Last week: There was a bit of movement across Forex pairs last week with the NZD/USD leading the charge following NZ Government changes to housing policy in an effort to try and curb rising prices. This was then followed by some US$ strength that helped to trigger some other Forex trend line breakouts. The S&P500 and DJIA closed with bullish weekly candles and at new all-time Highs but the risk-sensitive Russell-2000, Emerging markets (EEM), NASDAQ and Copper all closed the week lower; although the last two are shaping up in potential Bull Flags. Bonds (TLT) and Yields (TNX) both printed reversal-style weekly candles so that is a space worth watching over coming weeks in case they take a pause from their recent trajectories. This week might be relatively quiet in the lead up to Easter with the shortened trading week for some areas although US jobs data is reported on Friday (Good Friday). This is the second Eater to be impacted by Covid but let’s hope it’s the last!
NB: I am away with family on a 2-week holiday until Tuesday 30th March. This is holiday that had been postponed due to Covid restrictions. Weekday updates will be brief and few during this period.
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: Updates posted throughout last week can be found through the links here, here and here:
- S&P500: a TL b/o for 30 points.
- NZD/USD: a TL b/o for 170 pips.
- GBP/USD: a TL b/o for 130 pips.
- AUD/USD: a TL b/o for 120 pips.
- EUR/USD: a TL b/o for 50 pips.
- AUD/JPY: a TL b/o for 80 pips.
- GBP/JPY: a TL b/o for 70 pips.
- ASX-200: a TL b/o for 70 points.
This Week: (click on images to enlarge):
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- DXY: US$ Index: The US$ index closed with a bullish weekly candle and continues to hold up and out from the recently broken 12-month bearish-reversal descending wedge. There was a bullish Flag-style breakout (off the 4hr time frame) during last week as well. Note how weekly momentum is still declining and contracting though:
DXY weekly: a bullish weekly candle and another recent wedge b/o:
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- Bitcoin: I was asked a strategy style question regarding Bitcoin during the week so thought I’d share my reply and this can be found here.
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- Euro, Aussie Kiwi and Cable: The EUR/USD, AUD/USD, NZD/USD and GBP/USD, despite recent US$ strength, are all shaping up in potential bullish reversal 4hr chart Descending Wedge patterns.These actually form the ‘Flag’ of potential weekly chart ‘Bull Flags’.
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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 paused last week with the first bearish candle in 9 weeks. The weekly candle closed back below the weekly 200 EMA and as a bearish-reversal Hanging Man-style candle so watch for any pullback here following this lengthy bullish run.
- 10-yr T-Note Interest rate: watch for any pullback:
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- % Stocks above their 200 Day Moving Average Index: The Percentage of stocks above their 200 Day Moving Average remains above 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 at 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 bearish-coloured Spinning Top weekly candle. The long shadows on the recent weekly candles reflect the indecision that exists here at the moment, however, keep watch for any potential Bull Flag activity.
Copper weekly: another bearish weekly candle BUT watch for any Bull Flag:
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- Emerging Markets: The Emerging market ETF, EEM, closed with a bearish-coloured Spinning Top weekly candle and just below the 12-month support trend line BUT note the look of a Bull Flag here as well. Watch for any new Flag trend line breakout: up or down.
EEM weekly: watch the 12-month TL and Flag trend lines
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- DJIA: The DJIA closed with a bullish weekly candle and at a new all-time High; above 33,000.
DJIA weekly: keep watch of 33,000 for any new make or break.
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- NASDAQ composite: The NASDAQ Composite Index closed with another bearish-colored Spinning Top weekly candle reflecting indecision as the index still struggles under the recently broken 12-month support TL. However, traders need to watch for any potential Bull Flag formation, although, any serious sell off would bring the weekly chart’s 61.8% Fibonacci, circa 9,500, into focus.
NASDAQ weekly: watch for any potential Bull Flag:
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- DAX weekly: The DAX closed with a bullish weekly candle and at a new all-time High; just under 15,000.
DAX weekly: watch 15,000 for any new make or break:
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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 bearish weekly candle. The Index is holding above the 61.8% Fibonacci extension of the Covid-induced Swing Low so watch for any push to the 100% level, circa 2,475.
RUT weekly: watch for any hold above the 61.8% Fibonacci Extension:.
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- Bonds / TLT: The Bond ETF, TLT, closed with a bullish weekly candle and back above the 135 S/R level. Note the look of a bullish-reversal Morning Star pattern here now with this last cluster of three candles! My Elliott Wave indicator is still suggesting a potential uptrend.
TLT weekly: closed back above the 135 level:
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- USD/CAD and USD/CNY: keep an eye on these two weekly chart Descending Wedge patterns for any new trend line breakout.
USD/CAD weekly: watch for any new breakout:
USD/CNY weekly: the TL b/o looks to be getting going:
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- VIX: the Fear index closed with a bearish weekly candle and below the 20 S/R level so watch to see if this marks a return to a new and lower trading range for the index.
VIX weekly: watch the 20 S/R level for any new make or break:
Calendar: Courtesy of Forex Factory:
Earnings: Courtesy of Earnings Whispers: a coupleof big names but winding down at the end of the week with Easter:
Market Analysis:
S&P500: The S&P500 closed with a bullish weekly candle and at a new all-time High. Price action continues to hold above a 12-month support trend line but, as mentioned last week, is becoming increasingly squeezed between this support and resistance above from the whole-number and psychological 4,000 level so watch this for any new make or break.
Trading volume was a little higher last week and remains above the 200 MA and closed just above the revised bear trend line so watch for any continued push higher.
S&P500 ETF: SPY weekly: watch for any push higher:
The Index closed the week just below 3,975 making this the first resistance level to monitor for any new make or break. There are revised 4hr chart trend lines to assess with any new momentum breakout as well.
NB: The second weekly chart shows how the 61.8% Fibonacci extension of the Covid-induced Swing Low is up near 4,150. This would be one target for any bullish continuation move.
Bullish targets: any bullish 4hr chart trend line breakout above 3,975 would bring 4,000 into focus.
Bearish targets: any bearish 4hr chart retreat below 3,975 would bring 3,950 and the 12-month support trend line back into focus After that, watch 3,900 and whole-numbers on the way down to the weekly chart’s 61.8% Fibonacci retracement level, near 2,800. Traders need to watch for any potential weekly chart Bull Flag activity around this 12-month support trend line.
- Watch 3,975 and 4hr chart trend lines for any new breakout:
ASX-200: XJO: The ASX-200 closed with a bullish, almost Engulfing, weekly candle and just below the 6,875 level making this resistance level to monitor for any new make or break.
The Index closed the week above the pre-GFC High of 6,851.50 BUT the pre-2020 High of 6,893.70 and 2020 High of 7,197.20 still loom large and ahead of current price action and might offer considerable resistance levels for the index.
Trading volume was a bit lower last week and below the 200 MA so watch for any new break back above this level and the bear trend line.
XJO weekly: watch for any new b/o above the 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 and levels to monitor for any new breakout.
Note how ADX momentum still remains low on the daily chart and declining on the weekly chart.
Bullish targets: Any bullish 4hr chart breakout above 6,875 would bring the pre-2020 High of 6,893.70, the whole-numbers 6,900 and 7,000 and, then, the 2020 High of 7,197.20 into focus.
Bearish targets: Any bearish hold below 6,875 would bring the pre-GFC High of 6,851.50 and recent support trend line into focus. After that, watch 6,800 and 6,700.
- Watch 6,875 for any new 4hr chart make or break:
Gold: Gold closed with a bearish weekly candle but remains in a sideways, consolidation-style triangle pattern and pegged by $1,750. I have relaxed the upper 4hr chart triangle trend line a bit this week to capture the whole of the swing Low move since January 2021.
As mentioned over recent months: This price action and 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.
Not a lot changed last week and so $1,750 remains the horizontal resistance level to watch for any new make or break.
As per recent weeks: 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.
And also similar this week, the weekly ADX momentum remains above the 20 threshold level BUT the bearish DMI, although above 20, is still trending downward but watch for any uptick here.
Bullish targets: any bullish 4hr chart triangle breakout would bring $1,750 and $1,770 back into focus followed by $1,800, the daily 200 EMA, $1,850 and $1,900.
Bearish targets: any bearish 4hr chart chart triangle breakout would bring $1,700 and the recent Low, near $1,670, into focus.
- Watch for any 4hr chart triangle breakout:
EUR/USD: The EUR/USD closed with a bearish weekly candle after breaking down through 1.19 and 1.18 horizontal support. Price closed the week just below 1.18 so this will be the horizontal resistance level to monitor for any new make or break.
There are revised 4hr chart trend lines to watch for any new breakout BUT, despite the recent bearish activity, note the look of a bullish-reversal descending wedge here so keep an open mind. .
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 triangle breakout would bring ,above 1.18, would bring the 4hr chart’s upper wedge trend line into focus. After that watch 1.19, 1.20 and 1.21 followed by the monthly 200 EMA and 1.22 level and, then, 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 triangle breakout, and hold below 1.18, would bring the bottom 4hr chart wedge trend line followed by 1.17 into focus.
- Watch 1.18 for any new 4hr chart momentum-based triangle trend line breakout;
AUD/USD: The Aussie closed with a bearish weekly candle and just above 0.76 making this the support level to watch for any new make or break.
Price action is still holding just below the recently broken 12-month support trend line so this support-turned-resistance will need continued monitoring and, as with the break of any support trend line; a potential Bull Flag could still evolve here.
There are revised 4hr chart trend lines to monitor for any new momentum-based breakout with a smaller triangle sitting within a larger wedge (potential Bull Flag?).
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 0.77 and the the 4hr chart’s upper wedge trend line into focus. After that, watch for any push 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 0.76 and the bottom 4hr chart wedge trend line into focus. After that, watch 0.75 and 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 0.76 and for any 4hr chart triangle breakout:
AUD/JPY: The AUD/JPY closed with a bearish weekly candle following last week’s bearish-reversal Shooting Star-style candle. This week’s candle had a long lower tail, though, reflecting the buying recovery that took place after the initial sell-off and this enabled price to close the week back near a 22-week support TL. So this trend line, and 84 S/R, will be the 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 BUT one of the main things to make note of is the bearish-reversal Evening Star pattern that just formed on the weekly chart;
AUD/JPY weekly: note the bearish-reversal Evening Star pattern:
I have included a daily chart again here this week with a reminder to note how the 72 level is down near a previous reaction zone and not too far from 61.8% Fibonacci of the March 2020 – March 2021 swing High move; so it might be a target to aim for if risk appetite turns very sour.
Bullish targets: Any bullish 4hr chart breakout above 84 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 retreat below the 22-week, and a recent support, trend line would bring 83 and 82 into focus followed by the the monthly 200 EMA and 12-month support trend line. 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 84 and the 22-week support trend line for any new make or break:
NZD/USD: The Kiwi closed with a large, bearish weekly candle and down near 0.70 making this the level to watch for any new make or break.
Price action is well below the recently broken 12-month support trend line but this support-turned-resistance still needs monitoring as, with the break of any support trend line; a potential Bull Flag could still evolve here.
Like with the Aussie, there are revised 4hr chart trend lines to monitor for any new momentum-based breakout with a smaller triangle sitting within a larger wedge (potential Bull Flag?).
Bullish targets: Any bullish 4hr chart triangle trend line breakout would bring 0.71 and the upper wedge trend line into focus. After that, watch 0.72, 0.73, the recently broken 12-month support trend line, 0.74 and 0.75 as the latter is the next major horizontal S/R zone (see weekly chart). Then watch 0.76 as this is near a monthly chart 61.8% Fibonacci target of an earlier monthly chart triangle breakout.
Bearish targets: Any bearish 4hr chart triangle trend line breakout would bring the monthly 200 EMA and bottom wedge trend line into focus. 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 for any 4hr chart triangle trend line breakout:
GBP/USD: The Cable closed with a bearish weekly candle but recovered the dip below 1.37 to close back up just under 1.38 making this the level to watch for any new make or break.
Like with the Aussie and Kiwi, there are revised 4hr chart trend lines to monitor for any new momentum-based breakout with a smaller triangle sitting within a larger wedge (potential Bull Flag?).
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 to 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!
Bullish targets: Any bullish 4hr chart triangle trend line breakout, above 1.38, would bring the upper wedge / Flag trend line into focus followed by the recently broken 12-month support trend line. After that watch 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 4hr chart triangle trend line breakout would bring 1.37 and the lower wedge /Flag trend line 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 1.38 the 4hr chart triangle trend lines for any new breakout:
USD/JPY: The USD/JPY closed with a bullish weekly candle and finally escaped the 109 level to close just under 110 making this the one to watch for any new make or break.
NB: The bullish weekly descending wedge breakout continues here and this was first noted in my article of January 31st. Price action at the initial breakout was around 104.5 and has reached to near 110, a move of around 550 pips, so this trend line breakout was a great clue about things to come!
There are revised 4hr chart trend lines to monitor for any new breakout and note the low level of momentum.
Bullish targets: Any bullish 4hr chart breakout above 110 would bring whole-numbers on the way up to 115 into focus.
Bearish targets: Any bearish 4hr support trend line breakout would bring 109, 108.5, and 108 back into focus. After that, watch whole-number levels on the way down to 105 as this is near the 61.8% Fibonacci of the Jan-March 2021 swing High move.
- Watch 110 and for any new 4hr chart triangle trend line breakout.
GBP/JPY: The GBP/JPY closed with a bullish-coloured Doji weekly candle after last week’s Spinning Top with both reflecting indecision.
Price action dipped down below a 14-week support trend line during the week but managed to recover this loss to close back above this trend line and 151 so this will be the region to watch for any new make or break. There and revised 4hr chart trend lines to monitor for any new momentum breakout as well.
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 to 152, a move of around 1,100 pips, and so is another trend line breakout that has proven to be worthwhile monitoring.
Bullish targets: Any bullish 4hr chart hold above 151 would bring 152 followed by whole-number levels on the way up to the weekly chart’s 61.8% Fibonacci, near 170, into focus.
Bearish targets: Any bearish 4hr chart trend line breakout below 151 and a recent support trend line would bring the 14-week trend line back 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 151 and the 4hr chart trend lines for any new breakout:
