Last week: US stocks closed higher last week as concern over the impact of Omicron waned. All four of the US index majors, the S&P500, DJIA, NASDAQ and Russell-2000, closed higher for the week, despite the larger than expected print for US CPI, with the S&P500 closing at an all-time weekly high. Market participants will be keenly watching the raft of central bank updates this week with FOMC being key among these. The US$ index has now printed three consecutive small weekly candles so watch to see if FOMC gets the index moving again.

 

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:  The continued lack of movement with the US$ index has meant it was another relatively quiet week for trend line breakout trading opportunities. Articles released during the week can be found here, here and here.

• S&P500: a TL b/o for up to 100 points.
• EUR/USD: a TL b/o for 40 pips.
• AUD/USD: a TL b/o for 60 pips.
• NZD/USD: a TL b/o for 30 pips.

 

 

This Week: (click on images to enlarge):

 

• • DXY: US$ Index: The DXY closed with a bearish-coloured Spinning Top weekly candle, reflecting indecision, making for three consecutive weeks of small bodied candles. The index is holding above the 95 breakout region of a bullish-reversal Double Bottom or W Bottom on the weekly chart and remains just under the weekly 50% Fibonacci retracement so watch for any recovery and potential push to the key 61.8% level; especially with this week’s FOMC update.

 

DXY weekly: watch for any impact from this week’s FOMC update:

 

 

• • Central Bank Updates: there are five Central bank updates this week: FOMC (USD), SNB (CHF), BoE (GBP), ECB (EUR) and BoJ (JPY).

 

• • 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 large, bullish weekly candle and back near 36,000 level so watch this 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 bullish-coloured, almost Inside weekly candle, reflecting indecision, BUT momentum remains low. 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 bullish-coloured almost Inside and Inverted Hammer-style weekly candle so some mixed messages here above the recent support level. Watch 2,100 for any new make or break.

 

RUT weekly: watch 2,100 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 bullish-coloured Spinning Top weekly candle. Watch for any new momentum-based trend line breakout as the ADX is still on the decline here.

 

Copper weekly: watch for any new breakout:

 

 

• • Emerging Markets: The Emerging market ETF, EEM, closed with a bullish 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 bullish-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 bearish-coloured Inside weekly candle reflecting indecision so 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 large, bearish weekly candle and back below 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 large, bullish weekly candle as concern about the impact of Omicron waned and the index carved out a new weekly all-time high. Price action ended the week just above 4,700 making this the one 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 lower last week and back below the 200 MA so watch for any new breakout.

 

S&P500 ETF: SPY weekly: watch for any new breakout:

 

Keep in mind that a Golden Cross remains valid for the time being and the index is back above the 50 SMA. 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 hold above 4,700 would bring 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 retreat from 4,700 would bring the 20-month support trend line back into focus. After that watch 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 4,700 for any new make or break:

 

 

 

ASX-200: XJO: The XJO closed with a bullish weekly candle and continues to hold above 7,200 and so, with the ongoing hold above this key level, I have revised the weekly charts Bull Flag pattern.

Price action finished the week near 7,350 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 lower last week and back below the 200 MA so watch for any new breakout:

 

XJO weekly: trading volume back below the 200 MA:

 

Keep in mind that the recent Golden Cross remains valid here and the index is back near the 50 SMA. 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 revised 4hr chart trend lines to monitor.

Bullish targets: Any hold above 7,350 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 break below 7,350 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 7,350 for any new make or break;

 

 

 

Gold: Gold closed with another bearish-coloured Spinning Top weekly candle, reflecting indecision, as the metal trades on low 4hr chart momentum and under $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.

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

Bullish targets: any bullish 4hr chart trend line breakout would bring $1,800 into focus. After that, watch $1,850 and the 16-month bear TL followed by $1,900 S/R.

Bearish targets: any bearish 4hr chart trend line breakout would render a break below $1,770 and the daily/weekly chart’s 4-month support trend line and would bring $1,700 and the $1,670 support level into focus.

• Watch for any 4hr chart trend line breakout:

 

 

 

EUR/USD: The EUR/USD closed with a bearish-coloured Spinning Top weekly candle making that two indecision weekly candles in a row. Price action remains above the 1.13, this being the daily/weekly chart’s 61.8% Fibonacci, so watch this level for any new make or break; especially with this week’s ECB and FOMC updates.

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; especially with this week’s ECB and FOMC updates.

 

 

 

AUD/USD: The Aussie closed with a bullish engulfing weekly candle and just under 0.72 making 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 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 engulfing weekly candle and back above 81 making 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 4hr chart triangle breakout would bring the 82 region of the daily 200 EMA, monthly 200 EMA and recently broken 19-month support trend line into focus. After that watch 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 bullish-coloured Inside weekly candle reflecting indecision and just near 0.68 making 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 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 triangle breakout would bring the recent low, near 0.675, and 0.67 into focus. After that, watch whole-number levels on the way down to 0.62 as this 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 triangle breakout:

 

 

 

GBP/USD: The Cable closed with a small, bullish weekly candle but the long lower shadow is giving this a bit of a bullish-reversal Hammer look so watch for any bounce from here.

The 4hr chart shows a new descending wedge breakout in play so watch 1.33 for any new make or break.

Bullish targets: Any continued bullish 4hr chart wedge breakout would bring 1.33 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 hold below 1.33 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 for any new make or break;

 

 

USD/JPY:  The USD/JPY closed with a bullish weekly candle but on little 4hr chart momentum.

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

Bullish targets: Any bullish 4hr chart triangle breakout would bring 114 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 for any new 4hr chart triangle breakout:

 

 

 

GBP/JPY: The GBP/JPY closed with a bullish-coloured, almost Inside weekly candle, reflecting indecision, and just below 150.50 making 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 break above 150.50 would bring an 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 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: