Monday, June 21, 2010

Charts and analysis

Fake out!!  After the announcement that China would allow the Yuan to be more flexible vs the dollar the markets rallied hard at the open Sunday night, dollar down hard, crude, indices, other currencies up big.  But they must have forgotten to tell the Chinese Central Bank because when they released the Monday rates the Yuan vs the dollar was unchanged and then to add insult to injury they devalued the Yuan vs the Euro, GBP, yen, etc.  Oops.  Or maybe they meant to do that ...
I do not get the fuss about revaluing the yuan.  Unless the US public saves more and produces more and buys less crap then higher priced imports are just going to act like a tax going to the Chinese.  Or am I missing something.

After big moves off the lows and the jump Sunday open a lot of currency markets and crude are at significant SR or fib retracement levels where a pull back is possible. For the past 11 years the week following June options expiration has been negative for stocks.  That doesn't mean it will happen again but it is a significant statistic.  Last week ended with very very quiet trade for an option expiry week, and no retracement of the big rallies.  Indices consolidated sideways for three days instead of pulling back which is bullish and may mean any pullbacks will be shallow.

Interesting statistic - The S&P currently trades at the level of March 1998, when gold was trading at $302.  Dennis Gartman gave a good interview on Friday about why Gold is still going up.

SPX - 4hr chart 
Price has broken the descending trendline resistance from the flash-crash rally high so the trend is up and the trendline should now become support.  After three days trading sideways in a bull flag or equal triangle the Sunday open saw a breakout to the upside. Price then stalled at the 50fib retracement from the April top and the 61.8fib retracement from the flash-crash rally high which is an area of confluence that could cause a wobble.   This market is a buy on dips for me, short term and if the top if the wedge does not hold as support then I expect a pullback (if not Monday then Turnaround Tuesday) to retest support at 1090 or 1081.50 and then the rally to continue. 

FTSE 4hr chart 
Higher highs and higher lows put FTSE back in an uptrend but price has stalled and like the SPX I am looking for a pullback to retest 5100 (50% retracement of the move off the lows) or 5050 (61.8fib retracement) to buy again.  The daily has a bearish Gartley pattern which suggests a retest of the lows at 4900 is also possible for the FTSE.  

With the big jump at the open Sunday night Crude now has a 200 pip gap and has stalled at the 61.8fib retracement from the May high to low big drop. I expect $80 to be tested and then am looking for a pullback (I expect to 75.00 or 73.00) to buy again.

Dollar Index 
Dollar index has dropped hard and the break below the previous swing low at 85.13 confirms the down trend continues.  I would not be surprised to see a bounce here but I expect a retest the long term descending trendline (from Feb 02) before the uptrend continues.

After the wedge breakout followed by new highs in Gold I now expect Gold to test 1267 and the 1.618 fib extension before pulling back to retest support. Gold futures options expire at the end of this week and Gold often falls into option expiry and rallies afterwards.

Major currencies

EURUSD daily chart
EURUSD is having its best rally in 9 months and is set to test resistance and round number 1.25 also the 78.6fib retracement where I expect a bounce / pullback.  I am a buyer of dips looking for 1.2850 and 1.31 before the bigger down trend continues.

Cable has a bearish Gartley fibonacci pattern on the daily chart and has made two equal measured moves off the lows at 1.4885 but looks likely to test 1.4950 / 1.50 next.  I am looking for clear price action to short (target 1.4550) but because of cable's habit of going sideways I may pass.  My longer term view of cable remains bearish and I may wait for better levels to sell from.

Bearish correction on track for target of 1.09 where resistance becomes support and 61.8fib retracement.  I am waiting for price action there to go long.  A break below 1.09 and the rising trendline targets 1.0450

Price broke 90.80 support tonight and the bearish trend continues.  I expect 91.70 to hold as resistance and USDJPY to continue lower to the bottom of the rising channel and then retest 88.13.  A break above 92.12 changes my view to bullish.

AUDUSD blasted through my potential reversal level at 87.00 and now sitting at 88.00 SR level.  It is not a fib level to tempt me to short and I am looking for price action at 88.85 or 89.50 now for aussie to pullback.  The move has left a pretty good size gap for Aussie to fill.

1.015 is support and the point where USDCAD has made two equal measured moves down from the May high.  If price closes below here then it will likely continue to test 1.00 and then 0.9820

Strongly bullish the 70.70 SR level and 61.8 fib failed to stall the NZD advance and the next target is the descending trendline resistance and 88.6fib level.  

Has traded sideways the last few days I am looking for the  upwards correction to continue to 85.50

More charts to follow ...


  1. This comment has been removed by the author.

  2. given their economy and surpluses chinese currency should be the strongest in the world not weaker than gbp [which is bankrupt].

    so china are just gaming the system to benefit them although it has caused asset bubbles. but which problem would you prefer? the asset bubble or the bankruptcy?

  3. Richard, I agree that the Chinese currency should be the strongest.
    My point is until the USA stops consuming so much and starts saving more all they are going to be doing is paying more for their crap ...

  4. break through?


  5. Thanks Richard, good video.
    I think we keep going down this week and consolidate.

  6. USDJPY is an odd one, everything falling today but it found some bids ...
    S&P got below the 200daily sma and then the PPT came out at the close and pushed it back up again. Could be light volume and tricky trading into the fed announcement on Wednesday.