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.  

CRUDE 

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.

GOLD

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.

GBPUSD
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.

USDCHF 

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

USDJPY
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 

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.

USDCAD

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

NZDUSD 

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.  

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

More charts to follow ...

Friday 18 June 2010 - Quadruple Witching

Quadruple Witching option expiry today would normally mean some volatility and unexpected moves although volatility has died a bit, I am not sure if it is the world cup.
We are definately set up for a pull back and risk-off Friday.  Strong bonds and strong Gold are not what you usually see together, Gold may have triple topped and bonds should help it as a short but it is hard to sell against such a strong trend.
The breakdown in USDJPY means that Yen crosses should be better shorts than USD crosses.

USDJPY has broken out of wedge support to the downside, with the help of strong bond market and downside target is the bottom of the rising channel around 89.50

AUDUSD has hit the 61.8fib and SR level at 0.87 and I am short looking for a pullback to 0.8550 SR and then 84 as a minimum target.  AUDUSD is a bearish gartley pattern.

EURCHF
Breaking big lows ... the SNB are now said to tolerate 1.30 and the market is going to test that ... it means CHF is not an attractive short while this is going on.

CRUDE
Broke trendline support, has fibonacci and structure support at 75 but the 61.8fib and SR level at 73 seem possible too.



I will add more charts in a bit but its all one trade and its all looking like risk off. GBPUSD and GBPJPY are also daily bearish gartley or butterfly patterns and also the FTSE index ...

Weakest currency today is NZD and the strongest is JPY so I am planning to sell NZDJPY which is also a bearish Gartley pattern on the daily chart and 4 hour wedge suggesting some energy is storing up ... target 62.25 & 61.75 and a stop above 64.20


AUDUSD short 0.87 stop 0.873 PT 0.8550 / 0.84
CRUDE short closed 50% @3R 75.70 (+1.5R)
CRUDE balance stopped out @1R 76.50 (+0.5R)
NZDJPY short 64.18 stop 64.38, PT 62.25 - top of wedge

I have the following positions open:

AUDCHF short 0.9780 stop 0.9830 PT 0.955 / 0.9275 - 1/2

EURCAD long 1.2550 stop 1.2460 PT 1.3330

USDJPY short 91.07 stop 91.47 PT 89.50 / 88.50

INTERESTING STATISTIC FOR NEXT WEEK:
For the past 11 years, every year, the week after June Options expiration has been negative for the stock market.

Thursday 17 June

Yesterday was a day of consolidation in currencies and a daily doji in the S&P where we are at the 50fib retracement from the post flash crash rally high and the low.  I expect some pullback here.
Daily bearish gartley patterns are setting up on cable, FTSE and AUDUSD.  USDJPY is stuck in a tighter and tighter wedge.

Spanish debt is the big concern and spreads of Spanish bonds over bunds at record wide spreads and yields at 8 year highs.  Today Spain has a visit from the IMF, releases its bank stress test results and has a bond auction of 10 and 30 year bonds which will test market confidence and set the tone for the euro.  I am not tempted to buy or sell EURUSD here, but EUR crosses look interesting (EURGBP, EURAUD etc).

Cable is heavy with BP news and anticipated flow of $20 bln from UK pensioners to Obama's slush fund (joke) and news that the FSA will be abolished in yet more financial reform.  Sterling news is retail sales at 08:30GMT and CBI Industrial trends at 10:00 GMT.

Futures look heavy and as though we will slide but I am expecting one more push higher before I sell ..  US news this morning is employment claims at 12:30GMT and CPI m/m.

Update:  Cable breaks channel support ... I am selling sterling

GBPJPY short 1.340 stop 1.3450 PT 1.33 / 1.3250
USDCHF short balance closed 1.1310 (+0.64R)
GBPJPY stopped out (-1R)
AUDCHF closed 50% @3R 0.9630 (+1.5R)
CRUDE long 77.00 stop 76.60 PT 78.50
USDJPY short 91.07 stop 91.47 PT 89.50 / 88.50
CRUDE closed 77.20 - not working (+0.5R)
GBPJPY short 134.50 stop 1.3490 PT 132 / 131
CRUDE short 76.90 stop 77.30 PT 75.00
GBPJPY short stopped out again (-1R)

I have the following positions open:
AUDCHF short 0.9780 stop 0.9830 PT 0.955 / 0.9275 - 1/2

EURCAD long 1.2550 stop 1.2460 PT 1.3330

Wednesday 16 June

FTSE is heading for it's sixth straight day of gains and the S&P yesterday got back above its 200 day moving average for the first time in a month.  That *should* encourage more buyers but last night Cramer told viewers to sell into rallies because there was no reason for the market to rally (yeah but what about the last 15 months?).

All sounds great doesn't it so why is the spread of Spanish bonds to bunds at lifetime highs?  FtAlphaville thinks we have Eurozone news fatigue

Anyway after the continuous grind up the market is due to take a breather or pull back a bit.  If it doesn't happen today it will likely be tomorrow.  Like momo-Mondays, Thursdays are usually the weakest day of the week and now it is summer no doubt many take Fridays off.

Crude inventories today 10:30 NY time.  Consensus: -1.5m ....

USDJPY continues sideways making the yen crosses less attractive trades than dollar crosses.

CRUDE 4hr chart

Now up 8% from the lows it may have formed an inverse head and shoulders and retesting the neckline for support.  If so upside target is 83 which is also the 78.6fib.  A projection of the first swing of the wedge from the breakout point gives a target of 85.00 and the 88.6fib.  I am buying dips.

GOLD

Is stuck under the 61.8fib of last weeks move and sitting on the 50fib.  It *should* go lower from here, target is the ascending trend-line and then 1200 level.

EURUSD 4hr chart

Is in a clear ascending channel and stuck in a range between 1.2350 and 1.2150.  I am a buyer of dips to the bottom of the range looking for an upside break with a target of 1.2512

AUDUSD 

May have double topped (yesterdays high failed to break Monday's high) and forming a big bearish Gartley on the daily.  I am looking for one more push higher to 0.87 0 or 0.8885 to sell but this chart might be the first indication of a risk wobble today.

GBPUSD

Cable is a tough trade and is bouncing below previous support at 1.48 (March lows).  I am looking for it to break those levels up.  At 1.49 cable will have made two equal measured moves off the lows and hit descending trendline resistance and I will be looking to short there.  The daily is also a bearish Gartley pattern, invalidated above 1.4940 which keeps me from buying cable.

New positions:
CRUDE long 76.40 stop 75.90 - addition
AUDUSD closed 50% @3R 0.8655 (+1.5R)
USDCHF closed 50% @ 1st target 1.1250 (+1.07R)
CRUDE addition closed 50% @3R 77.90 (+1.5R)
CRUDE addition closed balance 77.40 (+1R)
CRUDE first long closed 77.40 (+2R)
AUDUSD stopped out balance 86.05 (+0.5R)

I have the following positions open:

USDCHF short 1.14 stop 1.1470 PT 1.09 - 1/2

AUDCHF short 0.978 stop 0.983 PT 0.955 / 0.9275

EURCAD long 1.2550 stop 1.2460 PT 1.3330

Tuesday 15 June

I still prefer dollar crosses to yen crosses as weak USDJPY is a drag.
EURCHF is banging its head on resistance at 1.40 and might make CHF  better buy than EUR so USDCHF short my favourite trade today if indices continue to rally.

SPX
Looks pretty gloomy with a third rejection at 1108 level yesterday on the Greek downgrade but break and successful retest of trend-line resisance now support suggests we go higher today to me.  1108 still the key level to break.  4hr chart

EURUSD
Stuck at the 50fib but a succesful retest of 1.2150 SR level suggests we correct higher today.  1.2330 is the level to break next.  4hr chart

CABLE ~ sideways
EURGBP bouncing and weaker numbers this morning are a drag on cable, up against resistance at 1.48.  I still like it higher but today may not be cables day.

USDCHF - daily chart
Potential support at 1.1250 but I like it to 1.09 / 1.0950




AUDUSD as per yesterday I still like this long.  SR at 87.00 but 89.00 a second target.
-----------------

CABLE long stopped out (-1R)
USDCHF short 1.14 stop 1.1470 PT 1.1250 / 1.09
AUDUSD long 0.8580 stop 0.8555 PT 0.87
CRUDE long 75.80 stop 75.40 PT 79.50
AUDCHF short 0.978 stop 0.983 PT 0.955 / 0.9275
CRUDE closed 50% @77.00 (+1.5R)

I have the following positions open:
EURCAD long 1.2550 stop 1.2460 PT 1.3330

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