Last week: Last week was shaped by extreme panic and, despite Friday’s strong stock recovery rally, I suspect there could be tough times and more selling ahead. I would expect the rising Covid-19 infection rate outside of China might dampen the type of enthusiasm seen on Friday and that it might take a plateauing of new cases before markets start to stabilise. The risk-off mood triggered plenty of new trend line breakout trades and I suspect the continued heightened volatility will bring more again this week. One noteworthy breakout move was on the Cable and this delivered over 700 pips so there are certainly some great trading opportunities during this period. There have been reports on Sunday of a sharp rise of infections in Spain triggering the declaration of a State of Emergency, lock-downs in France and Indonesia and a US travel ban extension to the UK and Ireland and one would have to expect there will be more lock-downs across other countries to come. These types of developments will likely prolong the unsettled market sentiment.
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.
Coronavirus: remains the dominate theme and consumed most of CNBC’s Home Page again on Saturday:
Trend line breakouts and TC signals: There were plenty of trend line breakouts again last week. Articles published during the week can be found here, here, here and here:
- S&P500: a TL b/o for 200 points and another for 230 points.
- ASX-200: a Bear Flag TL b/o completed for 1,000 points and there was another TL b/o for 80 points.
- EUR/USD: the long-term wedge b/o reached up to 380 pips before reversing and there was another TL b/o for 180 pips.
- GBP/USD: a TL b/o for 140 pips and another TL b/o below 1.28 for over 500 pips. Although, there was a 700+ pip move from last weeks profiled 1.305 watch level.
- Gold: a TL b/o move for $65.
- AUD/USD: a TL b/o for 120 pips.
- AUD/JPY: a TL b/o for 150 pips.
- NZD/USD: a TL b/o below 0.625 S/R for 200 pips.
- TLT: delivered up to $35 following the previous triangle TL b/o.
- USD/JPY: a TL b/o for 200 from Friday’s posted triangle. Note how price paused at the 61.8% fib level:
USD/JPY 4hr: chart posted Friday morning:
USD/JPY 4hr: chart after the 200 pip b/o move:
This Week: (click on images to enlarge):
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- DXY: US$ Index: The US$ index closed with a bullish weekly candle and above 98 S/R so watch for any push to 100 S/R:
DXY weekly:
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- Updates for next weekend: I am at a trading-related function all day Saturday and Sunday of next weekend. Thus, my updates will be brief and may be posted later than usual; perhaps even on Monday.
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- Central Banks: there are three Central Bank rate updates this week: FOMC (USD), BoJ (JPY) and SNB (CHF).
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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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- DJIA weekly: has closed with a bearish weekly candle but with a long lower shadow that reached down to near the 2009-2020 support trend line. Watch this trend line in coming sessions for any new make or break:
DJIA weekly:
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- NASDAQ composite weekly: has closed with a bearish-coloured Long Legged Doji weekly candle reflecting indecision and broke through the 2019-2020 support trend line. Watch the weekly 61.8% fib for any new make or break:
NASDAQ weekly:
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- DAX weekly: The DAX closed with a bearish weekly candle and below the 2019-2020 support trend line. Watch for any push to the weekly 61.8% fib.
DAX weekly:
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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 and below the 2019-2020 support trend line. Watch for any push to the weekly 61.8% fib.
RUT weekly:
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- Bonds / TLT: The Bonds ETF, TLT, delivered up to $35 following the recent triangle breakout. Price action peaked at $180 last Monday and note the level to where the ETF then retreated: The 61.8% fib!
TLT daily:
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- VIX: the Fear index closed with a large bullish weekly candle but well of its High. Watch for any test of the GFC high, near 90:
VIX weekly: note the hit at the 161.8% retracement of this 2018-2020 move.
VIX monthly: the Index is currently trading just below the monthly 61.8% level from the GFC High:
Calendar: Courtesy of Forex Factory:
Earnings: Courtesy of Earnings Whispers:
Markets:
S&P500: SPX: The S&P500 had its choppiest week since 1929 with 4% swings on each of the five days. The index printed a large bearish weekly candle, having a long lower shadow, as it managed to close off its Low; at just above 2,700 S/R.
Another noteworthy point for the index is that it tested the 11-year support trend line of the 2009-2020 swing High move on Thursday. There was a recovery on Friday, following President Trump’s declaration of a State of Emergency, with the index putting in its biggest one day gain since the GFC! However, this 11-year trend line will remain in focus if price action resumes any downward trend.
The recovery on Friday helped to generate a 4hr chart triangle giving traders trend lines to monitor for any new momentum breakout.
Price action is now at the bottom of the weekly Ichimoku Cloud; a level I had warned about in this recent article.
Important week: This will be an important week for the index. Any weekly break and hold below the 2009-2020 support trend line would bring the 61.8% Fibonacci level of this swing High into focus and this is down near 1,700.
Bullish targets: any bullish triangle breakout would bring 3,000 into focus as this is near the 4hr chart’s 61.8% fib.
Bearish targets: any bearish triangle breakout would bring the recent Low, near 2,400 and the 11-year support trend line, back into focus. After that, watch whole-numbers on the way down to 1,700 S/R.
- Watch for any 4hr chart triangle breakout:
ASX-200: XJO: What a week for the Aussie stock market! The ASX-200 closed with a large bearish weekly candle and down near 5,500 although this was well off its Low for the week.
More importantly, though, price action broke below an 11-year support trend line and almost made it down to the 61.8% fib of this 2009-2020 swing High move, circa 4,700. This 4,700 was my worst case scenario support that I recently wrote about in this article and is a level I consider being of significant support, and a potential turning point, for Aussie stocks. However, given Australia is still at a relatively early stage with Coronavirus infections, I struggle to see any reason for a market turn around just yet and wonder, therefore, if there is even more retracement to come? The reality of this virus situation is only just starting to be felt in our community and I can’t see how Friday’s market enthusiasm can be sustained. I sure hope I’m wrong!
There is some good news on the horizon for the Australian economy though and this is that our largest trading partner, China, might be starting to return to some kind of post-Coronavirus normal. Two measure of this being:
- News that Apple stores are set to reopen in China.
- The rate of new Covid-19 cases in China is slowing.
Add to this that South Korea reported more cases of Covid-19 recovery than new illness on Saturday and the progress for parts of Asia seems to be on a very new but slightly positive tangent. Any economic recovery in China, and other Asian countries, may help to drag Australia into a quicker recovery than that for Europe and the US which is something to keep in mind. However, it may take a peak in new Australian cases of Covid-19 to be reached before this optimism might be embraced by the market.
Friday’s market recovery effort helped to set up a consolidation triangle giving traders some trend lines to monitor for any new breakout.
Bullish targets: Any bullish 4hr chart triangle breakout will bring the 4hr chart’s 61.8% fib level, near 6,280, into focus.
Bearish targets: Any bearish 4hr chart triangle breakout would bring the recent Low, near 4,800, into focus followed by the 61.8% fib of this 2009-2020 swing High move, circa 4,700, into focus.
- Watch for any 4hr chart triangle breakout:
Gold: Gold took traders by surprise in this risk-off week by closing with a large bearish engulfing weekly candle. I’m reading that this sell off was due to a flight to cash and to margin covering, however, recall that $1,600 is the weekly chart’s 61.8% Fibonacci level and this key technical level seems to be wreaking havoc for Gold traders!
The metal closed just under $1,530 making this the level to watch for any new make or break.
Daily chart Bull Flag details: Recall that there is a broader Bull Flag breakout in progress on Gold (see daily chart below) and this remains at a total gain, thus far, of around $200. 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 break above $1,530 would bring the 4hr chart’s 50% fib, near $1.600 S/R, into focus.
Bearish targets: any bearish hold below $1,530 would bring the $1,500 into focus.
- Watch $1,635 for any new make or break:
Oil: Oil price steadied last week and the commodity printed a bullish coloured Doji weekly candle reflecting indecision.
Price action closed just below $33 making this the level to watch for any new make or break. The 4hr chart has revised trend lines to watch for any new breakout as well.
Bullish targets: any 4hr chart trend line breakout would bring $40 S/R into focus followed by $42 as the latter would represent a gap fill for the previous week’s close.
Bearish targets: any bearish trend line breakout would bring $30 S/R into focus followed by the Dec 2016 Low, near $26.
- Watch the 4hr chart wedge trend lines for any new breakout:
EUR/USD: The EUR/USD closed with a bearish weekly candle and back down near the recently broken wedge trend line. It remains to be seen if this just a test of the long-term wedge trend line or another failed wedge breakout.
Price closed the week just below 1.11 making this the level to watch for any new make or break and note the Bull Flag style trend lines on the 4hr chart.
Bullish targets: any bullish Flag breakout above 1.11 would bring 1.12, 1.13 and, then, the weekly 200 EMA, near 1.144 S/R, into focus.
Bearish targets: any bearish Flag breakdown below 1.11 would bring 1.10 and 1.09 back into focus.
- Watch the Flag trend lines and 1.11 S/R for any new make or break:
AUD/USD: The Aussie closed with a large bearish weekly candle and way down near 0.61 so this will be the support level to watch for any new make or break. The sharp drop last week has undermined the previous profile of a developing, long-term descending wedge pattern.
The monthly chart shows that 0.60 is a long-term level of S/R so watch for any test of this region in coming sessions.
Bullish targets: Any bullish hold above 0.61 would bring the 4hr chart’s 61.8% fib, near 0.65, into focus.
Bearish targets: Any bearish break below 0.61 would bring 0.60 S/R into focus.
- Watch 0.61 S/R for any new make or break:
AUD/JPY: The AUD/JPY closed with a bearish weekly candle but held above the 65 whole-number S/R level making this the main horizontal level to watch for any new make or break.
Price action recovered on Friday as risk appetite improved and this helped to develop a 4hr chart triangle giving traders some trend lines to watch for any new breakout.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 70 S/R into focus followed by 71 and 72 S/R.
Bearish targets: Any bearish 4hr chart triangle breakout would bring 65 S/R, followed by whole-number levels on the way down to 60 S/R, into focus.
- Watch 65 S/R and for any 4hr chart triangle breakout:
NZD/USD: The Kiwi closed with large bearish, almost engulfing, weekly candle and down near 0.60 S/R level making this the level to watch for any new make or break. Like the Aussie, this also suffered a sharp fall last week and note the break of 0.625 S/R and the 20-yr support trend line.
Bullish targets: any bullish bounce up from 0.60 would bring 0.625 into focus followed by 0.63 and, then, 0.64.
Bearish targets: Any bearish break below 0.60 would bring whole-numbers on the way down to 0.55 into focus.
- Watch 0.60 for any new make or break:
GBP/USD: What a week for the Cable! Last week I had urged traders to watch the 1.305 level for any make or break and there ended up being a 700 pip+ move to the downside; once that level gave way. Did any of you catch this move?
The GBP/USD ended up closing with a large bearish weekly candle and just near 1.23 making this the horizontal level to watch in coming sessions for any new make or break.
The weekly chart shows 1.20 as significant S/R so watch for any test of this region in coming sessions; especially as Covid-19 news develops for the UK.
Bullish targets: Any bullish bounce up above 1.23 would bring 1.28 into focus as this is near the 4hr chart’s 61.8% fib.
Bearish targets: Any bearish hold below 1.23 would bring whole-numbers on the way back down to 1.20 into focus.
- Watch 1.23 for any new make or break:
USD/JPY: The USD/JPY closed with a bullish, almost engulfing, weekly candle and back up near the 108 level. There was a 4hr chart triangle breakout on Friday that remains in progress.
Recall my warning from last week which is still valid this week: Take a look at the weekly chart and note how price action has been range-bound by 105, on the lower side, and 115, on the upper side, for the last three years! Thus, this 105 region will be an important level to monitor in coming sessions!
Price action ended the week back near 108 S/R and the 4hr chart’s 61.8% fib making this the region to watch for any new make or break.
Bullish targets: Any bullish break above 108 would bring 108.5, 109, and 110 into focus. After that, watch other whole number levels on the way up to 115 S/R.
Bearish targets: Any bearish hold below 108 would bring the monthly 200 EMA and 105 back into focus.
- Watch 108 and the 4hr chart’s 61.8% for any new make or break:
GBP/JPY: The GBP/JPY closed with a bearish weekly candle and down near 133 S/R level making this the main horizontal level to watch for any new make or break.
Note the 4hr chart triangle giving traders trend lines to watch for any new breakout.
Bullish targets: Any bullish 4hr chart triangle breakout would bring 140 S/R into focus as this is near the 4hr chart’s 61.8% fib
Bearish targets: Any bearish 4hr chart triangle breakout would bring 131.50 S/R into focus followed by 130 and, then, whole-number levels on the way down to 125.
- Watch 133 S/R and for any 4hr chart triangle breakout:
