Monday, March 22, 2010

Weekly analysis

New highs in the indices as they ground higher last week and profit taking on Friday saw a pullback to find support off the old highs. When we made new highs there was no squeeze of shorts covering but neither was there a rush of new buyers so sentiment does not appear to be extreme enough to make a significant market top at this point, however candle patterns suggest more correction could be in store at least for the first half of the coming week.

The US dollar roused itself and ended the week with a good old rally, it’s not out of the weeds yet but looking good for the week ahead. It has kept its appeal as a safe haven in risk-off moments but it gaining appeal as a speculative yield trade, a win-win. News of the rate hike in India helped this week. The yen repatriation flow has thus far failed to push down USDJPY much against supportive indices and yields. It will be interesting to see what happens there when that downward pressure to buy yens is removed.

I know the Vix is at very low levels, credit spreads are tight, corporate bond issuances seem to be trouble free but yet FX and commodities aren’t exactly brimming with risk appetite, in fact the opposite.

My favourite trades are shorting sterling and euros and the best trending pairs are the continentals vs. the commodity currencies again …(GBPAUD, EURAUD, GBPCAD, EURNZD etc).

Dollar Index (June):
A bull flag and a big rally Friday suggests the uptrend could have resumed and descending resistance line broken. We need to break above the end of Feb swing high but we look set to at least retest that from here. Looking very strong.


S&P -
Weekly long legged doji after making new highs, daily high wave doji found support off previous highs. A correction is underway off a small flat top and looks to continue at least for the first part of the week, support at 1140, 1127, 1112 and 1102. The indices could pullback to the daily trend-line from the lows, which lines up 1102, and still keeps the uptrend intact from a technical view.  I would sell a pull up to 1164 and the underside of the Friday's broken support.

FTSE - Weekly bearish long-legged doji, daily bearish engulfing both sitting on support at 5580 after taking out the August 08 highs. Candles suggest a correction or pull back here. Whilst the uptrend is in place I would buy a retest of 5500, below that says a greater correction is underway to 5385/5400. A break below 5240 says the bulls’ party is over.

Weekly long legged doji, daily bearish marabuzo. I am short term bearish after crude spent another week battling to get above $83 and failing despite a falling dollar and rising equities. Once equities pulled back it translated into the biggest drop in crude in a month after the narrowest range day for month. Support at 80 held but the ascending channel has broken and a break back below $80 looks likely before prices go higher. Support is at $78 but the chart suggests a retest of $75 possible.

Gold is mid range in an equal triangle / flag pattern and too hard to call at this point. It has tried four or five times unsuccessfully to break the 1100 level. The weekly and daily chart patterns are bearish and gold suffered its biggest daily drop in a while on Friday when India (the world’s biggest consumer of gold) announced a rate hike in an effort to control inflation, something that will not help Indian discretionary spending.

SILVER. Similar to gold, sitting on a pivot. Weekly and daily candles are bearish off a daily double top but price is held above 16.75 support. My bias is short and I would sell a break (or break and retest) of 16.75 with a target of 15.70

Currencies - Majors

Weekly small bearish high roller, daily bearish marabuzo off the 78.6 fib. The levels for last weeks bearish Gartley have not been breached and I still like this short. A close above 92.35 negates this bearish pattern and changes my view so for now I’m still bearish off this level.

NZDUSD – Weekly shooting star type doji off the 61.8fib retracement of the last swing has closed below 20ema, the daily bearish engulfing. Price is supported by a rising daily trendline and I would short a break of it at 70.50 or sell a break-retest of it, with a downside with a target of 0.6640/0.6580 and expect some resistance at 69.70

USDCAD – Still the best performing commodity currency for the third week downside momentum has stalled. Weekly candle is a long legged doji after price made new lows, daily is a bullish engulfing hammer below previous support becomes resistance at 1.02. If the dollar rallies this week this isn’t the best looking trade as a countertrend long (although I like it much higher). I would wait and sell rallies with a target of 98

Weekly bearish reversal off descending trendline and mid Feb swing low, daily is a big bearish marabuzo halted at 1.50 support. Remember last month when everyone was talking about the Euro and Greece whilst Sterling was being taken to the woodshed – it looks all set to happen again. Daily and weekly charts show big bear flag. Key round number support is 1.50 but rising trendline support is 1.4950 and a break of that sets up another big drop for cable. My downside target is around 1.4140. UK budget on Wednesday could be a big market mover.

EURUSD – This did look like a clear rounding bottom (Pring) but this pattern is hard to trade with no clear break points and no clear levels at which it is negated for stops. However the symmetry has been lost and it is hard to call between carving out a meaningful bottom or bearish consolidation before the next leg down. The news for EUR is not good and I tend towards the latter and sticking with the down trend. I am bearish below 13740, I would sell off 1.3650 or 1.37 and downside targets would be 1.34 (the 61.8fib retrace of 08/09 highs/lows) and 1.30

USDJPY – Second weekly doji inside bar, daily sideways in congestion. Flat.
Price is held at the upper boundary of a descending channel and should be a short here but there is no price action to short. Yen repatriation flow stops this being a buy for another week. I am staying out.

USDCHF – Reverse of EURUSD. I am bullish but I believe EURUSD is a better short than this is a long trade as EUR is declining so badly vs. CHF. Only a drop below 1.05 changes my bullish longer term view. First target 1.10, second target 1.15


AUDJPY – Long term trend down, medium trend up. Weekly inside bar pause, daily sideways consolidation. I am a seller of rallies and only a break above the January highs changes it. The 78.6 fib retracement is at 83.85 and we are held below that level. I like this short below 82 with a target of 79

NZDJPY – Weekly doji indecision, daily is a bearish and has broken an ascending trendline. I would sell a retest of 64 area with a downside target of 62.50 / 60.50. Only a break above 65.00 changes my bearish view for now.

CADJPY – The strongest currency this is at the top of a big weekly wedge and this week looks like a range trade short. Weekly is a doji pause, daily bearish shooting star type doji. As a short I think there are much better opportunities to buy the yen and I will pass

AUDNZD – Weekly bearish engulfing, daily spinning top. Monthly looks to be forming a shooting star with a close back below resistance which would indicate a counter-trend short or trend change. The NZD made a strong recovery this week and it shows in the charts but I will pass on this one and await more information.

EURNZD – Strong downtrend price made new lows again this week. Weekly big bearish marabuzo, daily inside bar. I am a seller of rallies in this pair and would look for price action to short at 1.9350 – 1.94 target 1.8181 (08 lows).

GBPAUD – Strong downtrend, weekly bearish inside bar, daily bearish marabuzo, I am a seller of rallies. I thought price could make it up to 1.7150 to sell again but it appears to be forming a bearish flag. I would sell a break of the daily candle at 1.6360 target 1.6245 and lower

Downtrend, weekly inside bar, and in a very tight triangle. I am a seller of rallies or the break of daily trend-line support at 92.50. I see this as a US/China trade, I like this one a lot …

EURAUD – Weekly bearish marabuzo engulfed last weeks counter-trend hammer and made new lows for this cross. I would sell a 50% retrace of this candle at around 1.4890. Although this pair is due a bigger correction I don’t see that happening unless the indices fall off this week and more risk aversion returns.

GPBJPY – The most bearish chart! Weekly bearish engulfing, daily bearish marabuzo this pair has broken trend-line support and is all set for more declines. I would sell a retest of 137.00 if it gets there or sell rallies in this pair, downside target would be 134 / 132.50 / 1.32 and below.

GBPCHF – Huge rally in CHF this week after clumsy remarks by the SNB has pulled this pair down. Weekly bearish engulfing, daily bearish marabuzo. This pair is a sell on rallies or retest of 1.60 from the underside with a target of 1.5650 / 151.00 retest of the lows.

EURGBP Weekly high roller doji, daily bullish engulfing, I like this long and I would buy dips off 90.00 or a break of descending trendline resistance, target 92.40 / 93 & 94 .

Weekly bearish inside bar, daily bearish, price has bounced off 125 SR level and broken down an ascending daily trendline. I am bearish, would sell 123 123.15 area or a break of Fridays low, targets 120.70 and 119.63 and lower

EURCHF – This chart has fallen off the planet and I missed it. The market appears to have over-reacted to SnB member comments regarding rate hikes but I am not tempted to buy here and would prefer to wait and sell a pullback.

USDNOK – Weekly bullish engulfing, daily bullish marabuzo, the uptrend appears to have resumed after pullback to 5.8000 level, I would buy a pullback to 5.870 with a target of 6.077 / 6.250

Weekly bullish piercing line – completion of which makes a higher swing low in an uptrend. Daily bullish marabuzo. I would be a buyer here for a long term swing and a target above 1.43. This looks a good long opportunity at this level.  Beware ugly spread in this pair.




  2. Well done Nic!!

    Time well spent on things you like!


  3. If this is Sparta, where is Gerard Butler, (sigh ..)

    Hello Ams, looks like you are right EURGBP and I am not, hope you got some $$ on it. Nics

  4. Hey Nic,

    Euro is by far weekest last week but for some reason EG is holding up. Not sure why. Maybe preparing for something we saw before euro crashed 1000 pips (sudden buying to 153ishh). We know what impact it might have on pound due to that. anyways, King is due to speak that will send pound down a bit. So better be a buyer on EG, and seller on cable etc to reap the reward. Either we go UP now on EG or we don't. This level .90 has to hold. You are right in buying dips from this level. I would like to buy @ 89700 with sl @ 89500


  5. The budget on Weds will be decider for GBP, I think. Last year the market did not like it at all.