Sunday, June 28, 2009

Major currencies (EUR, GBP, CHF, JPY) sustain recent trends against the USD

EUR/USD & GBP/USD both closed above their 21-Day MAs and continue to move inside their Uptrend channels. This sticks well with the USD Index bearish close below 80 on weekly basis.

Bouncing off the Support trendlines next week we should see moves in Euro to 1.45 and in Sterling up to 1.74 targeting the Channel tops.

Technical picture in USD/CHF is somewhat different since we witnessed strong intervention maneouvers by SNB (and also allegedly through BIS) to weaken the Swiss Franc. The Swiss currency was used as a carry vehicle in the previous credit cycle and after the first stage of the global financial crisis we saw those funds repatriated back. So it's no surprise that those funds are now again going out in search for alpha return.

Downside support in USD/CHF is at the pivotal 1.08 coinciding with the 21-Day MA. Upside however is very important as there are much touted big stops above the important 1.10 level where is the Resistance trendline.

USD/JPY was rejected both by the 21 and 200-Day MAs which is pretty bearish. This view is accentuated by the Descening Triangle which suggest Continuation of the move and is prone in most cases to break from the Flat side.

We should see a fierce battle from BOJ / MOF / Kampo (all names that are always cited to stand behing the moved in Yen) to Support the critical 94.00 level. Technical picture suggests that if we see a break and confirmed close below 94 that we shoul see the 6 big figures range rotating to the downside with a target around the 88.00 lows..

At this moment it is a long shot however as we observe volatility and credit spreads at their lows as there wasn't any credit crunch 3-4 months ago it is safe to assume there will be a break in stock market some time soon. I will hold to that scenario at least until I see the Bond market rally is still intact.

Saturday, June 27, 2009

EEM (iShaares MSCI Emerging Markets) - The Uptrend is intact

The trend channel is intact but the momentum seems to be fading.

The obvious in the weekly chart is he consolidation range 30 - 35.

The recent correctiong was held by the 55-Week MA and the previous Gaps also indicate the importance of the 30 level. The upside bouncesd off the failed test of the 200-Week MA just shy of 35. Not much to offer until one of the range ends gives way.

TLT (iShares Barclays 20+ Year Treasury Bond Fund) - Bond rally in progress

Weekly chart indicates we had a significant Reversal in the Bond market trend accompanied with a record volume and a Hammer candle pattern.

The support came at the 144-Week MA which already held 3 tests as evident from the chart.

For the time being TLT Bond Fund is trading in the 90 - 89 range and in the coming week will test the immediate Resistance of the Trendline from the December 2009 Highs. next test is the 97-98 level defined by Sept '08 Hihgs and the 55-Week MA. This week Treasury auctions had good results and participation thought there were different interpertations of the 'Indirect' participants true identity.

USD Index ($USD) Weekly chart - Bearish evidence

USD Index closed at 79.83 - which is important to the pivotal 80 level.
The trendlines I added give us a glimpse of the interesting situation of the US Dollar.
It is consolidating right below the recent Supportive trendline but also below the significant to the Mid-term direcion 55-Week MA (81.48). Last Support comes at 78.50 where the last Support trendline lies.

On the other side the momentum of the downside move is accelerated - ADX is edging higher at 23.39. Last week was a classic Doji candle which should be read as indecision in that particular position and the present week's close below 80 is a confirmation to the downside direction.

Thursday, June 25, 2009

USD/CAD Support & Resistance --- Focus on 1.18 target

US Dollar strength is a fact at present. USD/CAD which tightly correlated with Crude Oil price is tracking the CL correction from the $73.88 top. Let's see the important points on the USD/CAD daily chart.

First obvious thought is that 1.18 recent Top has a huge attraction power and the trending momentum is intact so far.

However its obviousness makes it tricky just like the H&S pattern in EURUSD much commented last week - it is a fact that today instant knowledge makes obvious patterns to never materialize.

Howeve the Trendline Resistance from March Highs comes at 1.1660 - so it is an important point that if breached with close above must confirm the immediate 1.18 target.

Support levels IMHO (derived from important chart points) are:

Tuesday, June 23, 2009

CRB (Reuters/Jefferies CRB Index) is falling over a significant Support level (Close 246.07)

CRB Index closed at 246.07 in a violent selloff session along with major stock indices.

The importance of this Support level is significant based on the book example of a long term Resistance now turned Support. The chart presents evidence of 3 failed tests to rise above that level sinceNovember 2008.

The other significant support is the 200-Day MA at 245.31. Technical picture however is convincingly bearish with RSI and MACD in confluence both gave sell signalsa week ago and the move down now accelerates. Next Support is located at 230 as shown on he chart.

Copper Selloff starts - Trend channel is broken

Copper High Grade Futures finally broke off the Trend Channel.

The Downside Gap accentuates the drop in the price as actually opened below the important 220 level where the Support of the previous 2 tops was located. First targets on the downside are the 200 psychological level coinciding with the June Low and 191.9 - the 200-Day MA.

Monday, June 22, 2009

EUR/USD & GBP/USD technical update

EUR/USD heads lower to test the 1.3740 Balance point, moving into the minor trend channel.

As stated before the target if 1.3740 is confidently breached is located in the 1.35 region where is the Long term trend cahnnel bottom trendline.
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GBP/USD has a slightly different setup due to the prolonged and solid downtrend in EUR/GBP.

It has 3 failed attempts to breach the 1.66 ceiling and last move appears a slow grind laboured move that might produce a sharp drop to test the Range bottom at 1.58. This setup will be confirmed by a close below the Trendline Support converging with the 21-Day MA at 1.6260.

Saturday, June 20, 2009

CRB Index is correcting lower

Commodities are headed lower after bouncing off the channel top.
Targe tis located at 229.69 which coincides with the 21-Week MA and also a previous Resistance level.

RSI is close to dropping below the 50 mark and ADX shortly after signalled a buy is very close to reversing to a sell signal again with trend strength gauge reading below 30.

EUR/USD heads lower into minor correction within the Long term uptrend Channel

EUR/USD is currently trading lower into a minor corrective channel within the Long term Uptrend channel.

Short term Resistance level that caps the price action is the 21-Day MA at 1.4009.

Support is located at the 1.3740 level which already held the test this week. It represents the former Resistance that was tested 2 times before a breakout materialized on May 20.

Should we see a clear break and close below the Support cluster 1.3740 - 1.3800 the next target becomes the Long term channel bottom (1.3450) and the 200-day MA (1.3340).

GUR (SPDR S&P Emerging Europe) & EEM (iShares MSCI Emerging Markets) breakdown trend channels

While I see a slight chance for the major S&P 500 to rally for a test of the 1000 mark the outperforming Emerging Markets are falling off a cliff.

GUR (SPDR S&P Emerging Europe) - I follow this market as I live in Bulgaria which is part of Emerging Europe and a EU member since 2007.
Technically speaking there are several points to acknowledge for the breakdown of the index:
1. The top of the trend is right at the previous Gap from Octomber 2008 which now acts as solid Resistance level
2. The reversal is accompanied by huge volume of transcations
3. We have a weekly close below the 50-week MA and a breakdown of the trend channel.
4. RSI is going for a dive below the mean and ADX has a potential to signal a short sell - both need to be watched for a confirmation though.

EEM (iShares MSCI Emerging Markets) - BRICs have outperformed the S&P as they witnessed a much greater selloff throughout the liquidity crisis.
Here are the technical points that add to the bearish sentiment:
1. The top of the recent uptrend coincided with the important 200-week MA.
2. The reversal candle is called Hanging Man for a reason and the last 2 weekly candles are confirming the Bearish implications of the Hanging Man candlestick pattern.
3. RSI and ADX have similar patterns to the GUR chart however they are not so much bearish and I would be watching closely for some divergence since Emerging Markets have a much different compisition than the Emerging Europe.
4. The breakdown of the trend channel is a sure sell signal however I would like to see the market reaction to the Support cluster at 30 (the Oct '08 Gap top) and 29 (the 50-Week MA.)

VIX and S&P 500 trends side by side

While the trend channels i have drawn are not very precise they give a relative perspective on the positive correlation between the trending move in US stocks and the decline in Volatility.

The more important point I try to study in those charts is that both stockas and Volatility are intoa horizontal range that rules for the time being. As I pointed out last week S&P has a solid Support around 875-885 and Resistance is defined by the recent consolidation below the 960 high. There is a pending Golden Cross of the 50 & 200-Day MAs which will bring major media attention and will force retail accounts and mutual funds to pour into stocks.

The contrarian within whispers there will be a fireworks and some euphoria before the imminent break.However it is adviseable to wait and see if we can touch the 1000 mark on the wings of media and public sentiment shift from crisis fear into "the bad is already in the past" theme.

LIBOR - 20-Year Historical Chart

The hitorical perspective shows we are at the lower end of the credit cycle though there is some more space to the downside if we trust the technical channel. This is however doubtful since the last top didn't touch the upper channel either. If history could be any guide I would take the big difference in the different LIBOR maturities as a potential sign of a turning point like it is seen around 1984 peak.

Friday, June 19, 2009

Emerging Markets & Emerging Europe trends break down

Emerging Markets brkoe down the trend channel and are targeting the 55-DMA at 30.31.
Upside is capped by the 21-DMA at 32.86 and it should serve a good R?R Stop-loss level for a short trade looking for a test of the 200-DMA at 26.60.

RSI & ADX both are confirming the downtrend direction and strength.
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Emerging Europe is the next best thing to watch as a proxy to the sentiment of the Bulgarian Stock Exchange-Sofia.

The obvious breakdown of the trend channel match the Emering Markets technical view with supports and targets at the 55 and 200-DMAs (30.47 and 27.94). The short sell trade has a risk of reversal to the long side at the 21-DMA which negates the bearish view.

RSI and ADX are both clearly showing there is a downtrend in progress at present so we stick with he short side until there a divergence is observed.

Thursday, June 18, 2009

S&P 500 Index at a critical juncture - A break of the tight 905 / 930 consolidation range will produce a strong trend move

Here are the important facts drawn from the current chart.

The break from the 945/950 level bounced nicely off the infamous 200-DMA at 904.
However the short-term view favors the bearish side until S&P is trading below the 21-DMA. It is clearly seen that we might witness some range trading defined by the 21 and 200-DMAs - that is in the 900/905 <> 925/930.

The technical picture has a bias on the bear side as well:
-RSI is holding below the mean 50 level and it is for the first time since the big March panic selloff - sure a sign to pay attention to.

- ADX - the trend indicator has already signalled by the DI+ cross below the DI- a trend reversal. Now we watch for confirmation and acceleration since the trend strength (ADX reading is 19.22) is close to the lows for the year.

- MACD has given also short signallast week and is trending lower with a sustainable slope angle.

At the moment I watch for a break of the 900 - 930 consolidation range with a slight bias to see the solid Support line at 875 being tested. Should it not happen and we see a close above 950 then I favor a fast rally to the important 1000 mark.

Monday, June 15, 2009

GBP/USD - Possible Double Top

GBP/USD Daily chart - there is a possible Double Top in progress.

The wide range 1.66 - 1.60 has a Supportive base in the 1.58 - 1.60 area. This is obvious from the accumulation range in the end of May and the June 08, Key Reversal Candle shadow.

The possible scenario if we see a decisive breakdown of the 1.60 and a close below is to observe a range rotation of the same extent to the other side of the fulcrum level. That is a measured move taking the 1.66-1.60 (600 pips) down from 1.60. So the target is 1.54 which happens to be right above the 200-Day MA (1.5375 presently).

Other Support levels are the bottoming out pattern breakout Resistance levels 1.50 and 1.5350. However let's observe the market reaction and act accordingly rather then divine the unfathomable future.

EUR/USD possible Head & Shoulders

EUR/USD Daily Chart is in progress of a Possible Head & Shoulders pattern.

The neckline Support comes around 1.38 level and if we see a decisive break and a close below it should open an immediate target of the Supportive cluster of previous Highs and Lows in the 1.3550 - 1.3450 area.

First test of the downtrend would be the Previous Highs at 1.3740 and after I observe the market reaction there I would asses the market action again.

S&P 500 Index Review - 15.06.2009

Trend is intact - Old News some would say. Anyway I like the trend channel as it is narrowing the range even more.

Bullish facts: the 21-DMA is tracking nicely the rise in stocks and the 21/200-DMAs Golden Cross and also the pending 55/200-DMAs cross are enough of evidence for the strength in the recovery of this major index. I would also interpret the fall in Volume which is in accordane with the record low readings of the Volatility Index and the TED spread as Risk appetite is not fading. Actually low volatility and Volume are characteristic to trend continuation.

Note the RSI is also trending higher and only the ADX (23.23) bothers me as it is fading a bit lower. However if it was above 30 it would produce a parabolic move and this maybe is correct to be viewed as actually a sustainable trending.

Bearish case would be activated first on any close below 21-DMA. Next I assume we will see some reaction at the 1007 level whch is the November '09 high and then if broken the 1044 High.
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The Weekly chart view has the first impression we are building a very steep Bearish Rising Wedge patern. Here is a clear confluence of Resistance level around 1007 - previous top + Wedge Resistance line top.

RSI is trending up after a successful bounce off the 50 level. ADXhas already given Long signal after the DI+ crossed over the DI- so we remain in trend-following mode until there is a change to observe and act upon.

Saturday, June 13, 2009

Japanese Governemnt bonds - Montly chart - 13.06.2009

Monthly JGBs - there is the Long view - I have read some time ago about very intelligent bond traders that have been holding shorts in JGB for years in anticipating a bearish trend to ensue.

Well, seems it takes more than patience to wait until this actually meterialises. The 'lost decade' and the huge debtto GDP of Japan are still not enough for the JGB to break out of the comfortable 130 - 140 range, roughly said.

Sure enought Gravity has to be felt at some point but I can't divine future so will wach for potential developments. As to purely technicla reading of this chart ther eis actually some probability that we see a Golden Cross of the 34 and 55-Month MAs and another test of the 140 level.

After all the Yields in JGB might just again go down as the deflationary pressures even after a decade of printing money are again on the news. Let's see if the immediate Resistance at 137.70 (89-month MA) will be easy to regain and then we can review the possible developments.

UK Long Gilts Chart review - 13.06.2009

UK Long Gilts Daily chart - we could see a Gap which could possibly turn into an Island reversal pattern. However the trend is intact and the breach of the 200-DMA is a substantial fact.
There is a very good probability of Gap filling up to 117.50 and even a test of the Ressitance of the 200-DMA at 118.

Should the Bears reign in full stregth the immediat target is the previous High at 114.40.
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The UK Long Gilt Weekly chart is in accordance witht e Daily one. The 55-Week MA at 115.21 is a tempting target to test. The last Weekly candle range (116 - 118) might see some rotational flow to test both ist sides before a trend continuation or reversal so I will remain vigilant to any possible changes.

US Treasuries downtrend on watch - Weekly charts - 13.06.2009

10-Year US Treasury Notes continue to slide. Weekly chart shows a Piercing Bullish Pattern.

The 89-Week MA which held Support 2 times before is now acting as Resistance after the breach around 118. Obviously a reversal would have to be validated by regaining 119-10 levels but that's just Gap filling I remain vigilant for the subvsequent changes in the trend.

The immediate downward target is 112 - 111.44 lows.
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30-Year US Treasuriy Bonds are helped by the support of the 200-Week MA which holds a third consequtive test on the downside.

There is a Bullish reversal Harami candle pattern that eventually helps the reversal scenario with immediate Resistance at 120. The Bearish view is activate d should the 112 level is broken decisively and the re is noting until the 105 low.

Friday, June 12, 2009

Commodity Rally persists --- Crude Oil / Nat Gas / Silver / Copper - 12.06.2009

Well it leaves the whole world scratching their heads why Crude Oil is rising. Is it the OPEC cutting production, is there higher global consumption or maybe the world reserves are getting scarce? Yes indeed I heard a news report that at current rate of producion there are 40 years left of reserves.

The obvious link is the tight correlation between the Crude Oil and the EURUSD - there are marching right by side - so seems the USD depreciation is fueling the Crude and actually the overall Commodity rise. Let's see what the price tells:

The most obvious fact is that the Trend has reached the Channel top which is around $74.
The Parabolic rise has a recond high ADX reading at 37(Substantial trend strength) and a bounce off to a rather big distance from the rising 21-DMA. The RSI is rising in accordance.

I try to watch and react to chart, not try to be too smart. So I have too possible scenarios that I wait to see a confirmation for. The Bullish one is a Parabolic thrust above the Channel top into the Goldman Sachs touted target $85.
The Bearish scenario should see the Channel bottom broken:
-1st Support: $65 / 21-DMA
-2nd support: $58-60 / confluence of 55 and 200-DMAs
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Natural Gas is a puzzle while the Crude is flying.
The overhaed resistance at $4.50 rejected it 3 times and now there is a pending Dead Cross of the 21 and 55-DMAs. The observation is on the slightly rising Support trendline.

ADX has a very poor reading to state the obvious range consolidation. Currently here is the 4.25 - 3.50 range that has to be broken to have a signal of some sort.
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Wow, Silver is a bullish article as Gold has somewhat stalled in a 5 day flat line.
Well, to be honest it is on a important Support level - both the Channel trendline and a bounce off the Rising 21-DMA.

ADX strength (32.79) is good and the DI+/DI- are maintaing the Bullish scenario atm.
There is always a possibility that while we watch the trend we overstay our welcome. However there is always a loss attached to trying to outsmart or guess or vidine the future. As I noted that Crude was at a fulcrum point and might break - so is Silver here.

The Bullish target would be the Channel top above $18 - this means a parabolic breakaway move. The Bear case given a channed breakdown is the immediate Support at $13.50 / 55-DMA.
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Copper Futures persist in their rise. The Rising channel top gives some reasonable targets around 260/270 range.
Trend is intact supported by the rising 21 and 55 MAs. Wilder's ADX also states the trend is actually accelerating witha reading of trend strength of 22.35. The RSI is rising in accordance.
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Wednesday, June 10, 2009

Jesse Livermore on suckers and trends...

This is quote from Edwin Lefevre's 'Reminiscences of a Stock Operator':

Where I should have made twenty thousand dollars I made two thousand. That was what my
conservatism did for me. About the time I discovered what a small percentage of what I should have made I was getting I discovered something else, and that is that suckers differ among themselves according to the degree of experience.

The tyro knows nothing, and everybody, including himself, knows it. But the next, or second, grade thinks he knows a great deal and makes others feel that way too. He is the experienced sucker, who has studied—not the market itself but a few remarks about the market made by a still higher grade of suckers.

The second-grade sucker knows how to keep from losing his money in some of the ways that get the raw beginner. It is this semisucker rather than the 100 per cent article who is the real all-the-year-round support of the commission houses. He lasts about three and a half years on an average, as compared with a single season of from three to thirty weeks, which is the usual Wall Street life of a first offender. It is naturally the semisucker who is always quoting the famous trading aphorisms and the various rules of the game. He knows all the don'ts that ever fell from the oracular lips of the old stagers—excepting the principal one, which is: Don't be a sucker!

This semisucker is the type that thinks he has cut his wisdom teeth because he loves to buy on declines. He waits for them. He measures his bargains by the number of points it has sold off from the top. In big bull markets the plain unadulterated sucker, utterly ignorant of rules and precedents, buys blindly because he hopes blindly. He makes most of the money—until one of the healthy reactions takes it away from him at one fell swoop.

