Charts and analysis

The Asian session tonight has broken some resistance levels that suggest this bounce has legs.

SPX - 4hr chart

Good rally of the lows from last Tuesday has yet to clear the previous swing high at 1108  and confirm double bottom but tonight the trendline has broken (just) and the rally looks set to continue.   Buy on dips still target 1148 / 1160 (where rally will equal the bounce from the flash crash lows and market will have symmetry.

CRUDE

Still bullish correction, buy on dips.  Breakout from the wedge consolidation and above the 38fib targets the 61.8 fib at 79.50

GOLD

Sideways consolidation but gold is higher despite rising Euro and risk appetite so it may be back to trading as a speculative trade rather than the fear trade.  Price has broken out long from a wedge but failed to hold new highs.  A retest of the wedge trendline has held thus far and price now needs to either break out to new highs or down from this wedge.

The article about Gold on the front cover of todays NY Times and the 93% bullish positioning makes me think we could correct down from here.

Major currencies

EURUSD daily chart

CoT positioning shows traders loaded up again short the EURUSD and it is back at 2010 extremes.  

Tonight has broken strong resistance at 1.2150 level and set to rally further  Buy on dips, target 1.25 1.2850 and 1.31 and the descending trendline resistance.

GBPUSD

The market has tested the 61.8 fib retracement level at 1.47 and bounced but it looks set to try again tonight. I like this long target 1.4850 and then the top of the descending channel and the 1.52 area.  Another failure at 1.4760 and I would exit and forget longs.

I am not tempted to short unless it breaks 1.4345 which is not out of the question.  It is one of the weakest currencies and weighed down with BP.

USDCHF 

Finally a turn after 12 weeks up in succession.  I like this short counter-trend a lot and I would sell rallies with a stop above the high at 1.1675 and a target of 1.09

USDJPY

I favour the downside in USDJPY but it is not a trade with rising stocks and other yen crosses pulling it upwards,  it is rangebound and I don't see a trade unless it breaks 90.84 to the downside or 92.24 to the upside.

AUDUSD 

Speculation that the proposed 40% mining tax will be dumped is helping AUD.  It has broken its wedge and confirmed the double bottom by breaking above 85.50 and the upside target is 87.00. 

USDCAD

Weekly higher lows have reversed with a big weekly outside bar.  Needs to break strong support level at 1.0220 and 1.00 for me to hold short and target is the lows at 0.9930, then 97.00 then 91.00

CAD could be slowed up relative to other currencies with these big support levels and parity level.

NZDUSD 

Confirmed I like this long with a target of 70.00 so it is a little late to enter here from a risk reward prospective.  At 70.00 it will be a bearish Gartley and an interesting short trade.

Currency crosses to follow shortly ...

EURGBP
Has made a higher high tonight confirming the double bottom at 82.20.  I would buy a pullback to 82.80 and my target would be 84.25 and then 85.50

EURJPY
I am not sure the yen crosses are the best EUR buys but I like this long and the target is 116.75 initially.

AUDJPY
Has made a good base at 72.00 and I am a buyer of dips, targeting 80.00 then 82.00/83.00

GBPJPY
I like this long targetting 139.30 and I would cut the trade if it fails again at 137.40.  139.30 is when the swing would be equal distant to the swing starting 25 May.

EURAUD
1.40 is an important level for EURAUD from 1997 and I like it to strengthen here and confirm a higher low at the 78.6fib level but it is countertrend and higher risk so I am waiting for a daily candle reversal which we do not have yet.

EURCAD - monthly chart
EURCAD is at a BIG level.  The daily chart shows this could be bottoming.  With USDCAD stuck above big support levels and EUR on a bit of a tear this trade might just work ...  I like this trade, it has very good risk:reward potential.

GBPAUD
Bearish, this pair moves inversely with stocks normally.  I am looking for a pullback to 1.7250 or 1.7550 to sell again.

AUDNZD - weekly chart
Selling rallies looking for a break of the trendline support.  A pullback to 1.2670 gets me short, target 1.1650

AUDCAD daily chart
Trend is down but looks set to retest the underside of the long term wedge where it broke out from last month.  Counter-trend long target is 0.925 but looking to short again.  Downside target for short is 0.80



I have the following positions open:
CRUDE long 74.60 stop 74.30 PT 77.00 / 79.50
AUDJPY long 77.75 stop 77.40 PT 80.00 / 81.70
EURCAD long 1.2550 stop 1.2460 PT 1.3330
AUDJPY closed 50% @3R 78.80 (+1.5R)
CRUDE closed 50% @3R 75.50 (+1.5R)
CRUDE stopped out balance 75.20 (+0.5R)
AUDJPY closed 78.90 (+1.6) - fell short of my target but not liking the JPY crosses as much as the USD
GBPUSD long 1.4740 stop 1.4690 PT 1.49 - 4hr bull flag

Interesting article in the Telegraph today: Investors are betting on a Black Monday-style collapse, BoE warns
There is an Irish proverb: The obvious rarely happens, the unexpected constantly occurs 

Friday 11 June 2010

After some impressive rallying from the lows on Tuesday I would not be surprised to see some pullback or downward correction today before continuing higher.  EURUSD has some big levels to get through above for the rally to continue and London is half way through Friday and the first day of the world cup, and I am wondering how many in NY are already in the Hamptons.
Economic data at 08:30 NY time (retail sales then later consumer sentiment) might be a driver.
Ugly manufacturing numbers and the BP problems have hit sterling hard today and price action in EURGBP might be supporting EUR more than any optimism about the EU.

EURUSD (4hr chart)
If the weekly candle closes here it is a bullish piercing line pattern but is underneath the lows of the past two weeks where support becomes resistance so technically momentum still bearish and we need to break up above 1.2150 to get us up the first step safely.

EURJPY 4hr chart
Holding below previous trendline support and in a pretty clear range this chart makes me think we dip lower today before moving higher.




USDJPY is in the middle of a rising channel and stuck around the 91.50 level.  I think it is being moved by the JPY crosses at the moment rather than under its own steam and I am passing on this chart.

CRUDE 240 min
Crude has made a good rally off the lows, higher lows and now a higher high and has good support again above 74.50.  Profit taking today could send it lower to test 73.00 but my long target for this swing is 78 (1.27 fib extension of the swing off the low and where this swing is equal distance to the first one) and 80.00

SPX
S&P is at the 61.8fib of the June high to low and *should* dip back to the 38.2 fib and previous support at 1067 before moving higher where I expect 1108 and the range high to be tested next.  However bullish momentum is quite strong and a bull flag and breakout are possibilities.
1107 needs to be surpassed to confirm the double bottom.

EURGBP 240min chart
Double bottom?  This will be very supportive for EUR and this trade has some very good Risk reward potential for a retest of 0.85 at least.



Update:

Continuing yesterdays contrarian indicator theme.
This is the cover story from Business Week.  We may have a temporary bottom in stocks.

Contrarian signals

Bank of Montreal yesterday told their clients to get out of equities and  "Go To Cash - In Plain English".

Last week this was the cover of Newsweek:
However my favourite contrarion signal is GS lowering it's target for EURUSD today to 1.15 for clients.  (I am pretty sure that it will go there eventually and lower but they got EUR wrong twice and three times is a charm.)

Bearish sentiment is now at an 11 month extreme.

So we could a little uber-bearish and due a risk bounce.
I am not suggesting that we are starting a new bull run or that anyone should buy euro's but there is a possibility of a bounce and a new place to sell more ...

I posted last month about the S&P  and I think the 1038 low of 25 May has become one of those key line in the sand levels.   Wednesday's candle and close is bearish and if the 1038 low does not hold then supports are at 1000, 981 and 952 and we will likely hit them very sharpish if that 1038 breaks.  But while we hold above 1038 with no follow through I am looking for a rally to 1122 or 1150 to sell again but we have to break kryptonite fib retracement levels at 1075 and 1083 to get there.


AUDUSD has bounced off a key SR level and pivot from 1995

Monthly chart

Daily chart:
If the descending trend line breaks I am looking for a rally to 0.86 or 0.873 to short again.

FX options indicate that AUDUSD might be set to rise also and AUDJPY looks to have put in a base around 72.00 and I am looking for a rise back up to 80.00

CABLE / GBPUSD
Cable is in a pretty clear descending channel, three waves down, and has bounced off the bottom put in a lower high and today's daily candle is a bullish engulfing.  I like this long to at least 1.49 / 1.50  but 1.52 is a better level to look for shorts again.
Thursday is the Bank of England rate decision ... no change in policy expected for now.

CRUDE: 4hr chart
Crude looks to have put in a bottom and broken trendline resistance.  I am looking to buy dips for a counter-trend rally back to 78.00 or 79.50.  In the event of a good short squeeze 81.00 is not ridiculous.

Dollar Index.  The dollar index broke its double top / bull flag.  It has now rallied for 6 straight months and it has never rallied for 7 months in its 39 year history.  I am a big time dollar bull but this month may be a month for a correction for the dollar.  Check this chart from Bespoke Investments.

PS - I was going to say I think Gold could be putting in a double top but I won't mention it because everyone loves Gold except me.

My positions tonight:
AUDJPY long 75.50 stop 74.90 PT 78.00
GBPAUD short 1.7440 stop 1.7480 PT 1.7250 (break of daily IB and trendline support)
CRUDE long 75.00 stop 74.50 PT 78.00

GBPAUD daily chart.
This pair is inversely correlated with stocks

Dollar Index double/triple top?

The Dollar index could be putting in a double or triple top (daily chart) and a break down below 85.17 would confirm it.
This breakdown could target a retest of the long term trendline shown in the second (weekly) chart.  The previous correction on the dollar index was very shallow and if this one is equally shallow then the support at 85.17 could hold and we could form a wedge or bull flag here.

The dollar Index had been moving up with the Indices this year unlike last year when it moved inversely. Today's move shows the old correlation is back where equities move up and the US dollar is moving down.
EURUSD is 50% of the dollar index and looks to have put in a double bottom but with stocks moving higher I think that the commodity currencies of AUD CAD and NZD are better longs vs the USD.

S+P

So looks like the pre-holiday rally is underway and everyone is looking at the inverse head and shoulders on the hourly  S+P with neckline at around 1090.  This would give a target for the bounce in the S&P of 1150.
I like this 1150/1152 target a lot:
1.  It is a measured move so would be equal in distance to the bounce off the flash crash low
2.  Its the level where the S&P broke the daily trendline from the March 09 lows
3. It's the previous resistance from the January highs.

All in all if the S&P can break 1090 then 1150 is a very reasonable target and pretty nice reward.
This also means that the AUD and CAD long trades (and NZD too) should work very nicely.

I'm Back

Thanks for all the e-mails and messages, I had some other stuff to take care of.
So where are we in the markets ....

This is a long holiday weekend in the US and the UK (Monday) and normally going into a holiday weekend the market reverses its prior trend and then following the week it should resume it again.  The trend of late has been down so I would expect to rally into the holiday but Thursdays are usually the biggest down days of the week and I therefore think we go down today and possibly end the week with a face-ripping rally.  Which all makes it pretty dangerous out there!!  I might not trade very much until next Tuesday.

So what looks good.

Euro is weak vs everything.
You can draw a pretty good wedge of EURGBP on the daily and a break of yesterdays low is a break of the wedge and says we have much more downside.
EURAUD is a good short on its way to at least 1.45 but I think the breakout level of 1.42 is possible.  EURCAD is dropping like a stone also, next key support is at 1.28

Gold fell from the highs, and has bounced up to the 61.8 retracement at around 1218.  I think it is a pretty good short here although slightly higher risk.  Waiting for a daily reversal candle might be better or a break of this 4hr trendline.


Crude is rallying I think on the hope that the fix in the Gulf will stop the leak.  Crude is pretty overbought and I think from here it rallies to test the 75.00 level and the underside of the channel it broke out from but I think a rally has the potential to take us to $80.  Any bad news from the Gulf will not help crude longs so I am watching the news closely.

In summary, we look likely to get a big risk reversal into the holiday weekend and EUR is not the best buy right now.

I like long AUDUSD to 87.00

and short USDCAD to target 1.03 - 1.025





Finally ... USD prelim GDP and employment numbers could be a market mover, out at 08:30 NY time

Tuesday 18 May

I have taken profits and closed my EURUSD and CRUDE shorts for the following reasons.


Crude has fallen over 20% without a bounce and tomorrow is the release of the UN draft sanctions on Iran. Iran has said it is prepared to block oil and "wreck Western economies" if sanctions are imposed.

EURUSD has fallen hard today and bearish sentiment is really extreme.  The all-time low is at 0.8228 in October 2000 and the all time high at 1.6040 in July 2008 so that means the 50fib is at 1.2140 … and the 1.618 fib extension of the last swing is around 1.2165.
In fibonacci terms this is a good place for a bounce.

S+P futures have stopped tonight at the 50% retracement of the bounce off the flash crash lows.  It makes me think that the indices could rally from here.

Remember .. I am often wrong :)

EURAUD

On all the higher time frames while the trend is clearly down this pair has so much upside potential if you can get an entry and hang on to it.
4hr chart:

Daily chart:

Sunday analysis

The futures are all red tonight and its a pretty ugly start to the week for risk.

EURUSD has smashed through the 08 support levels and 123 level and Sterling has broken major support and the flash crash lows and AUD is closing in on them fast.  
This article in the Sunday Times about the Euro going to parity has not helped and overseas all the asian indices have opened much lower.
There is a traders old wives tale apparently that when Asia makes these big moves it us usually the end of a run, so we shall see.  The commodity currencies look all set to take over from the continental currencies as the weakest plays vs the dollar.

Bearish sentiment in the Euro is worryingly extreme which could mean some nasty volatility or short squeezes. The CFTC data shows a net short position in EURUSD of 18bln and last weeks rallies reportedly only due to short sellers buying upside option protection and "Le Tarp" trillion dollar bailout buying only the briefest of rallies.  Likewise Gold bullish sentiment is at 98% (a record) and means that Gold is vulnerable to a sharp correction before continuing higher.  The big break down in risk appetite has hit crude hardest with those shaken out of the market showing no inclination as yet to jump back in and no bounce whatsoever in crude which has now collapsed 17% in two weeks and fallen out of a rising channel it has been in for the past year indicating a bigger trend could be forming.

The biggest event risk this week for the dollar is the CPI figure.  So far is has held above target even though the Fed says it sees no inflation pressure.  If it keeps putting in higher numbers expectations of a rate hike will rise and it may force their hand.

Indices:

S+P futures: 

The S&P has rolled over just short of the 61.8 retracement of the big drop from the credit crunch and this week retraced to the 78.2 fib of last weeks big fall and then fell off again.  This and the close back below the trendline from the March 09 lows is bearish and suggests a continuation to 1090.  We have a clear trading range now with last weeks high and the low of two weeks ago.  I prefer to sell rallies and I have a 1120 then 1075 target, BUT the drop of Thursday/Friday could just be a pull-back in the big rally off the lows and we could continue higher from here.

FTSE futures

After the dramatic fall of two weeks ago putting the FTSE below the daily trendline from the March lows the trendline has been retested from the underside and rejected.  Below this line I would sell rallies with a target of  4850 and I would be looking for price action around 5320 to short.  Like the S+P this move down could also be a shallow correction from the rally off the crash lows and we could power higher from here.  For me the trend is down and below the trendline I would sell rallies until last weeks high is taken out.

GOLD 

Strong up trend, Gold made new highs last week before correcting but finds support at the previous high 1226 level.  This rise is so steep gold could correct all the way back to 1100 without breaking the trendline from the March 09 lows.  Gold is at significant fibonacci resistance here and when it makes new highs and that does not bring in significant new buyers then I would expect a pull back here to the 1170 or 1145 area and look for price action to buy again.  If Gold continues to rally here then next stop 1275 then 1337.

SILVER  

is in a strong uptrend but for the reasons I outlined last week I am counter-trend short looking for a pullback to 18.75 and then 18.00 (61.8fib retracement).

CRUDE 

Bearish weekly and daily with no bounce.  Crude has fallen out of a long term channel and this has implications for a longer term trend change. 

I would sell a retest of the trend line from the underside.  Crude is in steep contango again and the last day of trading the June contract is Thursday 20th so if you are trading the front month expect a rally into Thursday followed by a sell off and lots of volatility (usual pattern). 

Currencies

DOLLAR INDEX 

A sharp rally in the US dollar has broken it up out of a rising channel and this weekly chart shows it has also broken out through 8 year trendline resistance.  This is an extremely bullish breakout and I would expect any retraces to be held on a retest of that trendline in the 84.50 area.  In the short term there is nothing much in the way of resistance before 88.00

AUDUSD
Weekly inside bar, daily bearish reversal at the 61.8fib of the previous weeks big drop.  AUDUSD has dropped a dramatic 130 pips on the Asian open tonight and broken support at 0.8800.  Drop is halted at the 78.2fib retracement which is a favourite reversal level for AUDUSD.  AUDUSD needs to break below 0.87 to confirm the lower high and set up the February lows at 0.8580, which is a key level.  If this is broken the objective becomes 0.7700

NZDUSD
Technically NZDUSD is in a rising channel which looks to have been broken tonight along with the 200sma which has been long time support.  As this has just happened in the last two hours in the Asian session I am waiting for a pull back and retest before I entertain a short.

USDCAD
The weekly inside bar broke long in the Asian session tonight and is now held down by the daily 200sma.  It has been more than a year since USDCAD has traded above this moving average and a close above would be significant.  USDCAD has broken out above the resistance line from early 2009 and succesfully retested it and I am bullish this pair, buy on dips.

EURUSD - monthly chart
EURUSD has broken major support tonight at 1.2320 and the 2008 lows.  This level also represents fibonacci extension levels and the bottom of channel/trendline support.  I am wondering if the moves that broke this support in the Asian session are an exhaustion move and we may see some sort of correction here where we can sell again.  After such a big move down and the market so extremely positioned it is hard to enter short here and I am looking for consolidation or possibly a bounce.  I am looking to sell the next rally below 1.25 and the next objective is 1.18 and the 161 fib extension, 127 fib extension and trendline support from the 2000 lows .

GBPUSD
Bearish.  I had 1.44 as my target for this swing (1.618fib) which has been exceeded and in the Asian session tonight when cable broke the "flash crash" lows.  I am looking for a bounce here to retest the break at 1.45 initially to sell again and my next target is 1.4120

USDCHF
Strong uptrend.  My target for this swing based on Fib extensions was 1.14 and again it has been hit in the Asian session tonight.  I expect some consolidation here and possibly a pullback to buy again.  The correlation with EURUSD and the bearish extreme sentiment makes this a tempting short with the right price action.

USDJPY
USDJPY looks like a range trade to me at the moment within the huge candle of two weeks ago and price has stalled tonight at 91.80 resistance level.  We could rally from here but if we dip then I am looking at the 90.80 or 89.50 levels for price action to buy.

EURJPY
Bearish extreme! A close below 112 support sets up a test of the spike low and 109.94 (1.618 extension). and a break below that targets 103.00.  We have tested 112  tonight and I am watching to see if it holds.  The market is very heavily short EUR and this pair is very volatile and we could have a couple of weeks of consolidation within the big weekly candle of two weeks ago.

GBPJPY
After a solid rejection at the 61,8 retracement of the spike low GBPJPY is all set to retest that low after dropping 275 pips in the Asian session tonight.  A break of the spike lows gives a fib extension target of 120 but after such bog moves I would not be surprised to see some consolidation in the spike range before that happened.

---------------------------------

I am taking a bit of a break this week and so will not be posting daily trades.  I will be checking the charts though and if I see anything that looks good I will post it.
Hope everyone has a great week.

Friday 14 May

Markets are very nervous ... Asian markets sold off overnight and European stocks look set to do the same.  The dollar and yen rally look set to continue.
Every bounce in Euro seems to get sold and the UK  election euphoria has worn off and sterling is sold even harder than EUR.
Having said all that I would not be surprised to see 1150 hold in the S+P and a rally in US stocks to end the week.  The sentiment seems overly bearish and that level is very sticky.  If it doesn't hold look out below.
Either way we look set to close the week with a lot of inside bars after last weeks flash crash.
The EUR looks set to be the only one to break last weeks low but I guess a trillion dollars does not buy you much bounce these days.
If there are no bounces I will be selling breaks of support today.

EURUSD short 1.2515 stop 1.2550 PT 1.2330 on a break of 1.25
EURNZD closed 1.7575 - euro rally over - (+1R)
GBPAUD closed BE - trade not working

AUDCAD long 0.9150 stop 0.9130 PT 0.9350

GBPJPY short 134.95 stop 1.3545 PT 133.10 / 131.20

EURUSD short 1.2515 stop 1.2550 PT 1.2330 break of support

EURJPY short 116.00 stop 116.50 PT 114.40 / 110

AUDUSD short 89.32 stop 89.57 PT 88.30 / 87

GBPJPY stopped out at US open (-1R)

BRENT crude short 79.90 stop 80.40 break of low of daily doji
SILVER closed 50% @3R 19.060 (+1.5R)

EURUSD short closed 50% @3R 1.2410 (+1.5R)
EURJPY short closed 50% @3R 114.50 (+1.5R)
BRENT crude short closed 50% @3R 78.40 (+1.5R)
AUDUSD closed 50% @3R 88.57 (+1.5R)
BRENT short closed balance 78.00 (+1.9)
EURJPY short closed balance 1.1410 (+1.9)
EURUSD short closed balance 1.2360 (+2.2)
AUDUSD short closed balance 88.55 (+1.54)
AUDCAD closed 91.65 (+0.75)
USDJPY closed balance 92.40 (+1.35)

Open trades:

EURUSD short 1.3110 stop 1.3135 PT 1.23 - 1/4 

SILVER short  19.630 stop 19.820 PT 18.65 - 1/2