Last week: The weekly charts of the four major US stock indices reveal some new hesitation. Indecision-style candles, albeit bullish coloured, were printed on the S&P500, NASDAQ and Russell-2000 but the DJIA printed a bearish-reversal candle. Whilst 83% percent of US earnings reported thus far have beaten expectations it is suspected that much of this optimism has already been priced-in leaving US stocks vulnerable to jitters from recent news events such as a potential US Capital Gains Tax increase and the worrying expansion of Covid-19 in India. The US$ closed lower, and will be in special focus this week with FOMC, but this latest weakness helped to trigger a great 200 pip breakout trade on the GBP/USD that I had warned about in last week’s update. Added to this, the breakout move on the EUR/USD has now given 300 pips, the one of the AUD/USD has given 150 pips, and the one on the NZD/USD is up 170 pips so these descending wedge patterns are really proving their worth! The hesitation with US stocks was not mirrored on risk-sensitive Copper though with the print of a good sized bullish weekly candle but the print of a bullish-reversal weekly candle on the VIX suggests that there are enough signals out there to warrant some extra caution as US stocks trade at rather lofty levels.
Technical Analysis: It is important to keep in mind that this analysis is Technical and chart-based but that any major Fundamental news items, as recently seen with Covid-19, have the potential to quickly undermine identified chart patterns. This is why it is critical that traders appropriately manage their trade exposure and risk per trade during these volatile market conditions.
Trend line breakouts: Most of the breakout moves below were triggered as a result of US$ weakness. Updates posted throughout last week can be found through the links here, here and here:
- GBP/USD: a TL b/o for 200 pips.
- GBP/JPY: a TL b/o also for 200 pips.
- AUD/USD: a recent TL b/o that has now given up to 150 pips.
- Gold: a recent TL b/o that is now up around now over $70.
- EUR/USD: a recent TL b/o that has now given up to 280 pips.
- NZD/USD: a recent TL b/o that has now given up to 170 pips.
- USD/JPY: a TL b/o for 50 pips.
This Week: (click on images to enlarge):
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- ANZAC Day: Today, April 25th, is ANZAC Day. This is a national day of remembrance in Australia and New Zealand to commemorate those who have served the country in conflict and peace-keeping missions. Lest we forget.
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- DXY: US$ Index: The US$ index closed with a bearish weekly candle so keep watch for any new momentum-based trend line breakout. This week brings the FOMC rate update so watch for any impact from this announcement.
DXY weekly: watch for any new momentum-based trend line breakout:
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- BTC/USD: Cryptos have been getting a lot of attention over the last couple of weeks as a pause seems to be in place for the bullish run on BTC/USD. A 16-month support trend line is being tested so watch for any breakdown that is supported by momentum and volume:
BTC/USD weekly: watch for any volume supported trend line breakdown:
BTC/USD weekly: watch for any momentum supported trend line breakdown:
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- Indecision weekly candles: there were a few indecision weekly candles printed last week on: the NASDAQ, Russell-2000, S&P500, ASX-200, Gold, AUD/USD, AUD/JPY and the GBP/JPY.
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- Central Bank Update: There are two Central Bank updates this week: BoJ (JPY) and FOMC (USD).
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- Robin Hood: I found this 90 min podcast interview of the co-founder of Robin Hood, Vlad Tenev, quite interesting so have posted the link here in case you would also care to listen.
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- 10-yr T-Note Interest rate: The chart of the 10-yr Treasury Interest rate shows the recent bullish breakout from the triangle congestion pattern remains paused under the weekly 200 EMA region. Watch to see if the previous Resistance region of 15 might act as any potential new Support.
- 10-yr T-Note Interest rate: watch 15 for any potential Support:
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- % Stocks above their 200 Day Moving Average Index: The Percentage of stocks above their 200 Day Moving Average is now below the 85% region. The first chart below gives a perspective of this current level and shows the previous peaks near 92.50% and how there often tends to be some mean-reversion once such lofty levels are reached. The second, expanded, chart shows the continued struggle under the 92.50% level.
% of US Stocks above the 200 Day Moving Average: watch for any further reaction at the 92.50% region:
% of US Stocks above the 200 Day Moving Average (expanded): holding below 92.50%:
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- S&P500: Keep the bigger picture in perspective with the recent moves as this chart suggests there is a lot more room to move with the overall bullish run. However, this does not discount the odd pullback along the way as trends do not travel in straight lines forever; they tend to zig and zag their way along either bullish or bearish paths. Note how the recent Covid dip does not even figure on this chart!
S&P500 yearly: keep this latest move in perspective:
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- Market Phases: It is important to recall the three main types of market phases: Accumulation, Participation (Up and Down) and Distribution. Traders should monitor the chart of the S&P500 chart for any Distribution type activity that might eventually lead to Participation Down; especially as the S&P500 trades up near an all-time High. The chart below shows how the S&P500 evolved in the years leading up to, and during, the Global Financial Crisis (GFC). Note how the Distribution phase evolved over a period of many months and there was a double test of the all-time High region. Keep this in mind with the current market action on the S&P500.
S&P500 market phases: Global Financial Crisis 2007-2009:
S&P500: keep watch for any Distribution type of activity:
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- Copper: Copper is often viewed as one metric of economic health and closed with a bullish weekly candle. The Bull Flag remains in progress BUT watch for any potential Double Top hesitation:
Copper weekly: watch for any continued Bull Flag b/o move:
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- Emerging Markets: The Emerging market ETF, EEM, closed with a small bullish weekly candle but remains below the 12-month support trend line. There isn’t much momentum here just yet but watch for any Bull Flag continuation.
EEM weekly: watch for any Bull Flag continuation:
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- DJIA: The DJIA closed with a bearish-reversal Hanging Man weekly candle, albeit still above 34,000, but watch for any pause here.
DJIA weekly: watch for any pause here:
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- NASDAQ composite: The NASDAQ Composite Index closed with a bullish-coloured Doji style weekly candle as price holds under the previous all-time High. The Bull Flag remains in play BUT watch for any potential Double Top hesitation.
NASDAQ weekly: watch for any continued Bull Flag:
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- DAX weekly: The DAX closed with a bearish-reversal Hanging Man-style, and almost Inside, weekly candle. The Index still remains above a 12-month support trend line but watch for any weakness.
DAX weekly: watch for any weakness after this bearish weekly candle:
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- Russell-2000: The Russell-2000 is often viewed as the ‘Canary in the Coal Mine’ for US stocks and the index closed with a bullish-coloured Spinning Top weekly candle. The Index continues to hold above the 61.8% Fibonacci extension of the Covid-induced Swing Low so watch for any push to the 100% level, circa 2,500.
RUT weekly: keep watch for any new triangle breakout:
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- Bonds / TLT: The Bond ETF, TLT, closed with a bullish weekly candle and my Elliott Wave indicator is still suggesting a potential uptrend.
TLT weekly: holding above the 135 level and the 61.8% Fibonacci:
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- Commodities: this bullish descending wedge breakout remains in play and dovetails in nicely with this weekend Bloomberg article about rising commodity prices.
DBC weekly: this bullish wedge b/o continues:
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- USD/CAD and USD/CNY: keep an eye on these two weekly chart Descending Wedge patterns for any bullish breakout and / or follow-through.
USD/CAD weekly: watch for any new breakout:
USD/CNY weekly: note how 6.5 has been broken so watch for any Bear Flag:
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- VIX: the Fear index closed with a bullish-reversal Inverted Hammer-style weekly candle but is still below the 20 S/R level so watch for any new breakout.
VIX weekly: watch the 20 S/R level for any new make or break:
Calendar: Courtesy of Forex Factory:
Earnings: Courtesy of Earnings Whispers: It is a huge week for Earnings this week:
Market Analysis:
S&P500: The S&P500 closed with a bullish-coloured Doji weekly candle, reflecting indecision, and just under the 4,200 level making this whole-number resistance to monitor for any new make or break. The choppiness last week above the 4,150 level was not at all surprising given that this region, as noted over recent weeks, marks the the 61.8% Fibonacci extension of the Covid-induced Swing Low so watch to see if this old Resistance turns into new Support.
Trading volume was a bit higher last week and is now sitting right at the 200 MA and bear trend line so watch for any new breakout.
S&P500 ETF: SPY weekly: watch for any new volume trend line breakout.
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The 4,200 level is the resistance to keep watch for any new make or break and there are revised 4hr chart trend lines to assess with any new momentum breakout and note the look of a 4hr Bull Flag here so try to keep an open mind.
NB: The second weekly chart shows how the 61.8% Fibonacci extension of the Covid-induced Swing Low is up near 4,150 so watch to see if this region forms any new support.
Bullish targets: any bullish 4hr chart Flag trend line breakout above 4,200 would bring 4,300 into focus.
Bearish targets: any bearish 4hr chart Flag trend line breakout would bring 4,100 and 4,000 back into focus as the latter is near the 4hr chart’s 61.8% Fibonacci and 12-month support trend line. After that, watch whole-numbers on the way down to the weekly chart’s 61.8% Fibonacci retracement level, now near 3,000.
- Watch 4,200 and for any new 4hr chart Bull Flag breakout:
ASX-200: XJO: The ASX-200 closed with a bearish-coloured Doji weekly candle but still above the pre-GFC High of 6,851.50, pre-2020 High of 6,893.7 and the whole-number 7,000 level. However, the placement of this indecision-style candle, at the top of a long swing High move, is giving this weekly chart a bearish-reversal Hanging Man appearance.
Trading volume was a little higher last week but still remains below the 200 MA and the bear trend line so watch for any new breakout.
XJO weekly: keep watch for any new b/o above the 200 MA and bear TL:
Keep in mind that the recent Golden Cross still remains valid. The Golden Cross is a bullish signal where the 50 SMA crosses above the 200 SMA. Such crosses are often, but not always, followed by a decent bullish run so these crosses are worth noting:
XJO daily: the recent Golden Cross remains valid for the time being:
There are revised 4hr chart trend lines to monitor for any new breakout.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 7,100 followed by the 2020 High of 7,197.20 into focus.
Bearish targets: Any bearish 4hr chart triangle breakout would bring 7,000, the pre-2020 High of 6,893.70 and the pre-GFC High of 6,851.50 back into focus followed by 6,800 and 6,700.
- Watch for any new 4hr chart trend line breakout:
Gold: Gold closed with a bearish-coloured Doji weekly candle, reflecting indecision, and again just under $1,780 making this the resistance level to watch for any new make or break. The recent bullish wedge breakout continues and has given up to $70 but watch for any new break above $1,780 to support any continuation move.
As mentioned over recent months: The hold below $1,900 acts as further evidence in support of the longer-term Inverse H&S thesis that I have been discussing as an option here for many months.
The weekly chart still has the look of a broad Inverse H&S pattern; or some may see this as a broad Cupping style pattern. Both are rather similar though as they are bullish patterns and suggest follow-through to the order of magnitude of the depth of the Cup / height of Head. In this case, that move is of around either $800. Keep watch of $1,900 now that price action is trading below this neckline region!
$1,900 remains the region in focus for any bullish Cup or Inverse H&S breakout:
- Any hold above $1,900 would support the Cup pattern thesis.
- Any move back below $1,900 would support the Inverse H&S pattern thesis.
Traders need to watch this $1,900 level over the coming sessions especially as the US$ index is still below the recently broken 10-year support trend line:
- any US$ hold below the multi-year support trend line could help send Gold higher.
- any US$ move back above this support trend line could keep Gold range-bound. This would help to further develop the Inverse H&S pattern.
The daily chart reveals the importance of the $1,670 level so this continues to be a ‘line in the sand’ support level to monitor. Any new weekly close below the $1,670 level would bring $1,500 into greater focus. The two weekly charts show that $1,500 is:
- near the 61.8% Fibonacci of the Aug 2018 – Aug 2020 swing High move.
- forms the lower boundary of the Inverse H&S pattern I have had on my charts for many months.
Bullish targets: any bullish 4hr chart continuation move above $1,780 would bring $1,800 into focus followed by $1,850 and $1,900.
Bearish targets: any bearish 4hr chart break below $1,770 would bring $1,750 and $1,700 into focus followed by the $1,670 support level.
- Watch $1,780 and $1,770 for any new make or break:
EUR/USD: The EUR/USD closed with a bullish weekly candle the tally from the recent bullish 4hr chart descending wedge breakout now stands at 300 pips.
This wedge breakout is still in progress but price action is consolidating just under 1.21 so watch this level for any new breakout.
NB: Note that the longer-term target for any continued bullish movement following the previous break of the 13-yr trend line is the monthly chart’s 61.8% Fibonacci, near 1.40. This trend line breakout was flagged back in a post on August 2nd 2020. Price at the breakout was around 1.17 and has reached up as far as 1.23, a move of around 600 pips, so this has been a breakout worth monitoring.
Bullish targets: Any bullish 4hr chart continuation above 1.21 would bring the monthly 200 EMA and 1.22 into focus. After that, watch whole-numbers on the way up to a previous weekly chart High, circa 1.26 and for any continued push up to 1.40.
Bearish targets: Any bearish 4hr chart retreat from 1.21 would bring 1.20, 1.19, 1.18 and 1.17 back into focus.
- Watch 1.21 for any new make or break:
AUD/USD: Not a whole lot has changed here this week. The Aussie closed with a bullish-coloured Spinning Top weekly candle but the tally from the recent bullish 4hr chart descending wedge breakout now stands at 150 pips.
This wedge breakout is still in progress and price action is still consolidating in a triangle above the 0.77 level so watch these trend lines for any new breakout.
NB: The longer-term target for any bullish continuation from the weekly/monthly chart’s Descending Wedge breakout is the weekly 61.8% Fibonacci, near 0.90. This monthly wedge trend line breakout was also flagged back in the post on August 2nd 2020. Price at the breakout was around 0.71 and has reached up as far as 0.80, a move of around 900 pips, so has been another breakout worth monitoring.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 0.78 into focus. After that, watch whole-numbers on the way back to the 12-month TL and, then, whole-number levels on the way up to the weekly chart’s Descending Wedge breakout target of 0.90.
Bearish targets: Any bearish 4hr chart triangle breakout would bring 0.77 into focus. After that, watch whole-number levels on the way down to 0.65 as this is near the 61.8% Fibonacci of the March 2020 – Feb 2021 swing High move.
- Watch for any new 4hr chart triangle breakout:
AUD/JPY: Not a whole lot has changed here this week either. The AUD/JPY closed with a bearish-coloured Spinning Top weekly candle, reflecting indecision, as price keeps hovering near 84 and under the key 85 level, keeping these as the two regions to watch for any new make or break.
As noted over recent weeks:
- The weekly chart reveals that the 85 level has been a significant reaction zone for the AUD/JPY and has been resistance for the last three years; this level was peppered many times throughout 2018 but could not be broken. The next major level above 85 is 90 so watch this target level if 85 is broken.
- AUD/JPY traders also need to keep an eye on the sentiment with stocks though, especially the S&P500 index, as the two are generally highly aligned; as the chart below reveals. Any pause or serious pullback with stocks might render similar for the AUD/JPY:
AUD/JPY versus S&P500 (gold line): a high degree of positive correlation:
There are revised 4hr chart trend lines to monitor for any new breakout.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 85 S/R back into focus followed by whole numbers on the way to 90 S/R.
Bearish targets: Any bearish 4hr chart triangle breakout, below the 12-month support trend line, would bring 83 S/R into focus. After that, watch whole-numbers on the way down to 76 as this is still near the recently broken 7-yr bear trend line, and then 72 as this is near the 61.8% Fibonacci of the March 2020 – March 2021 swing High move.
- Watch for any new 4hr chart triangle breakout:
NZD/USD: The Kiwi closed with a bullish weekly candle and the tally from the recent bullish 4hr chart descending wedge breakout now stands at 170 pips.
This wedge breakout is still in progress but price action is currently consolidating in a triangle just below 0.72 so watch these trend lines for any new breakout.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 0.73 into focus. After that, watch whole-numbers on the way up to the recently broken 12-month support trend line.
Bearish targets: Any bearish 4hr chart triangle breakout would bring 0.71 and 0.70 into focus followed by the monthly 200 EMA and 0.69. After that, watch whole-number levels on the way down to 0.63 as this is near the 61.8% Fibonacci of the March 2020 – Feb 2021 swing High move.
- Watch 0.72 and for any 4hr chart triangle breakout:
GBP/USD: The Cable closed with a bullish weekly candle and just under 1.39 making this the next horizontal resistance level to watch for any new make or break.
NB: The longer-term target for any bullish continuation above the previously broken 14-yr trend line, noted here in my article on December 20th, is the monthly chart’s 61.8% Fibonacci, near 1.75. Price action at the initial breakout was around 1.35 and has reached up as far as 1.42, a move of 700 pips, so this trend line breakout was a great clue about things to come and the target for this move has not even been reached yet!
There are revised 4hr chart triangle trend lines to watch for any new breakout. However, 1.40 is the next major resistance zone, after 1.39, to monitor for any new breakout and the significance of this key S/R level can be clearly seen on the monthly chart below.
Bullish targets: Any breakout above 1.39 would bring a 4hr chart resistance triangle trend line and the key 1.40 S/R level into focus. After that, watch for any push to the recently broken 12-month support trend line and, then, whole-number levels on the way up to 1.50 as this is a previous S/R region on the weekly chart. Any bullish continuation after that would bring whole-number levels on the way up to 1.75 into focus.
Bearish targets: Any bearish hold below 1.39 would bring a 4hr chart support triangle trend line and 1.38 into focus. After that, watch whole-number levels on the way down to 1.25 as this is near the 61.8% Fibonacci of the March 2020 – Feb 2021 swing High move.
- Watch 1.39 and for any new 4hr chart triangle breakout:
USD/JPY: The USD/JPY closed with a bearish weekly candle and this makes the second bearish such candle following the recent bearish-reversal Railway Track pattern. Technical analysis hard at work again!
Price closed the week just below 108 making this the resistance to watch for any new make or break BUT there are also revised 4hr chart wedge / channel trend lines to monitor for any new breakout.
NB: The bullish weekly-chart descending wedge breakout was first noted in my article of January 31st. Price action at the initial breakout was around 104.5 and has reached up as far as near 111, a move of around 650 pips, so this trend line breakout was a great clue about things to come!
Bullish targets: Any bullish break above 108 would bring the 4hr chart’s upper wedge / channel trend line into focus followed by 108.5, 109 and 110. After that, watch whole-numbers on the way up to 115.
Bearish targets: Any bearish hold below 108 would bring the 4hr chart’s lower wedge / channel trend line into focus.
- Watch 108 and for any new 4hr chart wedge / channel trend line breakout.
GBP/JPY: The GBP/JPY closed with a bearish-coloured Spinning Top weekly candle, reflecting indecision, as price consolidates in a new 4hr chart descending wedge and under 150 S/R. This wedge, however, is giving the daily chart a bit of a Bull Flag appearance so keep an open mind.
NB: The longer-term target for any bullish continuation above the previously broken 40-yr trend line, noted in my post of January 3rd, is the weekly chart’s 61.8% Fibonacci, near 170. Price action at the time of this breakout was near 141 and has reached up as far as 153, a move of around 1,200 pips, and so is another trend line breakout that has proven to be worthwhile monitoring.
Bullish targets: Any bullish breakout above 150 would bring 151 into focus followed by the upper 4hr chart wedge trend line. After that, watch 152, 153 and the 18-week support trend line followed by whole-number levels on the way up to the weekly chart’s 61.8% Fibonacci, near 170.
Bearish targets: Any bearish 4hr chart hold below 150 would bring 149 back and the lower 4hr chart wedge trend line into focus. After that, watch whole-number levels on the way down to 135 as this is near the 61.8% Fibonacci of the March 2020 – March 2021 swing High move.
- Watch 150 and for any 4hr chart wedge breakout:
