1

Thanksgiving in the Covid era

November 22, 2020

Last week: Covid news started to dominate post-US Presidential Election news last week as the infection case load across the USA and Europe continued to rise at an alarming rate. Despite this, risk sentiment held up rather well with the the small caps Russell-2000 and Copper closing with good-sized, bullish weekly candles. The US stock majors of the S&P500 and DJIA closed with bearish weekly candles BUT just under their all-time Highs and the NASDAQ carved out a slightly higher close. The US$ index remains range-bound, Gold remains below $1,900 and the VIX remains below 30 in a week that saw the print of numerous indecision-style weekly candles. This week brings Thanksgiving for the USA so watch for a potentially slower-paced end to the trading week.

 

Technical Analysis: As noted over recent months, 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.

 

Trend line breakouts summary: Only a few trend line breakouts last week.  Articles published during the week can be found here, here, here and here:

 

  • AUD/USD: a TL b/o for 50 pips.
  • NZD/USD: a TL b/o for 50 pips.
  • USD/JPY: a TL b/o for 30 pips.
  • GBP/USD: a TL b/o for 50 pips.

 

This Week: (click on images to enlarge):

    • DXY: US$ Index: The US$ index closed with a bearish-coloured Spinning Top and Inside weekly candle with both reflecting indecision. The index remains range-bound and under the recently broken 10-yr support trend line on low momentum. Watch for any support level from the 91.75 level and, after that, the previous Low near 88.

 

DXY weekly: an indecision-style Spinning Top and Inside weekly candle:

 

    • Thanksgiving: next week brings US Thanksgiving so watch for potentially lower trading volumes towards the end of the week as many take a long weekend holiday.

 

    • BTC/USD: BTCUSD looks to be setting up with another bullish chart pattern. You can view post from earlier today via this link.

 

    • Indecision-style weekly candles: indecision-style weekly candles were printed on a few instruments last week: the DXY, DJIA, S&P500, NASDAQ, EEM, DAX, VIX, Gold,  EUR/USD, AUD/JPY and GBP/JPY.

 

    • Schedule for weekend Market Update posts: The Weekly Market update has, to date, been posted on a Sunday, Australian time. I am looking to delay the release of this update to a Monday, Australian time, which is still a Sunday in many other parts of the world. My analysis takes a full day to complete and I am attempting to shift this load away from my weekend time.

 

    • Podcast: This 60 minute podcast is well worth a listen. Nick Bryant reports from New York for the BBC. It’s a city he’s loved since his first visit in the 1980s but now, when he looks at the USA, he wonders if the nation’s decline is irreversible.

 

    • S&P500: Keep the bigger picture in perspective with the recent moves:

S&P500 yearly: keep this latest move in perspective:

 

 

    • 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 near all-time Highs. 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:

 

    • Copper: Copper is often viewed as one metric of economic health and closed with a large and bullish weekly candle and still above the key 3 level. Price action also continues holding above the recently broken 10-year bear trend line:

 

Copper weekly: holding above the 3 level;

 

    • Emerging Markets: The Emerging market ETF, EEM, closed with a bullish-coloured Spinning Top and Inside weekly candle, with both reflecting indecision, BUT still above the key 45 S/R level.

 

EEM weekly: still above the 45 level:

 

    • DJIA: The DJIA closed with a small, bearish and almost Spinning Top-style weekly candle and within the trading range of last week’s candle giving this a bit of an Inside candle appearance as well. Watch for any ascending triangle breakout above the psychological 30,000 level.

 

DJIA weekly: very close to the psychological 30,000:

 

 

    • NASDAQ composite: The NASDAQ Composite Index closed with a bullish-coloured Doji weekly candle, reflecting indecision, and still under $12,000 S/R so this remains the main level to monitor for any new make or break. Traders should also keep watch for any bearish-reversal ‘Triple Top’ potential:

 

NASDAQ weekly: watch 12,000 for any new make or break:

 

 

    • DAX weekly: The DAX closed with a bearish-coloured Spinning Top weekly candle, reflecting indecision, and still within the ascending triangle. Watch for any push back up to the recent High:

 

DAX weekly:

 

 

    • Russell-2000: The Russell-2000 is often viewed as the ‘Canary in the Coal Mine’ for US stocks and the index closed with a good sized bullish weekly candle as it continues with the Ascending Triangle breakout above the 1,720 level. One target for this move would be the 161.8% Fibonacci extension, near 2,200:

 

RUT weekly: watch for any continued Ascending Triangle breakout move:

 

RUT weekly: one target for this b/o move is the 161.8% Fibonacci, near 2,200:

 

    • Bonds / TLT: The Bond ETF, TLT, closed with another bullish weekly candle. The Elliott Wave indicator is still suggesting an uptrend from here:

 

TLT weekly: 

 

 

    • Fedex: Fedex closed a small, bullish weekly candle and the Bull Flag pattern has been revised.

 

Fedex weekly: watch for any potential Bull Flag:

 

    • VIX: the Fear index closed with a bullish-coloured Doji style weekly candle but still below the key 30 level.

 

VIX weekly: watch the 30 level for any new make or break:

 

 

Calendar: Courtesy of Forex Factory: It is Thanksgiving this week for the USA:

 

 

Earnings: Courtesy of Earnings Whispers: starting to slow down:

 

 

 

Market Analysis:

 

S&P500: The S&P500 closed with a bearish-coloured Spinning Top weekly candle, reflecting indecision, but still up under the all-time High region, near 3,600.

Trading volume was a bit lower last week and remains below the bear trend line. I would expect trading volume might be lower again this week given the pause for USA Thanksgiving on Thursday.

 

S&P500 ETF: SPY weekly: Volume was a bit lower last week:

 

There are revised 4hr chart trend lines to monitor for any new breakout AND note the look of a Bull Flag on this time frame as price struggles near 3,600 S/R. However, also keep watch for any possible bearish reversal weekly-chart Triple Top.

As noted recently: The weekly S&P500 chart below shows that the 61.8% Fibonacci level of this recent swing-High move (March 2020- September 2020) is down near the 2,700 region. Technical analysts would suggest that a pullback to this 61.8% level would be in order; even if there is to be ultimate bullish continuation. Trends do not travel in straight lines unabated so traders should be aware of this zig-zag potential.

Bullish targets: any bullish 4hr chart Flag trend line breakout, above 3,600, would bring 3,700 into focus.

Bearish targets: any bearish 4hr chart trend line breakout would bring whole-number levels on the way down to 3,200 into focus. The 3,400 level is still near the 4hr chart’s 61.8% Fibonacci so that would be a key level to monitor if weakness sets in at all.

  • Watch 3,600 and for any 4hr chart Flag trend line breakout:

 

 

ASX-200: XJO: The ASX-200 closed with a bullish weekly candle as the advance above the 6,200 resistance level continues.

Price action closed just below 6,550 so this will be the region to watch next week for any new make or break.

Trading volume was a bit lower last week and closed back below the multi-month volume trend line.

 

XJO weekly: trading volume a bit lower last week:

 

Keep in mind that the recent Golden Cross remains valid. This 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:

 

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

Bullish targets: Any bullish 4hr chart move up above 6,550 would bring 6,600 into focus followed by whole-number levels on the way up to the pre-2020 High of 6,893.70.

Bearish targets: Any bearish 4hr chart support trend line breakdown would bring whole-numbers on the way down to 6,000 into focus.

  • Watch 6,550 and for any new 4hr chart trend line breakout:

 

 

Gold:  Gold closed with a bearish-coloured Spinning Top weekly candle, reflecting indecision, as it continues to struggle under the $1,900 S/R region. 

As mentioned over recent weeks: 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 back trading below this neckline region!

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

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

Traders need to watch this $1,900 level over the coming days / weeks especially as the US$ 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.

There are revised trend lines on the 4hr chart to monitor for any new breakout. Note how the Evening Star pattern on the monthly chart was a good predictor of subsequent price action!

Bullish targets: any bullish 4hr chart trend line breakout would bring $1,900 followed by the upper Flag trend line into focus.

Bearish targets: any bearish 4hr chart trend line breakout would bring $1,850 into focus.

