Last week: It was a relatively quiet week for trend line breakouts but I suspect traders around the world are watching the US stock majors of the S&P500 and DJIA to see how these indices react at looming key resistance: success might allay fears of another Global Financial Crisis-style pullback but failure might bring deja vu to mind. Market action was choppy for many instruments and this was evident from the numerous indecision-style weekly candles that were printed. There could be more of the same in the coming week as the S&P500 navigates near this key 2,900 – 3,000 level so traders should manage trade size and risk appropriate to the current market conditions.
Technical Analysis: As noted over recent weeks, 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 during these volatile market conditions. Coronavirus remains the dominant market theme and this can be seen from CNBC’s Saturday’s front page where every headline related to the topic:
Trend line breakouts and TC signals: It was another shortened Easter week but there were a few trend line breakout trades. Articles published during the week can be found here, here and here:
- Gold: a TL b/o move for $35.
- AUD/USD: a TL b/o move for 90 pips.
- AUD/JPY: a TL b/o move for 100 pips.
- Oil: a TL b/o move for $2.00.
- GBP/USD: a TL b/o move for 120 pips.
This Week: (click on images to enlarge):
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- DXY: US$ Index: The US$ index closed with bullish-coloured Indecision-style Spinning Top weekly candle under the key 100 level:
DXY weekly:
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- New Member-Only pages: Please remember to check out these new member-only pages to help with trying to catch trend line breakout trades off lower time frame charts. These two pages are linked below:
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- Indecision weekly candles: there were lots of these printed last week: DXY, EURX, ASX-200, DAX, Russell-2000, TLT, Gold, Oil, EUR/USD, AUD/USD, NZD/USD, GBP/USD, AUD/JPY and GBP/JPY.
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- S&P500: Keep the bigger picture in perspective with this pullback:
S&P500 yearly: keep this latest move lower in perspective:
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- Currency Strength Indicator: note the bunching of currencies on this daily chart. A warning for Forex traders! Click on the chart to enhance the size and contrast:
Currency Strength Indicator: daily chart view showing bunching:
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- DJIA weekly: The DJIA closed with a bullish weekly candle and the chart below shows that this latest bullish pullback has now reached up to just above the 50% fib but watch for any push up to the 61.8% fib as this would satisfy a Gap Fill as well:
DJIA weekly:
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- NASDAQ composite: The NASDAQ Composite Index closed with a bullish weekly candle. The chart below shows this latest bullish pullback has now reached up to the 61.8% fib so watch this level for any new make or break:
NASDAQ weekly:
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- DAX weekly: The DAX closed with a bullish-coloured Spinning Top style weekly candle. The weekly chart shows this latest bullish pullback is still just under the 50% fib but watch for any push up to the 61.8% fib as this would satisfy a Gap Fill as well:
DAX weekly:
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- Russell-2000: The Russell-2000 is often viewed as the ‘Canary in the Coal Mine’ for US stocks. The weekly chart shows this latest bullish pullback is still holding just under the 38.2% fib but watch for any push up to the 61.8% fib as this would satisfy a Gap Fill as well:
RUT weekly:
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- Bonds / TLT: The Bond ETF, TLT, closed with a bullish-coloured Spinning Top weekly candle reflecting ongoing indecision. Note the pullback that is still being suggested by the Elliott Wave indicator:
TLT weekly:
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- VIX: the Fear index closed with another bearish weekly candle and note how price is down past the 61.8% fib retracement of the recent swing High. Watch this region for any new make or break:
VIX weekly: price has pulled back more than the Elliott Wave tool predicted!
Calendar: Courtesy of Forex Factory:
Earnings: Courtesy of Earnings Whispers: some big names report this week. Netflix reports Tuesday and I’d expect they might do well in these current times:
Market Analysis:
S&P500: SPX: The S&P500 closed with a bullish weekly candle and just under 2,900 making this the horizontal S/R level to monitor for any new make or break.
