Monday, May 10, 2010

Sunday Analysis, 9 May

Extreme Volatility!  The kind of price action following last weeks moves might be difficult for swing traders and favour day traders.  Patience and discipline required :)  with weekly candles and trading ranges not seen since the Lehman aftermath.  Forget fat fingers and computer meltdowns.  The computers switched off, the market reverted to people and the people panicked.  
Prior to the drop of last week the stock markets were extremely bullish and I expect a volatile week and a substantial rebound however the speed at which the market panics and becomes bearish is not good for bears as sentiment needs to stay somewhat bullish for this down-leg to continue.  It really bothers me we have not dinged the 61.8fib retracement in the S+P.  I would not be surprised to see a new high to touch that big level before the downward correction continues again.  In the meantime we have a wide trading range in which we could be chopped to death by a thousand cuts if we are not careful.

The EU have announced their market calming package and it it certainly bigger than I was expecting, it is almost a trillion dollars but it still has to pass at national government levels.    The package also indicates they will intervene in the debt markets.  The market is massively short EUR so even if the package is less than inspiring the EUR is going to be prone to short sharp squeezes and looks set to make a corrective rally irrespective at this point.


S&P futures: 
Weekly opening black Marabuzo that covers 8 prior weeks of gains, daily inside bar following Thursdays huge range.  The diamond top reversal of last week worked better than perfectly!  Despite the sharp rebound from the lows the close below the daily trend line support and 200 daily moving average indicates a trend change in the offing.  However because the 61.8fib from the big drop has not yet been touched I would not be surprised to see new highs in this index before we continue down again.  Technically the 1152.75 SR level and the underside of the weekly trend line from the lows looks like a good place to try a short and if that fails then 1188 would be my next area of interest.

The dow in its drop fell right onto the 61.8fib retracement level.  Very neat and a little clean ... hmm

FTSE futures
Weekly opening black marabuzo, daily inside bar following Thursdays wide range. Downtrend correction.   Friday price came up and tested the 200 daily moving average and bounced down again.  Obvious levels to watch for shorts are 5390 and 5562 but the upside could be capped at 5275 with no resolution to the election horsetrading.

A bull market in full swing.  Weekly bullish continuation, daily doji made new highs following Thursdays long marabuzo. Price has paused at 161.8 fib extension of the last swing and has made two symmetrical swings to reach this high so I would expect a pullback here to the 1161.88 level  before continuing higher to test the previous highs.

Silver has a weekly hanging man doji (bearish) and despite a long bullish day Friday failed to close above the open for the week.  The daily shows an interesting broadening wedge pattern which clearly defines the ranges and possible entry short. 

What a week, weekly bearish long marabuzo, daily inside bar following Thursdays steep drop only halted by the round number 75.00 level.  I know people who are bullish crude and who simply do not believe that crude has dropped 1200 in one week (and are in some pain).  The triple top of last week has produced a drop that has removed 10 weeks of gains (a drop not seen since Sep 08), price has closed below the trendline support from the March 09 lows and below the 200 day moving average for the first time.  Price has stopped smartly on the daily 50sma and the August 09 swing high, so I expect a good bounce here but the trend has clearly changed.  I am looking at a retest of 80.00 / 80.80 and the underside of the trendline or 81.30 / 82.00 as areas to add shorts and I would also add to shorts on a clean break of 75.00 but selling rallies is preferred and we could have a big bullish week after this drop.


Dollar index is at the upper reaches of an ascending channel.  While the bull trend is intact a pullback is possible at this point of the 85.00 round number and fibonacci resistance.

This chart has rolled over.  Weekly dark cloud cover potential reversal, engulfs multiple weeks of gains and has broken trendline resistance from the February 09 lows and 200 daily moving average.  I am a seller of rallies and I am looking at 91.30- 92.00 as a good area for price action to get short again targeting a break of 85.75 support.

Going back on a long term chart for this pair, using data for the ECU that the Euro replaced you can see that 1.25 and 1.30 are important pivot levels for this pair and a bounce here would not be a surprise.  The market is very short EURUSD and even if the market ultimately does not like the rescue package or it is bearish for EURUSD, sharp short squeezes are inevitable when sentiment is so lopsided.  Added to this we have EURUSD on longterm trendline support which although penetrated, it has closed above.  This pair has hit my objective of 1.26 and so I will let the rally play out and look for price action at 1.3040-60 and 1.3120 to get short again.  Only a close above 1.36 changes my view with regard to the trend.

Weekly opening black marabuzo, daily inside bar following Thursdays long hammer on high volatility.  The trend is down and n this pair due to Thursdays election that still has not resulted in a majority Govt.  Although the trend is clearly down in this pair and it has broken long term daily trendline support it is clear a retrace is on the cards.  I am watching for 1.5125 + 1.5175 area to short this pair but it has to clear the resistance at 1.4840-1.4950 where we could bounce back to the lows.
NZD is the strongest currency after the USD and JPY so the best countertrend long and the least rewarding short.  Weekly is a doji (almost a hanging man but with a bigger body) and daily is an inside bar following Thursdays long marabuzo.  This pair briefly popped out of the bottom of the ascending channel but back in now and all set to retest the highs.  I would sell rallies, but this is not the most rewarding pair.  Pass.

Weekly bullish marabuzo with long upper tail, daily inside bar following Thursdays huge rally.  This pair has broken long-term trendline resistance and hit my target of 1.07.  I would buy dips.  I am looking at 1.02 but I would not rule out a retest of 1.00 

Weekly bullish marabuzo, daily inside bar following Thursdays big rally.  I am a buyer of dips, I am looking at support at the bottom of the channel 1.0650/1.07 for longs.

The market was very long USDJPY and got sqeezed badly when it failed at the 95.00 SR level.
The weekly drop erased two months of gains and no doubt a lot of longs had their stops eaten before a sharp bounce off the lows.  I favour more downside for this pair and I am watching for a retest of the short term trendline at 93.00/ 93.50

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