  • Watch the 4hr chart triangle trend lines for any new breakout:

 

 

EUR/USD: The EUR/USD closed with a bullish-coloured Spinning Top weekly candle, up near the 1.19 S/R level and also up near the weekly chart’s Bull Flag upper trend line.

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

Bullish targets: Any bullish 4hr chart trend line breakout above 1.19 would trigger the weekly chart’s Bull Flag breakout and would bring whole-numbers on the way up to a previous weekly chart High, circa 1.26, into focus.

Bearish targets: Any bearish 4hr chart trend line breakout would bring 1.18 and 1.17 S/R into focus.

  • Watch 1.19 and for any new 4hr chart trend line breakout;

 

 

AUD/USD: The Aussie closed with a bullish weekly candle following the recent weekly-chart Bull Flag breakout.

There are revised 4hr chart triangle trend lines to monitor for any new momentum-based breakout as price still sits near 0.73 S/R.

Keep in mind that price action continues to hold above the recently broken upper trend line of the multi-year bullish-reversal Descending Wedge.

Bullish targets: Any bullish 4hr chart bounce up from 0.73 would bring whole-number levels on the way up to the weekly chart’s Descending Wedge breakout target of 0.90 into focus.

Bearish targets: Any bearish 4hr chart trend line breakout would bring 0.72 and 0.71 into focus.

  • Watch 0.73 and for any new 4hr chart trend line breakout;

 

 

AUD/JPY:  The AUD/JPY closed with a bearish coloured Doji weekly candle and just below 76 S/R.

The weekly chart trend lines have been adjusted to reflect recent Support and Resistance but the chart still has a Bull Flag appearance.

The multi-year bear trend line isn’t too far above current price action and so might come into greater focus in coming sessions.

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

Bullish targets: Any bullish 4hr chart trend line breakout would bring the weekly chart’s Flag trend line, followed by 77 and, then, the 7-yr bear trend line into focus.

Bearish targets: Any bearish 4hr chart trend breakout would bring 75 and 74 S/R into focus.

  • Watch for any new 4hr chart trend line breakout:

 

 

NZD/USD: The Kiwi closed with a bullish weekly candle following the recent weekly-chart Bull Flag breakout.

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

Bullish targets: Any bullish 4hr chart trend line breakout would bring 0.70 into focus.

Bearish targets: Any bearish 4hr chart trend line breakout would bring 0.69 into focus followed by 0.68 and 0.67 S/R as the latter is still near the 4hr chart’s 61.8% Fibonacci.

  • Watch for any new 4hr chart trend line breakout;

 

 

GBP/USD: The Cable closed with a bullish weekly candle and up near the 1.33 S/R level. Traders need to monitor Brexit news in coming days as there are rumours that a Brexit deal could be close.

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

Bullish targets: Any bullish 4hr chart breakout above 1.33 would bring 1.34 into focus on the way up to the recent weekly-chart High, near 1.35.

Bearish targets: Any bearish 4hr chart trend line breakout would bring the 7-month support trend line into focus.

  • Watch 1.33 and for any 4hr chart trend line breakout; especially IF a Brexit deal is announced:

 

 

USD/JPY:  The USD/JPY closed with a bearish weekly candle and back below 104 S/R making this the level to watch in coming sessions for any new make or break.

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

Bullish targets: Any bullish 4hr chart trend line breakout would bring 105 into focus as this is near the 4hr chart’s 61.8% Fibonacci.

Bearish targets: Any bearish 4hr chart trend line breakout would bring the recent Low, near 103.25, into focus followed by whole-number levels on the way down to 100 S/R.

  • Watch 104 S/R and for any 4hr chart trend line breakout:

 

 

GBP/JPY: The GBP/JPY closed with a bullish-coloured Long Legged Doji weekly candle, reflecting great indecision, and still near 138 S/R.

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

Bullish targets: Any bullish 4hr chart triangle breakout would bring 139 into focus followed by 140 as the latter sits near the 40-yr bear trend line.

Bearish targets: Any bearish 4hr chart triangle breakout would bring the daily 200 EMA region into focus as this is near the 4hr chart’s 61.8% Fibonacci.

  • Watch 138 S/R and for any 4hr chart triangle breakout; especially IF a Brexit deal is announced: