Last week: It has been a volatile couple of weeks across the markets with the Vix, or ‘Fear Index’, spiking to levels not seen since the 2009 GFC era. Despite this there have been two quite decent TC signals during that period: E/U for 570 pips and the Gold signal for $40.
This week:
Despite these rather extreme market gyrations the US$ index and EURX are still consolidating within weekly chart triangle patterns. An update on the FX Indices can be found through this link.
There is a lot of high impact data this week with the Jackson Hole Symposium concluding on Sunday, although nothing too revelatory seems to have emerged from that, two Central Banks reporting on interest rates (RBA and ECB), Chinese Manufacturing PMI data being released on Tuesday and all culminating on Friday with US NFP.
The monthly candles will close after Monday so watch for new monthly pivots.
Gold: watch to see where the Gold monthly candle closes. A monthly close after Monday below the $1,145/$1,150 and 61.8% fib region would be quite bearish for the precious metal.
EUR/USD: this is back near the 1.12 / 61.8% fib level. Watch to see where the monthly candle closes with respect to this key S/R level.
Kiwi: the NZD/USD has printed a fairly bearish weekly candle below a recent Flag which is supporting a possible 1,000 Bear Flag. Watch for any continued US$ strength and bearish follow through on the NZD/USD.
S&P500: has carved out a bullish-reversal ‘Hammer’ candle for the week but has also printed its first bearish Death Cross since Aug 2011. Where to from here then?
Oil: Oil has printed a bullish engulfing candle off $40 support and the ‘Triple Bottom’ on the weekly chart is suggesting the potential of bullish follow through. If so, this may help to lift sentiment across other commodities and with Oil stocks. To this end some beaten down energy stocks like VALE and XOM and the 3x Energy Bull ETF, ERX, might be worth keeping an eye (charts below).
Stocks and broader market sentiment:
It has been a turbulent couple of weeks for global stocks but many stock indices managed to close out this week with bullish weekly candles: S&P500, DJIA, NASDAQ, FTSE, TSX, DAX and the Russell 2000.
The S&P500 has printed a bullish-reversal ‘Hammer’ candle off Cloud support but is still below the key 2,000 S/R level for now. A close back above 2,000 after Monday would be a decent achievement to see out August:
However, as pointed out on CNBC, the S&P500 has printed its first Death Cross since Aug 2011. With these conflicting technical patterns one might, at a minimum, expect further choppiness:
The NASDAQ printed a particularly large bullish weekly candle and also closed back above the key 4,800 level. Regular readers will recall that I have been looking for a pullback to test 4,800 here. The big test now, though, will be to see whether it can close out the month of August (after next Monday) above this key S/R level:
Apple has bounced again up off 50% fib support in ‘history repeating’ style and I’m wondering if this, in itself, is a bit of a market signal? We shall see!
Another noteworthy event is that the Emerging Markets ETF, EEM, has just printed a huge bullish weekly candle off 61.8% fib support:
However, with all of this, 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 closed below the psychological 2,000 level and below daily trend line support but above monthly support.
Ichimoku S&P500 daily chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. The bearish Tenkan/Kijun cross remains open but as this evolved IN the Cloud it is deemed a ‘NEUTRAL’ signal. Price is still below the Cloud and daily support:
S&P500 monthly chart: a break of the monthly support trend line. The monthly trend line remains intact but a break of this support level would suggest to me of a more severe pull back or correction. I am still seeing divergence on the monthly chart for now though.
Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and has again closed the week below the key 1,220 level but, at least, with a bullish weekly candle.
VIX Index: The ‘Fear’ index is back below the 30 level and printed a bearish coloured candle. Note how the weekly spike took the index to levels not seen since back in 2009!
Oil: closed with a bullish ‘engulfing’ candle for the week which has helped to add credibility to the bullish ‘Triple Bottom’ building on the weekly chart. Bullish follow through here would possibly help to lift sentiment across other commodity classes and with Oil related stocks.
ERX: Any bullish follow through with the Oil/Energy sector might help the Energy Bull 3x ETF, ERX, take on its bear trend line. Price has just printed a bullish weekly candle off major support:
XOM: this has printed a large bullish candle and bounced up off 78.6% fib support:
VALE: a well and truly beaten down energy stock but at least it is conforming to a bullish descending wedge. It also just printed a bullish weekly candle:
Trading Calendar Items to watch out for:
- Sat 29th: Day 2: Jackson Hole Symposium. GBP BoE Gov Carney speaks.
- Sun 30th: Day 3: Jackson Hole Symposium. FOMC Member Fischer speaks.
- Mon 31st: NZD ANZ Business Confidence. GBP Bank Holiday.
- Tue 2nd: CNY Manufacturing PMI and Caixin Final Manufacturing PMI. AUD Building Approvals, Cash Rate & RBA Statement. GBP Manufacturing PMI. CAD GDP. USD ISM Manufacturing PMI. NZD GDT Price Index.
- Wed 3rd: AUD GDP. GBP Construction PMI. USD ADP NFP.
- Thurs 4th: AUD Retail Sales and Trade Balance. EUR Minimum Bid Rate & ECP Press Conference. CAD Trade Balance. USD Unemployment Claims & ISM Non-Manufacturing PMI.
- Fri 5th: USD FOMC Lacker speaks, NFP & Unemployment rate. CAD Unemployment data & Ivey PMI.
Forex:
E/U: The E/U rally continued at the start the week and the TC signal from the previous week ended up peaking near 570 pips. This was a massive move and coincided with the FX indices being in alignment for LONG EUR and SHORT US$. I have previously noted how periods of FX index alignment can deliver lenghty trends and this was a classic example of that.
The EUR/USD rally faded though once price edged up to within 100 pips of the key 1.18 level. This is a major S/R zone for the E/U as it represents the bottom trend line of the previous monthly chart based triangle breakdown. I had been looking for a test of this level as per the quote from my last w/e update: “Any breakout above the top trend line could signal a basing pattern here for the E/U, even if only temporary. I would then be looking for a test of the other major S/R zone at 1.18″.
It is worth noting that the resultant pullback from the 1.18 resistance region found some support when it reached the 1.12 region and this is of no surprise. The 1.12 region is the 61.8% fib of the 2000-2008 swing high move. Until recently 1.12 had been resistance but now, as often the case, it appeared that this resistance may turn into support. However, the E/U closed the week just below 1.12 but the monthly candle close on Monday will be the one to watch here to see if it can reclaim this key S/R region. A monthly close above 1.12 might seem like a small move but it would be a significant psychological one!
Traders still need to keep an eye on the weekly chart’s Flag trend lines:
- Any new trend line breakdown and continuation could signal the start of a weekly-chart Bear Flag breakdown worth up to 3,500 pips. Keep an eye on the lower flag trend line, and also the recent low down near 1.045, in case they offer up any support.
- Any breakout above the top trend line could signal a basing pattern here for the E/U, even if only temporary. I would then be looking for another test of the other major S/R zone at 1.18.
Descending triangle on the monthly chart: There is still an overall bearish pattern in play on the E/U monthly chart: a 4,000 pip bearish descending triangle breakdown on the monthly chart. The descending triangle pattern is a bearish continuation pattern and has a base at around the 1.18 level. The height of this triangle is about 4,000 pips. Technical theory would suggest that the bearish breakdown of this triangle below 1.18 might see a similar move. It is worth noting that this would bring the E/U down near 0.80 and to levels not seen since 2000/2001!
Price is trading above the Cloud on the daily chart but below the Cloud on the 4hr, weekly and monthly charts.
The weekly candle closed as a bearish coloured, essentially ‘Inside’, candle reflecting some indecision here.
- I’m watching for any new TC signal on this pair, the 1.12 support level and the weekly chart’s Bear Flag trend lines.
E/J: The E/J chopped lower last week and broke down from a daily chart triangle pattern. This break came with little momentum though and so the triangle has been revised.
I’m still seeing a potential bullish ‘inverse H&S’ pattern building on the monthly chart.
Price is trading below the Cloud on the 4hr, daily and weekly charts but above the Cloud on the monthly chart.
The weekly candle closed as bearish candle.
- I’m watching for any new TC signal on this pair.
A/U: The A/U chopped lower last week and fell below a long-term monthly support trend line. The monthly candle closes after Monday and so traders need to see whether the A/U can close above this support to see out August. Apart from this monthly candle close traders need to watch out for impact from the RBA with their Interest Rate announcement on Tuesday.
The hold below the 0.755 level is keeping the prospect of a major 1,700 pip Bear Flag in focus for now though.
There is still support below the current level of the A/U although this is coming from just one region now. The remaining support is from the 0.71 level which is near the 78.6% fib of the 2008-2011 swing high move.
Price is trading below the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair and the monthly support trend line.
G/U: The Cable opened the week a bit higher but then fell over 450 pips and closed below a daily triangle pattern. The triangle break alone gave up to 150 pips of movement. The 4hr triangle break came with increasing bearish momentum and there is the suggestion of bearish momentum building on the daily chart too. Any continued bullish US$ activity would help to keep pressure on the Cable and, if so, would have to bring the 1.50 level back into focus for this pair.
Weekly chart H&S: There is still a possible bearish H&S pattern forming on the weekly chart but the failure to break below the ‘neck line’ is holding this pattern off the time being. The height of the pattern is about 2,400 pips and suggests a similar move lower with any break and hold below the ‘neck line’. I would consider that any close and hold back above 1.60 would void this pattern.
Price is trading below the Cloud on the 4hr, daily and weekly charts but in the bottom of the Cloud on the monthly chart.
The weekly candle closed as a large bearish candle.
- I’m watching for any new TC signal on this pair and the 1.50 level.
Kiwi: NZD/USD: The Kiwi experienced a huge spike lower last week and, although making a decent recovery, has now closed the week below the recent Flag pattern suggesting the start of a 1,000 pip Bear Flag. Any continued US$ strength will help to develop this Bear Flag.
I’m still on the lookout for any support from the 0.64 region though as this is near the key 61.8% fib of the 2008-2011 swing high move.
‘Double Top’ breakdown on Monthly chart? The monthly chart still reveals a possible ‘Double Top’ pattern with a neck line at 0.735. The monthly candle close below this level for January suggested a possible 2,000 pip bearish follow through move as this is the height of the ‘Double Top’. This bearish move has spiked to over 1,000 pips so far.
Price is trading below the Cloud on the 4hr, daily, weekly charts and monthly charts.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair, the Bear Flag and the 61.8% fib level near 0.64.
The Yen: U/J: The U/J broke down from a daily chart triangle last week and a spike-move resulted in a 500+ pip dip from the Monday open. Price action bounced back from 117 support though and this activity is only helping to support the choppy ‘Handle’ action that I have been on the lookout for.
Price is trading in the Cloud on the 4hr chart, below the Cloud on the daily chart but above the Cloud on the weekly and monthly charts.
The weekly candle closed as a bearish coloured Doji candle reflecting some indecision here.
Monthly Chart Bullish Cup’ n’ Handle pattern: There looks to be a new 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.
- I’m watching for any new TC signal on this pair and the 124 level.
USD/CAD: The USD/CAD remains choppy above the key 1.30 level. The significance of this region can be best seen on the monthly chart.
Whilst I’m still seeing a ‘Cup’ pattern on the monthly chart this does bring the potential of extended choppiness around this 1.30 region so as to create the ‘Handle’.
Triangle breakout target: The Loonie had previously broken up and out from a major monthly chart triangle pattern that was identified to deliver up to 2,500 pips and this move is almost complete! This 2,500 pip figure is evaluated from the height of the triangle. I have used the triangle height from the beginning of the bull trend line, as shown in the monthly chart below. The height of the triangle is around 2,500 pips and, thus, this would be the expected move from any breakout action. Extrapolating a bullish move from this triangle places price up at the 61.8% fib level. These fibs levels are popular targets in retracement moves and so this adds some confluence to this as a possible target. The bullish move has given over 2,300 pips so far.
Monthly Chart Cup ‘n’ Handle? The monthly chart now also 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 Doji.
- I’m watching for any new TC signal on this pair and the 1.30 level.
GBP/AUD: This pair remains choppy above the 2.07 level and I’m still watching for a test of this key S/R region and the bearish weekly candle is offering some encouragement of this potential.
I have mentioned over recent weeks that I’d be looking for any signs of a pullback here to test either the monthly 200 EMA or the 2.07 major S/R level. Now that the monthly 200 EMA has been tested I’m watching for further tests and the 2.07 region. There is the look of a ‘Cup’ pattern on the monthly chart and so we could see some choppiness around this 2.07 region as a potential ‘Handle’ forms up.
Price is trading in the Cloud on the 4hr chart but above the Ichimoku Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bearish coloured Doji candle reflecting some indecision.
- I’m watching for any new TC signal on this pair and the 2.07 level.
GBP/NZD: The GBP/NZD remains choppy whilst it trades under the monthly chart’s bear trend line. There was a huge spike worth over 700 pips above this level during last week but price pulled back to close the week below this major S/R level.
It is worth noting that any 61.8% fib pullback here would bring price back down to near the previous breakout and S/R region of 2.10.
The GBP/NZD is trading in the Cloud on the 4hr chart but above the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bullish candle but with a huge upper shadow.
- I’m watching for any new TC signal and the monthly chart’s bear trend line.
Silver: Silver traded lower last week on the back of the strengthening US$ and, although it fell back below $15, it found support at $14.
Silver is back trading below the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bearish, almost ‘engulfing’ candle.
Any new monthly hold below $15 after Monday would be bearish and would bring the $11 and $9 levels in focus. $11 is previous S/R and the $9 area is the 100% fib level.
- I’m watching for any new TC signal.
Gold: As with Silver, Gold pulled back last week on the back of a strengthening US$ but, whilst closing below the key $1,145 and 61.8% fib levels, it managed to close above the $1,100 level.
I had been expecting that many traders might SHORT Gold with any test back up at this key $1,145 / $1,150 region though as the previous break below this level had been the first since March 2010. This pullback trade did offer a $30 move lower during the week but price found support from the monthly pivot near $1,115.
The weekly hold back below $1,145 for now though is bearish and suggests that a deeper pull back could still be in store for Gold. The monthly candle will close after Monday and a monthly close below the 61.8% fib and $1,145/1,500 region would only add to this bearish sentiment. Bearish targets below $1,145 and $1,100 include the $1,000 psychological level and, then, the 78.6% fib near $950.
Gold is trading in the bottom of the Cloud on the daily chart but below the Cloud on the 4hr, weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Inside’ candle reflecting some indecision here.
- I’m watching for any new TC signal and the $1,145/1,150 level.
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