The 2,900 / 3,000 level is a key S/R region as it marks the 61.8% Fibonacci retracement of the latest pullback. This region remains in focus as this was a turning point region for stocks back in GFC as the following charts reveal:
S&P500 weekly & GFC: note the pullback to the 61.8% fib with the first bounce of the GFC:
S&P500 weekly & Covid-19: watching for any pullback to the 61.8%, circa 2,950 / 3,000 with this first bounce:
Back in the GFC era though, price action eventually moved much lower after this test of the 61.8% fib as the following chart reveals:
S&P500 weekly & GFC: price action moved lower after the first bounce and test of the 61.8% fib with the GFC:
As per last week the following question remains: Will current price action mirror that seen during the GFC? No one can know for sure but the reaction at the 2,900 / 3,000 level, should this be reached, will be critical to aid our understanding of what might be to follow. It is worth watching this short video update from Ryan Detrick as he takes a positive view of current market activity.
As mentioned over recent weeks: I am still watching for any broader pullback to the 61.8% Fibonacci of the 2009-2020 swing High move and this level is down near 1,700 / 1,600. This is a region of some confluence as it is the previous upper level from the 2013 channel breakout. The 61.8% Fibonacci zone was also tested in the 1987 and GFC market pullbacks, as described in this post. For the moment though, the index has only pulled back to around 45% of this 2009-2020 swing High move so keep this move in perspective as technical theory would suggest the uptrend is intact until the 61.8% fib is broken!
Bullish targets: any bullish continuation move, above 2,900, would bring 2,950 / 3,000 into focus as this is near the 4hr chart’s 61.8% fib.
Bearish targets: any bearish retreat from 2,900 would bring the recent S/R level of 2,650 back into focus followed by the recent Low, near 2,200.
- Watch 2,900 for any new make or break:
ASX-200: XJO: The ASX-200 closed with a small bullish-coloured Spinning Top weekly candle and continues to hold above the support from the weekly 61.8% fib; a key S/R region that was previously highlighted in articles here and here.
This small weekly candle means that the price action seen over recent weeks continues and can be viewed in either of two ways:
- Bullish: any continuation above 5,450 would support a V-shaped recovery and would endorse the bullish-reversal Inverse H&S pattern.
- Bearish: the revised 4hr chart trend lines are still shaping up in a potential Bear Flag so keep an open mind for any breakout: up or down! The Flag pole here is large and would predict the index falling to down near 2,000 so let’s hope this pattern fails! However, the impact from the economic fallout due to Covid-19 is still uncertain but could take an enormous toll if the situation continues out to the end of the year.
Bullish targets: Any bullish 4hr chart continuation above 5,450 would bring the 4hr chart’s 61.8% fib level, near 6,125, into focus and this would satisfy a Gap Fill move as well.
Bearish targets: Any retreat back below 5,450 and bearish 4hr chart Bear Flag style breakout would bring 5,000 and, then, whole-numbers down to the recent Low, near 4,400, into focus followed by 4,000 and, after that, the GFC Low near 3,120.
- Watch 5,450 and the Bear Flag trend lines for any new breakout:
Gold: Gold closed with a small bearish, almost Inside, weekly candle and back under the $1,700 level but note the look of a Bull Flag on the 4hr chart as price navigates the $1,700 level.
Weekly chart: As mentioned over recent weeks, the weekly chart 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 $700 so it is a longer-term pattern worth monitoring. The upper breakout region for this pattern is $1,800 which is still a way off yet.
Bullish targets: any bullish 4hr Flag breakout above $1,700 would bring $1,800 S/R into focus.
Bearish targets: any bearish 4hr chart Flag breakout would bring $1,650, $1,600 and, then, $1,550 into focus as the latter is near the 4hr chart’s 61.8% Fibonacci level.
- Watch for any 4hr chart Bull Flag breakout:
Oil: Oil closed with a bullish-coloured Doji weekly candle reflecting continued indecision.
Price action on the 4hr chart is back within another Descending Wedge so watch these trend lines for any new momentum breakout. The bullish target remains up near $41 / 41.50 and this is near the 4hr chart’s 61.8% fib and would also satisfy a Gap Fill.
Bullish targets: any bullish 4hr Descending Wedge breakout would bring $30 S/R into focus followed by the $41 / $41.50 region as the latter represents a Gap Fill from a previous weekly close and is near the 61.8% fib of the recent swing Low move.
Bearish targets: any bearish 4hr Wedge breakout would bring $15 into focus.
- Watch for any 4hr chart Descending Wedge breakout:
EUR/USD: The EUR/USD closed with a bearish-coloured Spinning Top, and almost Inside, weekly candle still suggesting indecision.
Price action is trading within a revised 4hr chart triangle so watch for any new breakout.
Bullish targets: Any 4hr chart trend line breakout would bring 1.10 back into focus followed by whole numbers on the way up to 1.12 as this is near the 4hr chart’s 61.8% fib. After that, watch the 1.15 level, near the previous High.
Bearish targets: Any bearish 4hr chart trend line breakout would bring the 20-yr TL followed by the recent Low, near 1.065, into focus.
- Watch for any 4hr chart triangle breakout:
AUD/USD: The Aussie closed with a bullish-coloured Spinning Top weekly candle reflecting indecision.
Price action is consolidating within a triangle on the 4hr chart giving traders trend lines to watch for any new momentum breakout. Note the declining and contracting 4hr chart momentum.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 0.65 S/R back into focus and, after that, the recent High near 0.67 S/R.
Bearish targets: Any bearish 4hr chart triangle breakout would bring 0.625 S/R into focus followed by whole-numbers on the way down to 0.55 S/R.
- Watch for any 4hr chart triangle breakout:
AUD/JPY: The AUD/JPY closed with a bearish-coloured Spinning Top weekly candle reflecting indecision.
Price action remains just under the 61.8% fib and 70 S/R keeping this as the region to watch for any new make or break. Note the declining and contracting 4hr chart momentum here too.
Bullish targets: Any 4hr chart breakout above 70 S/R would bring whole-number levels up to 75 S/R into focus.
Bearish targets: Any bearish retreat from 70 S/R and break of the support trend line would bring 65 S/R back into focus followed by 60 S/R.
- Watch the 61.8% fib and 70 S/R for any new make or break:
NZD/USD: The Kiwi closed with a bearish-coloured Spinning Top weekly candle reflecting indecision.
Price action remains trading within a 4hr chart triangle giving trend lines to monitor for any new momentum breakout. Note the declining momentum here as well.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 0.625 into focus followed by the previously broken 20-yr trend line and recent High, near 0.64 S/R.
Bearish targets: Any bearish triangle breakout would bring 0.57 S/R back into focus as this is near the 4hr chart’s 61.8% fib
- Watch for any 4hr chart triangle breakout:
GBP/USD: The GBP/USD closed with a bullish-coloured Spinning Top weekly candle reflecting indecision.
Price action continued chopping sideways for much of last week, again near the 1.25 level, keeping this as the main region to watch for any new breakout. Note the revised 4hr chart triangle trend lines and the declining and contracting 4hr chart momentum.
Bullish targets: Any bullish 4hr chart triangle breakout above 1.25 would bring whole-numbers on the way up to 1.32 into focus.
Bearish targets: Any bearish 4hr chart triangle breakout would bring 1.22 S/R back into focus followed by 1.20 and, after that, the 2016 Low, near 1.145.
- Watch for any 4hr chart triangle breakout:
USD/JPY: The USD/JPY closed with a small bearish weekly candle and there was little change from the prior week.
Price action pretty much just chopped sideways again, but this time under 108, and there are revised 4hr chart trend lines to monitor.
Bullish targets: Any bullish 4hr triangle breakout would bring 108.5, 109 and, then, whole-numbers on the way to 112 into focus.
Bearish targets: Any bearish triangle breakout below 107 would bring 105 S/R back into focus as this is near the 4hr chart’s 61.8% Fibonacci and the monthly 200 EMA.
- Watch for any 4hr chart triangle breakout:
GBP/JPY: The GBP/JPY closed with a bearish-coloured Spinning Top weekly candle suggesting continued indecision.
Very little has changed here over the last three weeks as price action chopped sideways again for much of the week in a range boarded by 136 above and 132.50 below keeping this as the main region to watch for any new breakout.
Bullish targets: Any bullish 4hr chart channel breakout above 136 would bring whole-numbers on the way to 140 and 150 into focus.
Bearish targets: Any bearish 4hr chart channel breakout below 132.50 would bring 130 S/R back into focus and, after that, the key 125 level.
- Watch for any 4hr chart 136 – 132.50 channel breakout:
