Last week: Last week’s market update was published against a backdrop of risk-off sentiment and growing fear about Coronavirus. I had warned, though, that some obvious divergence pointed to the need for some caution and to be prepared for any quick turn around and that is what last week delivered, until Friday at least. The stock indices of the DJIA, NASDAQ and S&P500 closed with bullish weekly candles and printed new all-time Highs before pulling back on Friday following a mixed NFP result and renewed Coronavirus concern. News about the death of the young Chinese Doctor, who had first tried to warn about the new virus, was met with great sadness and shock which further rattled investor sentiment. I believe the next two weeks will be critical as Coronavirus cases, outside of China, are monitored for their virulence and impact, so that a full assessment of the global health risk can be evaluated. Weekend news about the death of the first American will not be supportive though. Traders need to make sure they appropriately manage their trade exposure and risk management during these uncertain times.
NB: As noted last week: 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 Coronavirus, 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.
NB: ACY Securities has been taking two of my articles each week and distributing these to their member base whilst they searched for a new Technical Analyst. They have now secured a person for this role but will still be taking my weekend update; for the time being at least. I was not interested in any full time position. Their new analyst will be generating technical reports as part of their full time role.
Trend line breakouts and TC signals: The risk-on shift at the start of the week triggered a few trend line breakouts. Articles published during the week can be found here, here, here and here:
- GBP/JPY: a TL b/o for 150 pips and a TC signal for 120 pips and 3 R.
- GBP/USD: a breakout move off 1.32 for 200 pips and a TC signal for 150 pips and almost 4 R and another TL b/o for 70 pips.
- AUD/USD: a TL b/o for 70 pips.
- AUD/JPY: a TL b/o for 150 pips.
- USD/JPY: a TL b/o for 110 pips.
- ES: a Bull Flag b/o for 33 points.
- Gold: a TL b/o for $20 and another for $12 by Friday:
This Week: (click on images to enlarge):
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- DXY: US$ Index: The US$ index closed with a bullish weekly candle and triggered a Bull Flag breakout although momentum remains low. Note how ADX momentum is still declining and converging. Also, it is worth remembering that the recent bearish-reversal Death Cross remains open.
DXY weekly: a new Bull Flag breakout BUT on low momentum:
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- Central Banks: there is one Central Bank update this week: RBNZ (NZD).
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- Chinese CPI: CNY CPI is released on Monday so watch to see how this print impacts markets, if at all, to start the week.
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- US data: last Friday’s NFP was a bit mixed with a good number of Jobs Added but the headline Unemployment rate and Wages components were disappointing, Thus, US CPI and Retail Sales might be in greater focus this week.
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- DAX: The DAX continues to hold under the previous High, circa 13,600 level but printed a fairly large bullish, almost ‘engulfing’ weekly candle. Watch this resistance level for any make or break. This bullish weekly candle voids last week’s three candle bearish Evening Star pattern.
DAX weekly:
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- Russell-2000: The Russell-2000 is often viewed as the ‘Canary in the Coal Mine’ for US stocks. Price action has struggled to break above the previous High, near 1,750 but the index closed with a bullish weekly candle. Watch trend lines for any new breakout:
RUT weekly:
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- Emerging Markets: The Emerging markets are often the first to suffer in any economic downturn. The ETF closed higher for the week and held above the 61.8% fib of the recent swing High move but could not break back above $45 but watch this region for any new make or break:
EEM weekly:
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- Copper weekly: Copper is often a metric used to gauge the health of the economy and this commodity has been hit hard with Coronavirus concern. The metal closed with a bullish weekly candle and, whilst still trading within a weekly triangle, note the uptick with bearish momentum!
Copper weekly:
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- VIX weekly: the Fear index closed with a bearish weekly candle but still above the 14 threshold. Note the move back below the recently broken bear trend line:
VIX weekly:
Calendar: Courtesy of Forex Factory:
Earnings: Courtesy of Earnings Whispers: It is another big week for earnings:
Markets:
S&P500: SPX: There were risk-on flows for the first four days of the week but sentiment soured on Friday and this ‘up and down’ has helped to generate a Bull Flag on the 4hr chart. New market Highs were printed during the week and the weekly candle was large and bullish but any accelerated concern with Coronavirus could turn market sentiment in a heartbeat and reverse the broader uptrend of this index. That is why traders need to carefully manage their trade exposure and risk per trade. For the time being though, the weekly chart shows higher Highs and higher Lows being printed which is the definition of an uptrend.
Bullish targets: any 4hr chart Bull Flag breakout would bring the whole-number 3,400 into focus.
Bearish targets: any bearish Flag breakdown would bring 3,300 followed by the 4hr chart’s 61.8% fib, near 3,250, into focus.
- Watch for any 4hr chart Bull Flag breakout:
ASX-200: XJO: The ASX-200 continues to hold up pretty well considering the situation with Coronavirus, the ongoing Aussie drought and recent devastating bush fires. The fact that the index is still holding above pre-2020 Highs is pretty remarkable really and I remind folk here of the trading saying that ‘Old resistance becomes new Support‘. I’m not making any predictions here but, whilst the index holds above 6,851.50, the pre-GFC High, there doesn’t seem to be any reason to be bearish. There are daily and weekly support trend lines in place and, until these are broken, the trend remains up.
The index opened the week just above the 2019 High of 6,893.70 and subsequently edged higher to close the week with a bullish coloured Doji weekly candle and just below the 7,100 whole-number level making this the one to watch for any new make or break. There are revised 4hr chart triangle trend lines to monitor into the new week as well.
Bullish targets: Any bullish 4hr chart triangle breakout break will bring 7,100 into focus and, then, the previous Highs.
Bearish targets: Any bearish 4 chart triangle breakout would bring 7,000 followed by the pre-2020 High of 6,893.70, into focus.
- Watch for any 4hr chart triangle breakout:
Bonds: TLT Bond ETF: Price action on the flight to safety ETF was mixed last week. The trend was down to start the week, as flows moved back into stocks, but this all reversed on Friday resulting in a bearish-coloured Indecision Doji being printed as the weekly candle.
Price action is holding above the 144 S/R level and, given the recent bullish triangle breakout, watch for any push up to the 150 S/R level.
NB: My charting software’s bullish Wave 5 move looks to be playing out here!
Bullish targets: any continued bullish triangle breakout would bring the whole-number 150 into focus.
Bearish targets: any bearish break back below 144 would bring the support trend line followed by 135 S/R level back into focus.
- Watch for any continued triangle trend line breakout to the 150 S/R level:
Gold: Gold remained supported last week despite the flows into stocks. This latest behaviour may be more technical in nature with the $1,600 seeming to call the precious metal again.
Price action is trading in a new 4hr chart triangle giving traders trend lines to monitor for any new breakout.
Daily chart Bull Flag details: Recall that the length of the Daily chart’s Bull Flag pole is about $300 and, according to technical theory, this could be the expected move on any bullish Flag breakout (see daily chart). This Bull Flag breakout remains in progress and brings the $1,790 region into focus; this being the target of the $300 Flag pole above the $1,490 breakout level, and this target is up near previous S/R at $1,800 for added confluence.
Bullish targets: any bullish 4hr chart triangle breakout would bring $1,600 back into focus on the way to the daily chart’s Bull Flag target, circa $1,790 and, then, $1,800.
Bearish targets: any bearish 4hr chart triangle breakout would bring $1,550 back into focus.
- Watch the 4hr chart triangle trend lines for any new breakout:
Oil: Oil managed to hold up pretty well last week considering the strength with the US$ as it held above $50 S/R, although, it did close with a bearish-coloured Spinning Top weekly candle suggesting indecision.
Price action continues shaping up in a potential bullish-reversal descending wedge, of a sort, on the 4hr chart though so keep watch for any possible relief-rally here; even if only short-lived.
Bullish targets: any bullish wedge breakout would bring $58 and, then, $60 S/R back into focus. The $60 level is near the 61.8% Fibonacci retracement of the recent swing Low move.
Bearish targets: any bearish wedge breakdown would bring the 4-yr support trend line (see weekly chart).
- Watch for any 4hr chart wedge breakout: up or down!
EUR/USD: The EUR/USD closed with a large, bearish engulfing weekly candle and back below 1.10. I’d mentioned to last week to watch 1.11 for any new make or break and the failure to close above this level delivered a 140 pip drop!
The EUR/USD is now back down in the vicinity of 1.09 making this the new support level to watch for any new make or break. Note how momentum is still declining and converging on the daily and weekly charts though!
Bullish targets: any hold above 1.09 would bring 1.10 and, then, 1.11 into focus.
Bearish targets: any bearish break below 1.09 would bring 1.08 into focus.
- Watch 1.09 for any new make or break.
AUD/USD: This is now the 6th consecutive bearish weekly candle for the Aussie but there is a bit of a bullish-reversal shape to this weekly candle so an element of caution is required here.
As noted last week, price action has been hit hard with the Coronavirus situation due to broad-based economic growth concern but, also, because of the fact that China is Australia’s largest trading partner and the impact on Tourism, Education and Trade could be considerable. Not much has changed here as the world monitors the spread of the virus outside of China. Any positive news on the health front could trigger a relief rally here, even if only temporary so traders need to watch for momentum-based trend line breakouts.
The AUD/USD closed just below the 0.67 level again keeping this the one to watch for any new make or break.
There are revised 4hr chart trend lines that, yet again, give the chart a bit of a descending wedge appearance so keep an open mind here.
Bullish targets: Any bullish 4hr chart wedge breakout would bring 0.68 followed by whole number levels on the way up to the 4hr chart’s 61.8% fib, near 0.69, into focus.
Bearish targets: Any bearish 4hr chart wedge breakout would bring 0.66 into focus.
- Watch for any 4hr chart wedge breakout:
AUD/JPY: The AUD/JPY closed with a bullish-reversal Inverted Hammer candle after price action shrugged off Coronavirus fear for the first part of the week.
Price action is now shaping up within a 4hr chart triangle so watch trend line for any new breakout.
NB: as per previous weeks, AUD/JPY traders should keep an eye on the broader stock market as this currency pairs often trades in tandem with stock market sentiment. A stock market pullback might take the AUD/JPY along for the ride.
Bullish targets: Any bullish triangle breakout would bring 75 and 76 into focus.
Bearish targets: Any bearish triangle breakout would bring 73 and 72 S/R into focus.
- Watch for any 4hr chart triangle breakout:
NZD/USD: The Kiwi decline has continued with another bearish weekly candle and price action came to rest at the whole number 0.64 ahead of next week’s RBNZ rate update.
Bullish targets: any bounce up from 0.64 would bring 0.645, that alignes near a 4hr bear trend line, and then 0.65 into focus followed by the daily 200 EMA and 0.66 S/R.
Bearish targets: Any bearish break below 0.640 would bring 0.63 S/R and, then, 0.625 S/R into focus.
- Watch 0.64 for any new make or break:
GBP/USD: The Cable closed with a large bearish engulfing weekly candle and well below 1.30, a level that had been reasonable support of late. It seems the stronger US$ and Brexit negotiations were too much for the GBP last week.
Price action not only broke below 1.30 S/R but 1.29 as well making this the one to watch for any new make or break. The daily chart below shows this level as clear influence but, really, so too are all the whole number levels.
Bullish targets: Any break back above 1.29 would bring 1.30 and, then, whole-number levels on the way to the 4hr chart’s 61.8 % fib, near 1.31.
Bearish targets: Any bearish hold below 1.29 would bring 1.28 into focus.
- Watch 1.29 for any new make or break:
USD/JPY: The USD/JPY closed with a relatively large, bullish weekly candle and back up near 110 S/R.
Price action is now shaping up in a Bull Flag under the resistance of this S/R level but, also, under a 5-year bear trend line so watch theses Flag trend lines and 110 for any new breakout.
Bullish targets: Any Bull Flag breakout to the upside would bring 110 S/R and the 5-year bear trend line into focus and, after that, whole number levels on the way up to 115 S/R.
Bearish targets: Any bearish Flag breakout would bring 109 into focus followed by 108.5.
- Watch for any 4hr chart Bull Flag and 110 S/R breakout:
GBP/JPY: The GBP/JPY closed with a bearish weekly candle and just below the 141.50 S/R level making this the one to watch for any new make or break.
I’ve noted over recent weeks how the 140 is considerable S/R so another test of this region is always possible. Check the monthly chart to see the impact of this S/R zone.
Bullish targets: any bullish recovery above 141.50 would bring a 4hr chart bear trend line followed by 143 into focus. After that, the 146 is still up near the 4hr chart’s 61.8% fib and weekly 200 EMA.
Bearish targets: any bearish hold below 141.50 would bring 140 into focus.
- Watch 141.50 for any new make or break:
