Last week: US stocks closed lower for the week due to concern over Omicron and the Fed but it seems that Covid, once again, is dominating headlines in the lead up to Christmas; as the screen shot of the CNBC page below reveals. All four of the US index majors, the S&P500, DJIA, NASDAQ and Russell-2000, closed lower for the week, albeit the first three with indecision-style weekly candles; a style of candle that was found on numerous other trading instruments. Whilst there may be a sense of deja vu with renewed Covid restrictions, cancelled events and mask wearing, Dr Ashish Jha, Dean of Brown University School of Public Health, is confident that that this won’t be the case due to the range of tools now available to fight the virus. Next week’s economic calendar is relatively light in the lead up to Christmas and caution would be prudent with potentially lower liquidity as traders watch to see if the Santa Rally makes an appearance this year.

 

Covid: back dominating headlines and news stories:

 

Important:

To all of my TC members,

This is a reminder that I have revised my plans for next year in the light of the last two years of Covid. It is something I have been mulling over for some months now and the looming end of year has helped me to clarify my thoughts.

 

 

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:  There were a few scrappy breakout moves last week. Articles released during the week can be found here, here, here and here.

• EUR/USD: a TL b/o for 60 pips.
• AUD/USD: a TL b/o for 60 pips.
• AUD/JPY: a TL b/o for 90 pips.
• GBP/USD: a TL b/o for 100 pips.
• NZD/USD: a TL b/o for 60 pips.
• GBP/JPY: a TL b/o for 90 pips.
• Gold: a TL b/o for up to $30.

 

 

This Week: (click on images to enlarge):

 

• • DXY: US$ Index: The DXY closed with a bullish weekly candle and is moving up from the 95 breakout region of a bullish-reversal Double Bottom or W Bottom on the weekly chart. Price action is now just above the weekly 50% Fibonacci retracement so watch for any push to the key 61.8% level;

 

DXY weekly: watch for any push to the 61.8% Fib level:

 

 

• • S&P500: Perspective: 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 the bigger picture in perspective:

 

 

• • DJIA: The DJIA closed with a bearish-coloured Inside weekly candle reflecting indecision. Price remains below 36,000 keeping this as the resistance to watch for any new make or break.

 

DJIA weekly: watch 36,000 for any new make or break.

 

 

• • NASDAQ composite: The NASDAQ Composite Index closed with a bearish-coloured, almost Inside, weekly candle reflecting indecision, BUT momentum remains low so watch for any new trend line breakout.

 

NASDAQ weekly: watch the TL for any new b/o:

 

 

• • Russell-2000: The Russell-2000 is often viewed as the ‘Canary in the Coal Mine’ for US stocks and the index closed with a bearish weekly candle. Watch 2,100 for any new make or break. I do note the look of a bullish-reversal descending wedge on the daily chart here though so, keep an open mind!

 

RUT weekly: watch 2,100 for any new make or break.

 

RUT daily: watch for any descending wedge follow-through:

 

• • % of Stocks above their 200 SMA: I have included this chart again this week as I note this index has continued to pull back and is now at the 61.8% Fibonacci retracement level. This is a level worth watching for any potential support.

 

% of Stocks above their 200 SMA (weekly): watch the 61.8% fib for any new make or break:

 

• • BTC/USD: The weekly chart of BTC/USD continues shaping up in a bullish-continuation pattern of a Cup or, potentially, Cup ‘n’ Handle.  The technical theory here is that the extent of the breakout, from either the neck line of the Cup or from the Handle, will extend by the same order of magnitude as the Height of the Cup. The height of the Cup on BTC/USD is around $40,000 so, IMHO, this is a pattern well worth monitoring!

 

BTC/USD weekly: watch for any bullish Cup or Handle breakout:

 

 

• • Copper: Copper is often viewed as one metric of economic health and closed with a bearish-coloured Long Legged Doji weekly candle reflecting indecision. Watch for any new momentum-based trend line breakout as the ADX is still below 20.

 

Copper weekly: watch for any new breakout:

 

 

• • Emerging Markets: The Emerging market ETF, EEM, closed with a bearish weekly candle BUT watch for any trend line breakout: up or down.

 

EEM weekly: watch for any trend line breakout: up or down:

 

 

• • 10-yr T-Note Interest rate / TNX: This has closed with a bearish-coloured Inside weekly candle, reflecting indecision, so watch for any new trend line breakout.

 

• • 10-yr T-Note Interest rate (weekly): Watch for any new TL b/o:

 

 

• • Bonds / TLT: The Bond ETF, TLT, closed with a bullish-coloured Spinning Top and Inside weekly candle with both reflecting indecision. Watch for any push to the 61.8% Fibonacci.

 

TLT weekly: watch for any push to the 61.8% Fibonacci.

 

 

• • VIX: the Fear index closed with a bullish-coloured Inside weekly candle reflecting indecision but back above 20 S/R so watch this for any new make or break.

 

VIX weekly: watch 20 S/R for any new make or break:

 

 

Calendar: Courtesy of Forex Factory:

 

 

Earnings: Courtesy of Earnings Whispers:

 

 

Market Analysis:

S&P500: The S&P500 closed with a bearish-coloured Inside weekly candle, reflecting indecision, as there was no follow-through buying after the previous week’s push up to the new weekly high. Concern about the growing impact of Omicron and tightening US monetary policy seems to be the consensus opinion to blame here. Price action ended the week below 4,650 making this the resistance to watch for any new make or break. 

NB: Keep in mind that the 4,600 level has been in focus of late as it is the whole-number level near the 200% Fibonacci retracement of the Covid swing Low (see the second weekly chart) and so this is a significant level to monitor as well.

Trading volume was higher last week and back above the 200 MA so watch for any continuation.

 

S&P500 ETF: SPY weekly: watch for any continuation:

 

Keep in mind that a Golden Cross remains valid for the time being and the index is holding above the 50 SMA, although only just. 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 and, as with the XJO, this Golden Cross was a great signal! I wrote an article recently evaluating the Golden Cross on both the SPX and XJO and this can be found through the following link.

 

SPX daily: the Golden Cross remains valid:

 

Bullish targets: any bullish recovery above 4,650 would bring 4,700 and the recent all-time intra-day high of 4,743.83 back into focus. After that, watch whole-number levels on the way up to the 5,000 level.

Bearish targets: any bearish hold below 4,650 would bring the key 4,600 level back into focus. After that watch 20-month support trend line, the 4,300 S/R region, as this is a significant reaction zone, followed by whole-numbers on the way down to the weekly chart’s 61.8% Fibonacci retracement level, near 3,150.

• Watch 4,650 for any new make or break:

 

 

 

ASX-200: XJO: The XJO closed with a bearish-coloured, almost Inside weekly candle, reflecting indecision, but continues to hold above 7,200 and within a weekly chart Bull Flag pattern.

Price action finished the week near 7,300 and so this is the region to watch for any new make or break.

As mentioned over recent weeks:

• Recall that the 7,200 region was resistance prior to 2021 and any hold above this region would be a bullish signal as it would suggest that this old Resistance has evolved into new Support.

• I do wonder if the XJO might just chop along sideways, above 7,200 and under the resistance of the previous high of 7,632.8, until after the next Australian Federal election, likely sometime in the first quarter of 2022? A change of Government might just be the catalyst needed to invigorate market confidence and get the index moving to tackle this 7,650 region.

• The second weekly chart shows the Fibonacci retracement of the Covid swing low move and projects bullish levels that are worth monitoring. The most interesting level would have to be the 200% retracement, a level the S&P500 has just passed, but for the XJO this level lies up at the whole-number level of 10,000; a nice round number to monitor!

 

Trading volume on the XJO was a bit higher last week and is back above the 200 MA so watch for any continuation.

 

XJO weekly: trading volume back above the 200 MA:

 

Keep in mind that the recent Golden Cross remains valid here but the index is back below the 50 SMA. Also, note how the SMAs are converging so watch for any new bearish Death Cross. 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 and this current Golden Cross proved to be great signal.

 

XJO daily: the recent Golden Cross remains valid for the time being:

 

There are 4hr chart trend descending wedge lines to monitor BUT note the lack of momentum on this time frame.

Bullish targets: Any bullish 4hr chart wedge trend line breakout would bring 7,400 and the weekly chart’s Bull Flag upper trend line into focus. After that watch whole-number levels, the previous all-time High region of 7,632.8, the 161.8% retracement of the Covid swing low (near 9,000) followed by the 200% level (near 10,000).

Bearish targets: Any bearish 4hr chart wedge trend line breakout would bring 7,200 back into focus. After that, watch the previous 2020 High of 7,197.20, the weekly chart’s Bull Flag lower trend line followed by 7,100, 7,000, the pre-2020 High of 6,893.70 and the pre-GFC High of 6,851.50. The weekly chart’s 61.8% Fibonacci is down near 5,600 so that would be the next support to monitor.

• Watch 7,300 and for any new 4hr chart trend line breakout:

 

 

 

Gold: Gold closed with a bullish, almost engulfing, weekly candle, after breaking out from last week’s 4hr chart pattern. Price action ended the week near $1,800 keeping this the level to watch for any new make or break.

As mentioned over recent months: The activity 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 – $900. Keep watch of $1,900 now that price action is trading back above this neckline region!

$1,900 remains the region in focus for any bullish Cup or Inverse H&S breakout:

• Any break back above $1,900 would support the Cup pattern thesis.
• Any hold below $1,900 would support the Inverse H&S pattern thesis.

The daily chart reveals the importance of the $1,670 level and this continues to be a ‘line in the sand’ support level. 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 recovery above $1,800 would bring $1,850 into focus. After that, watch the 16-month bear TL followed by $1,900 S/R.

Bearish targets: any bearish hold below $1,800 would bring the 4-month support trend line into focus. After that, watch $1,770, $1,700 and the $1,670 support level into focus.

• Watch $1,800 for any new make or break:

 

 

 

EUR/USD: The EUR/USD closed with a bearish weekly candle and back below 1.13, being the daily/weekly chart’s 61.8% Fibonacci, so watch this level for any new make or break.

There are revised 4hr chart trend lines to monitor for any new breakout.

Bullish targets: Any bullish 4hr chart triangle breakout would bring 1.15 into focus as this is near the 4hr chart’s 61.8% Fibonacci. After that, watch the weekly 200 EMA, 1.17, the daily 200 EMA and whole-numbers on the way up to the 14-yr bear trend line.

Bearish targets: Any bearish 4hr chart triangle breakout would bring 1.12 into focus.

• Watch 1.13 and the 4hr chart triangle trend lines for any new make or break.

 

 

 

AUD/USD: The Aussie closed with a bearish-coloured Spinning Top and Inside weekly candle, with both reflecting indecision, and back under 0.72 keeping this the resistance level to watch for any new make or break.

There are revised 4hr chart trend lines to monitor for any new breakout.

Bullish targets: Any bullish 4hr chart triangle breakout would bring 0.72 into focus. After that, watch 0.73, the weekly & daily 200 EMA, the 4hr chart’s 61.8% Fibonacci, 0.74 and the recently broken 19-month support trend line. After that, watch 0.75 and other whole numbers on the way up to the 11-yr bear trend line and 0.80 S/R.

Bearish targets: Any bearish 4hr chart triangle breakout would bring 0.71 into focus followed by 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 (see daily chart).

• Watch 0.72 and the 4hr chart’s trend lines for any new breakout:

 

 

 

AUD/JPY: The AUD/JPY closed with a bullish-coloured Long Legged Doji weekly candle, reflecting indecision, after testing the resistance of the 19-month trend line mid-week but then retracing. Price action ended up back near 81 keeping this the level to watch for any new make or break. 

There are revised 4hr chart trend lines to monitor for any new breakout.

Bullish targets: Any bullish bounce up from 81 would bring the 82, the region of the daily 200 EMA, monthly 200 EMA and the 4hr chart’s upper triangle trend line into focus. After that watch recently broken 19-month support trend followed by 86 S/R as there hasn’t been a weekly chart close above this level since Feb 2018. Then watch whole-number levels up to 90 and the 9-yr bear trend line.

Bearish targets: Any bearish 4hr chart triangle breakout would bring 80 S/R into focus followed by whole-numbers on the way down to 70 as this is near the 61.8% Fibonacci of the March 2020 – March 2021 swing High move (see daily chart).

• Watch 81 and for any new 4hr chart triangle breakout:

 

 

 

NZD/USD: The Kiwi closed with a bearish weekly candle and below 0.68 making this the resistance to watch for any new make or break.

There are revised 4hr chart trend lines to monitor for any new breakout and note the look of a bullish-reversal descending wedge here so keep an open mind!

Bullish targets: Any bullish 4hr chart wedge breakout would bring the weekly 200 EMA and 0.69 into focus. After that, watch the region of the daily 200 EMA, 50% Fibonacci and 0.70 level followed by the recently broken 19-month support trend, 0.71 and the 9-month bear trend line.

Bearish targets: Any bearish 4hr chart wedge breakout would render a break of 0.67 and would bring whole-number levels on the way down to 0.62 into focus as 0.62 is near the 61.8% Fibonacci of the daily chart’s March 2020 – Feb 2021 swing High move.

• Watch 0.68 and for any new 4hr chart wedge breakout:

 

 

 

GBP/USD: The Cable closed with a bullish-coloured Long Legged Doji-style weekly candle, reflecting indecision, and back below 1.33 keeping this the region to watch for any new make or break.

There are revised 4hr chart trend lines to monitor for any new breakout.

Bullish targets: Any bullish 4hr chart trend line breakout would bring 1.34 into focus. After that watch 1.36, as this is near the daily chart’s 200 EMA and 4hr chart’s 61.8% Fibonacci, followed by whole-number levels on the way up to the 15-yr bear trend line.

Bearish targets: Any bearish 4hr chart trend line breakout would bring 1.32 back 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 (see daily chart).

• Watch 1.33 and 4hr chart trend lines for any new breakout.

 

 

 

USD/JPY:  The USD/JPY closed with a bullish-coloured Long Legged Doji weekly candle, reflecting indecision, but back below 114 keeping this the region to watch for any new make or break.

There are revised 4hr chart trend lines to monitor for any new breakout.

Bullish targets: Any bullish 4hr chart triangle breakout would bring 115 into focus. After that, watch whole-number levels on the way to 120 S/R.

Bearish targets: Any bearish 4hr chart triangle breakout would bring 113 S/R into focus followed by 112.30 and whole numbers down to 107.50 as the latter is near the weekly chart’s 61.8% Fibonacci.

• Watch 114 for any new 4hr chart triangle breakout:

 

 

 

GBP/JPY: The GBP/JPY closed with a a small, bullish weekly candle but with a long upper shadow reflecting the failed buying this week. Price action ended up back near 150.50 keeping this the level to watch for any new make or break.

There are revised 4hr chart triangle trend lines to monitor for any new breakout.

Bullish targets: Any bullish bounce up from 150.50 would bring the upper 4hr chart triangle trend line into focus. After that, watch 153, the recently broken the 19-month support trend line and the recent high region of 158 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 triangle breakout, below 150.50, would bring 149 into focus. After that, watch whole-number levels on the way down to 137 as this is near the daily chart’s 61.8% Fibonacci of the March 2020 – current swing High move (see daily chart).

• Watch 150.50 and for any new 4hr chart triangle breakout: