right back when upbeat Services PMI data was released on Thursday. The US$ weakness that came along with Thursday’s ECB event would have helped this GBP/USD rally though too. Price action ended the week resting back near the half way mark between the 1.50 and 1.525 S/R levels.
The developing triangle is probably best viewed now as a weekly chart one and, thus, a weekly close below 1.50 would be best seen to support this potential 1,600+ pip move. I have adjusted the trend lines to capture the most recent price action here but the value is still much the same.
Any continued weakness might find support at 1.40 though as this appears to be a long tern S/R level as seen on the monthly chart below. This chart has a bit more data than my MT4 chart:
Price is trading in the Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bullish coloured ‘Inside’ candle reflecting some indecision here.
Traders need to watch out for Monday’s BoE Gov Carney speech, Tuesday’s Manufacturing Production data and for Thursday’s BoE Interest Rate announcement.
- I’m watching for any new TC signal on this pair and the triangle trend lines.
GBP/JPY: The GBP/JPY chopped up and down last week but still within the daily chart’s 1,600 pip evolving triangle. A new TC ‘SHORT’ signal here, following the GBP weakness, was advised to be avoided as price was still above 184 support and still within the triangle. This proved to be prudent advice as price bounced right back up after briefly testing the 184 level!
I note the ADX on the daily and weekly charts and see how this is trending downwards and towards the 20 threshold level. I suspect that we won’t see any decent breakout move here until there are some ADX>20 clues on, at least, the daily-chart time frame.
Price is trading in the Cloud on the 4hr and daily charts but below on the weekly and monthly charts.
The weekly candle closed as a bullish coloured ‘Inside’ candle, also reflecting some indecision here.
Traders need to watch out for Monday’s BoE Gov Carney and BoJ Gov Kuroda speeches, Tuesday’s GBP Manufacturing Production data and for Thursday’s BoE Interest Rate announcement.
- I’m watching for any new TC signal on this pair, the 184 level and the daily-chart’s triangle pattern.
Kiwi: NZD/USD: The NZD/USD was the quiet achiever last week and chopped up beyond the previous S/R level of 0.67. A new TC ‘LONG’ signal mid-week gave just 50 pips before closing off though.
I’m still seeing either a potential Bear Flag or basing-style bullish ‘Inverse H&S’ forming up on the weekly chart with no clear winner just yet.
The 0.70 region might be the one to watch in coming sessions as this is near the 50% fib of the recent swing low move, the 4hr 200 EMA and the top trend line of the Flag pattern and so could be a target for any bullish continuation (see daily chart below). This is over 250 pips away and so is worth the watch!
Price is trading above the Cloud on the 4hr and daily charts but below the Cloud on the weekly and monthly charts.
The weekly candle closed as a bullish, essentially ‘engulfing’, candle.
Traders need to watch out for Thursday’s RBNZ Interest Rate announcement.
- I’m watching for any new TC signal on this pair, the 0.70 level and the daily chart’s Flag trend lines.
The Yen: U/J: The U/J continued chopping up and down with a recent trading channel and below the key 124 level again last week and this remains as the major resistance zone to monitor with this pair.
Monthly Chart Bullish Cup’ n’ Handle pattern: There looks to be a bullish Cup ‘n’ Handle forming up on the monthly 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 4,800 ~ 4,900 pips. This may seem like a massive move but the longer term chart below shows this move to be reasonable as it would take the U/J up near the 50% fib of the 1985-2012 swing low move. Note the 101.5 level on the other monthly MT4 chart though. Any pullback down to this level, apart from helping to form up a huge Handle for the Cup ‘n’ Handle, would also help to develop a bullish ‘inverse H&S’ pattern:
Price is trading above the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a small bullish candle.
Traders need to watch out for Monday’s BoJ Gov Kuroda speech.
- I’m watching for any new TC signal on this pair and the 124 level.
USD/CAD: The USD/CAD continued to chop sideways under the resistance of the monthly chart’s 61.8% fib level.
I’m still seeing a ‘Cup’ pattern forming up on the monthly chart and this might help explain this extended choppiness around the 1.30 region as price action creates the ‘Handle’.
Monthly Chart Cup ‘n’ Handle? The monthly chart shows a possible bullish Cup ‘n’ Handle pattern forming up under the 1.30 level. This is worth keeping an eye on as the pattern would be worth up to 3,500 pips if it was to evolve as this is the height of the ‘Cup’. The interesting point is that the target for this pattern would put price up at the highs reached back in 2002 and this is equal to a 100% Fib retracement of the 2002-2007 bear move.
Price is trading above the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bullish coloured ‘Spinning Top’ candle.
Traders need to watch out for Tuesday’s Building Permits data and the BoC Gov Poloz speech.
- I’m watching for any new TC signal on this pair and the monthly chart’s 61.8% fib level.
GBP/AUD: This pair fell below 2.07 last week in a move that gave 420 pips before closing off. Price action rallied after Thursday’s upbeat GBP Services PMI result and it moved up to test this 2.07 region again on Friday. It closed the week just below this 2.07 level and the daily chart action continues to form up a potential ‘Handle for the Cup ‘n’ Handle pattern that I’m seeing form here.
Two bullish patterns: This choppy daily chart Flag action continues to support the pattern I’m seeing on the monthly chart, that of a ‘Cup ‘n’ Handle’ pattern with a neck line near 2.07. However, any resumption of bullish momentum could bring an alternative monthly chart pattern into focus though; a continued push up to the 2.40 region near the 61.8% fib would help to form up a possible bullish ‘Inverse H&S‘ pattern. I would then be looking for any pullback back down to the ‘Shoulder’ region of 2.07.
Price is trading below the Cloud on the 4hr and daily charts but above the Cloud on the weekly and monthly charts.
The weekly candle closed as a bearish candle.
Traders need to watch out for Monday’s BoE Gov Carney speech, Tuesday’s GBP Manufacturing Production data and for Thursday’s BoE Interest Rate announcement as well as AUD NAB Business Confidence data on Tuesday and AUD Employment data on Thursday.
- I’m watching for any new TC signal on this pair and the 2.07 level.
EUR/AUD: Price drifted lower here to start the week and gave a new TC signal that delivered up to 170 pips before finally closing off with Thursday’s ECB suprise. It recovered to the 50 % fib of the recent swing low move but stalled somewhat after that. This pair could become choppy again if both the EUR$ and AUD$ gather a similar momentum in coming sessions.
The EUR/AUD still remains below the monthly charts congested zone bound by 1.75 and 1.55. Also, I do have a penchant for drawing trend lines and so have added a triangle onto the daily chart.
Price is trading in the top of the Cloud on the 4hr and monthly charts, below the Cloud on the daily chart but above the Cloud on the weekly chart.
The weekly candle closed as a bullish coloured ‘Spinning Top’ candle reflecting some indecision.
Traders need to watch out for AUD NAB Business Confidence data on Tuesday and AUD Employment data on Thursday and and EUR LTRO data on Friday.
- I’m watching for any new TC signal on this pair.
GBP/NZD: The GBP/NZD continued to trade lower last week and quickly dipped below major 2.30 support. This momentum triggered a new TC signal and price made its way down to test the 2.24 S/R level in a move that gave 430 pips before closing off. Price rallied up from this 2.24 level during Friday’s Asian session but retreated later on to close the week sitting just below this S/R zone. I wrote a separate article about this pair during last week and this can be found through the following link. I do note now that the daily chart does have a bit of a bearish H&S look to it though.
Price action continues to consolidate under the monthly chart’s major bear trend line but it might try and target this region again, or possibly the previous S/R 2.30 level, if bullish momentum continues. However, any resumption of bearish momentum below 2.24 might target the weekly chart’s 61.8% fib down near 2.20 and, after that, the previous breakout and S/R region of 2.10 which happens to be near the weekly 200 EMA.
This monthly chart has a bit more data and shows the importance of this 2.24 level:
The GBP/NZD is trading below the Cloud on the 4hr and daily charts but above the Cloud on the weekly and monthly charts.
The weekly candle closed as a bearish candle.
Traders need to watch out for Monday’s BoE Gov Carney speech, Tuesday’s Manufacturing Production data and for Thursday’s RBNZ and BoE Interest Rate announcements.
- I’m watching for any new TC signal on this pair and the 2.24 & 2.30 levels.
Silver: Silver closed higher last week and triggered a new TC signal on Friday although it still remains below the $15 S/R level.
I’m still seeing a bullish-reversal descending wedge here and this still hinges on whether the US$ index holds below the 100 level.
Any sustained hold below $15 and break below the wedge trend line would be bearish though and would bring the $11 and $9 levels back into focus. $11 is previous S/R and the $9 area is the 100% fib level.
Silver is now trading above the Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bullish engulfing candle.
- There is a new TC ‘LONG’ signal on Silver.
Gold: Gold also closed higher last week and found some support from the weekly chart’s wedge trend line although it, too, remains below a key S/R level of $1,100. A new TC ‘LONG’ signal is trying to form up here.
I’m still seeing a bullish-reversal descending wedge here as well though and this also depends on whether the US$ index holds below the 100 level.
The weekly hold back below $1,100 is bearish and, if this continues, it will bring the recent low near $1,050 back into focus. Bearish targets below $1,100 include this recent low near $1,050, the $1,000 psychological level and, then, the 78.6% fib near $950.
Gold is trading below the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bullish ‘engulfing’ candle.
- I’m watching for any new TC signal, the wedge trend lines and the $1,100 level.
The post TC signals give over 1,000 pips so..trends returning?. appeared first on www.forextell.com.