But the Careful Mike sucker does what I did when I thought I was playing the game intelligently—according to the intelligence of others. I knew I needed to change my bucket-shop methods and I thought I was solving my problem with any change, particularly one that assayed high gold values according to the experienced traders among the customers.

Most—-let us call 'em customers—-are alike. You find very few who can truthfully say that Wall Street doesn't owe them money. In Fullerton's there were the usual crowd. All grades! Well, there was one old chap who was not like the others. To begin with, he was a much older man. Another thing was that he never volunteered advice and never bragged of his winnings. He was a great hand for listening very attentively to the others. He did not seem very keen to get tips—that is, he never asked the talkers what they'd heard or what they knew. But when somebody gave him one he always thanked the tipster very politely. Sometimes he thanked the tipster again—when the tip turned out O.K. But if it went wrong he never whined, so that nobody could tell whether he followed it or let it slide by. It was a legend of the office that the old jigger was rich and could swing quite a line. But he wasn't donating much to the firm in the way of commissions; at least not that anyone could see. His name was Partridge, but they nicknamed
him Turkey behind his back, because he was so thick-chested and had a habit of strutting about the various rooms, with the point of his chin resting on his breast.

The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock. They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap's answer was always the same.

The customer would finish the tale of his perplexity and then ask: "What do you think I ought to do?" Old Turkey would cock his head to one side, contemplate his fellow customer with a fatherly smile, and finally he would say very impressively, "You know, it's a bull market!"

Time and again I heard him say, "Well, this is a bull market, you know!" as though he were giving to you a priceless talisman wrapped up in a million-dollar accident-insurance policy. And of course I did not get his meaning.

Monday, June 8, 2009

GOLD daily chart - 08.06.2009

Gold has been a trendy asset as I have seen multiple sources say it is the only store of wealth in the coming hyper-inflation. Well, I'm not that smart to divine the future.

Anyway technically I see it falling.

First there is the present configuration of 5 consequent down-up-down-up-down days.
The range is expanded each day while the highs have a flat line - similar to the Tweezer Top candle pattern. I see he first indication of a fall in closing below the 13 MVA as it supported the rise from the start of May.

RSI is close to crossing the 50 level and thus close to supporting the correction theme.
ADX which I favor as a trend indicator of choice tells me the Uptrend not only lost its steam but also there is impending DI+ cross down the DI- - a signal of going Short.

I would be watching with interest the 920 level for signs of an easy penetration which would open a gap towards 880 where I anticipate to see the 200 MVA in the coming days.

USD/CAD Weekly chart - 08.06.2009

USD/CAD weekly is very similar to the USD Index chart.

Please note carefully the upper trading range of the Sept'08 - April'09 distribution phase was approximately 1000 pips (1.18 - 1.28). Here is a good place to underline the importance of the long shadows of the weekly nadles that reach up to the 1.30 area. This is exteemly valuable information and I'd like to remember it very well as it was a good indication that the 'goose' had problems flying that high.

Well as we see the 3-rd attempt to break above 1.28 in April was rejected. There is a nice Bearish Engulfment right at the top and the Downtrend ensued.

Here is a great note to measured moves. Now if we witness a 1000 pip trading range - once its borders are broken we can easily expect a rotation of the same extent to the other side ot border that has bent.

So once the 1.18 was broken the trend took the price down to 1.08. Now here we encounter 2 major Supports. One is the 89-week MVA and the other is the fact that 1.08 was a long term resistance level as shown on the chart. While the price is now in the middle of the 1.08 - 1.18 range I suggest we wait for a clear signal on the direction.

CRB Index Weekly chart - 08.06.2009

The ADX is signalling a Long position by the DI+ crossing above the DI-.

However the Trend strength is fading. I assume that right now there will be some confusion between the Inlationary pressure and the "Green shoots" themes while the market chooses which one should be prevailing.