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US stock highs into 4th July w/e

July 4, 2021

Last week: There were a number of small trend line breakout trades last week and new all-time closing highs again for the S&P500, DJIA and NASDAQ following NFP and ahead of the 4th July holiday weekend. The US jobs report was somewhat mixed with the biggest jobs gain since August 2020 but yet the headline unemployment rate edged higher. This resulted in the DXY closing lower on Friday and printing the first bearish daily candle of the week so that the index remains range bound heading into next week. There were still plenty of indecision candles printed again last week but one bright spot on the horizon is the number of bullish-reversal descending wedges shaping up across some of the Forex pairs. Monday is a holiday in the US so it might be a slow start to the trading week.

 

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: There were quite a few trend line breakouts but for relatively small gain; likely a function of the northern summer doldrums. Updates posted throughout last week can be found through the links here, here, here and here:

 

  • Gold: a TL b/o for $20 and another for $25 (still in progress).
  • EUR/USD: a TL b/o trade for 70 pips.
  • AUD/USD: a TL b/o trade for 80 pips.
  • AUD/JPY: a TL b/o trade for 60 pips:
  • NZD/USD: a TL b/o trade for 50 pips.
  • GBP/USD: a TL b/o trade for 60 pips.
  • USD/JPY: a TL b/o trade for 60 pips.
  • S&P500: a TL b/o for up to 50 points.

 

 

This Week: (click on images to enlarge):

 

    • DXY: US$ Index: The US$ index closed with a bullish-coloured Inside weekly candle, reflecting indecision, as the US Jobs report was mixed enough to provide little guidance. Whilst it was the biggest jobs gains since Aug 2020, with significant gains in the Covid-ravaged hospitality sector, the headline unemployment rate ticked higher and wages growth was little changed. The index had looked, mid-week, to be pushing above the weekly chart’s upper bear trend line but Friday’s weakness resulted in a close back within this congestion pattern. Resistance remains ahead from the weekly Cloud so watch this region for any new make or break.

 

DXY weekly: watch for any new TL b/o:

 

 

    • Indecision weekly candles: indecision style candles were printed on the weekly charts of: DXY, Copper, EEM, DAX, Russell-2000, VIX, XJO, AUD/USD, NZD/USD, GBP/USD, NZD/USD, USD/JPY, USD/CAD and GBP/JPY.

 

    • Central Bank Update: there is one Central Bank update next week: RBA (AUD).

 

    • USD/CAD: I have been monitoring this descending wedge for some months and it recently made a decisive breakout. It is not uncommon to see major trend lines tested after a breakout and so I will be looking to see if this is what is happening here, or, if it just another failed breakout. FWIW: I find the Fibonacci retracement to be a helpful tool to identify targets for breakout moves and, for the swing low move on the USD/CAD, this would bring 1.36 into focus.

 

USD/CAD weekly: watch for any push to 1.36:

 

 

    • % Stocks above their 200 Day Moving Average Index: The Percentage of stocks above their 200 Day Moving Average is still below 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%:

 

 

    • 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:

 

 

    • 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:

 

 

    • Copper: Copper is often viewed as one metric of economic health and closed with a bullish-coloured Doji weekly candle reflecting indecision as price holds below the S/R region of 4.60. Note the look a Bull Flag here now though!

 

Copper weekly: Note the look of a Bull Flag here:

 

 

    • Emerging Markets: The Emerging market ETF, EEM, closed with a bearish-coloured ‘Inside’ weekly candle, reflecting indecision, as ADX momentum remains low. Keep watch for any new momentum breakout.

 

EEM weekly: watch for any Flag breakout:

 

 

    • DJIA: The DJIA closed with a bullish weekly candle and at a new all-time high but still just under the recently broken 16-month support trend line. However, there does look to be a new Bull Flag breakout in progress as bullish momentum ticks higher. The 35,000 level is the main resistance above to monitor in coming sessions. Traders should watch for any failure at this resistance and, if bearish momentum resumes, watch for any pullback to the weekly 61.8% Fibonacci, near 25,000.

 

DJIA weekly: watch for any continued Bull Flag:

 

 

    • NASDAQ composite: The NASDAQ Composite Index closed with a bullish weekly candle and at a new all-time High. Note that the Bull Flag breakout continues and momentum is edging higher so watch for any continuation.  

 

NASDAQ weekly: new momentum supporting this Flag breakout:

 

 

    • DAX weekly: The DAX closed with a bullish-coloured Spinning Top weekly candle, reflecting indecision, but remains above the 16-month support trend line.

 

DAX weekly: the trend remains ‘up’:

 

 

    • 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-coloured Inside weekly candle reflecting indecision. Caution is still needed here though as the ADX remains below 20 and is trending lower but watch for any new momentum breakout.

 

RUT weekly: watch the 16-month support trend line:

 

 

    • 10-yr T-Note Interest rate / TNX: This has closed with a bearish weekly candle and back below the Resistance turned Support region of 15. Note the trend lines and low momentum so watch for any new breakout.

 

  • 10-yr T-Note Interest rate: watch 15 for any new make or break: 

 

 

    • Bonds / TLT: The Bond ETF, TLT, closed with a bullish weekly candle and note the test of the upper bear trend line so watch for any continuation.

 

TLT weekly:  still holding above the 61.8% Fibonacci:

 

 

    • BTC/USD: I continue to view this latest pullback as a well-due technical correction following the recent rally. I have previously mentioned that the 61.8% Fibonacci, near $30,000, is the line-in-the-sand level to monitor and this remains the case. IMHO: any hold above the 61.8% Fibonacci level would simply further legitimise BTC/USD and any of the other cryptos in the stable that might similarly hold above this support region.

 

BTC/USD: the whole-number $30,000 remains the level to watch:

 

 

    • VIX: the Fear index closed with a bearish-coloured Spinning Top weekly candle and at its lowest weekly close since February 2020, a period of almost 17 months!

 

VIX weekly: watch for any push back to 20 S/R:

 

 

Calendar: Courtesy of Forex Factory:

 

 

Earnings: Courtesy of Earnings Whispers: a quiet week on the Earnings front. The season ramps up over coming weeks:

 

 

Market Analysis:

 

S&P500: The S&P500 closed with a bullish weekly candle and at a new all-time High as the march higher continues.

Trading volume was lower last week ahead of the 4th July holiday weekend and remains below the 200 MA and bear trend line.

 

S&P500 ETF: SPY weekly: volume was a bit lower and remains below trend:

:

The index closed just below 4,350 so this will be the level to monitor for any new make or break. Note that I have revised the 16-month support trend line to reflect this continued uptrend.

Bullish targets: any bullish break above 4,350 would bring 4,400 into focus.

Bearish targets: any bearish hold below 4,350, and break of a recent support trend line, would bring 4,300 and the 16-month support trend line into focus.  After that, watch whole-numbers on the way down to the weekly chart’s 61.8% Fibonacci retracement level, near 3,000.

  • Watch 4,350 for any new make or break.

 

 

 

ASX-200: XJO: The index closed with a bullish-coloured Doji weekly candle reflecting indecision but this was after closing the July 2020 – June 2021 12 month financial year with a 24% gain, the best performance since the index inception. Traders and investors seemed to have taken the latest bout of Covid lock-down in their stride.

Despite this latest indecision candle, the index closed above the whole-number 7,300 level and remains in an uptrend; holding above the 16-month support trend line which remains the support region to monitor ahead of this week’s RBA rate update.

As mentioned over recent weeks:

  • It has taken a long time for the XJO to break and hold above the pre-GFC High region and, in this regard, it has lagged well behind most other global stock indices. However, any new hold above this 7,200 region to see out the month could well mark the beginning of a new trading range for the index and put it in catch-up mode with its peers.
  • S&P upgraded the Australian outlook from ‘Negative’ to ‘Stable’ recently so watch for any impact this may have on market sentiment for the XJO.

 

Trading volume was little changed again last week so watch for any new trend line and 200 MA breakout.

XJO weekly: keep watch for any new b/o back above the TL and 200 MA:

 

 

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 still 4hr chart wedge trend lines to monitor for any new breakout BUT note the current low momentum. Note,also, that I have revised the 16-month support trend line here as well so as to reflect this continued uptrend.

Bullish targets: Any bullish 4hr chart wedge trend line breakout would bring 7,400 back into focus.

Bearish targets: Any bearish 4hr chart wedge trend line breakout would bring 7,200 and the previous 2020 High of 7,197.20 into focus. After that, watch the 16-month support TL, the pre-2020 High of 6,893.70, the pre-GFC High of 6,851.50 followed by 6,800 and 6,700. The weekly chart’s 61.8% Fibonacci is down near 5,600 so that would be the next support to monitor.

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

 

 

 

 

Gold: Gold closed with a small, bullish-coloured weekly candle having a long lower wick, reflecting that buyers stepped up here during the week. The daily chart’s 61.8% Fibonacci retracement level, circa $1,770, continued to be rather effective support.

I had posted during the week, and on Twitter, about how the 4hr chart was shaping up in a bullish-reversal descending wedge and to watch for any bullish breakout. There was a subsequent bullish breakout and this mean-reversion move is the current one being tracked.

As mentioned over recent months: The activity 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 – $900. Keep watch of $1,900 now that price action is trading back above this neckline region!

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

  • Any break 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 $1,900 level over the coming sessions especially as the US$ 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.

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.

There is a 4hr chart descending wedge breakout in progress here.

Bullish targets: any continued bullish 4hr chart wedge trend line breakout would bring $1,800 and $1,850 into focus as the latter still intersects near the 4hr chart’s 61.8% Fibonacci.

Bearish targets: any bearish retreat would bring $1,770 and $1,750 into focus. After that, watch whole-numbers down to the $1,670 support level.

  • Watch for any continued bullish 4hr chart wedge trend line breakout:

 

 

 

 

EUR/USD: The EUR/USD closed with a bearish weekly candle but still above 1.18 keeping this the support level to watch for any new make or break.

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.

There are revised 4hr chart trend lines to watch for any new breakout and note the look of a bullish-reversal descending wedge here so keep an open mind.

Bullish targets: Any bullish 4hr chart trend line breakout would bring 1.19 and the 16-month support trend line into focus. After that, watch whole-numbers and the recent High of 1.235 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 trend line breakout, below 1.18, would bring 1.17 into focus.

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

 

 

AUD/USD: The Aussie closed with a bearish-coloured, essentially Inside, weekly candle, reflecting indecision, and above 0.75 making this the support level to watch for any new make or break.

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.

There are revised 4hr chart trend lines to watch for any new breakout and note the look of a bullish-reversal descending wedge here too so keep an open mind.

Bullish targets: Any bullish 4hr chart trend line breakout would bring 0.76 into focus. After that, watch whole-numbers on the way back to the weekly chart’s Descending Wedge breakout target of 0.90.

Bearish targets: Any bearish 4hr chart trend line breakout would bring 0.74 into focus. After that, watch 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 (see daily chart).

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

 

 

 

AUD/JPY: The AUD/JPY closed with a bearish-coloured, almost Inside weekly candle, reflecting indecision, as price consolidates within a 4hr triangle between the 84 and 83 levels. Note that the June candle was a bearish candle, the first after 7 bullish monthly candles.

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 BUT note the very recent divergence!:

 

There are 4hr chart trend lines to watch for any new breakout.

Bullish targets: Any bullish 4hr chart trend line breakout would bring 84 S/R into focus. After that, watch 85 S/R and whole numbers on the way up to 90 S/R.

Bearish targets: Any bearish 4hr chart trend line breakout would bring 83 S/R into focus. 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 70 as this is now near the 61.8% Fibonacci of the March 2020 – March 2021 swing High move.

  • Watch for any 4hr chart trend line breakout:

 

 

 

NZD/USD: The Kiwi closed with a bearish-coloured, almost Inside, weekly candle reflecting indecision, and above 0.70 making this the support level to watch for any new make or break.

There are revised 4hr chart triangle trend lines to watch for any new breakout.

Bullish targets: Any bullish 4hr chart trend line breakout would bring 0.71 back into focus followed by 0.72 and 0.73 S/R.

Bearish targets: Any bearish 4hr chart trend line breakout would bring 0.69 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 trend line breakout:

 

 

 

GBP/USD: The Cable with a bearish-coloured Spinning Top weekly candle reflecting indecision and back above 1.38 making this the support level to watch for any new make or break.

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 up as far as 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!

There are revised 4hr chart trend lines to watch for any new breakout and note the look of a bullish-reversal descending wedge here as well so keep an open mind.

Bullish targets: Any bullish 4hr chart trend line breakout would bring would bring 1.39 S/R into focus. After that, watch 1.40, 1.41. 1.42, the recently broken 16-month TL, 1.425 and 1.50 as the latter 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 trend line breakout would bring 1.37 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 for any 4hr chart wedge trend line breakout:

 

 

 

USD/JPY:  The USD/JPY closed with a bullish-coloured Spinning Top-style weekly candle, reflecting indecision, as price holds near 111 keeping this the horizontal level to watch for any new make or break.

NB: The bullish weekly-chart descending wedge breakout was first noted in my article of January 31st. Price action at the initial breakout was around 104.5 and has reached up as far as near 111, a move of around 650 pips, so this trend line breakout was a great clue about things to come!

There are 4hr chart trend lines to monitor for any new breakout.

Bullish targets: Any bullish hold above 111 would bring whole-numbers on the way up to 115 into focus.

Bearish targets: Any bearish break below 111 would bring a 10-week support trend line and 110 S/R into focus followed by 109 and 108 S/R.

  • Watch 111 and for any 4hr chart trend line breakout:

 

 

 

GBP/JPY: The GBP/JPY closed with a bearish-coloured Inside and Spinning Top weekly candle, with both reflecting indecision. Price closed just below 154 making this the level to watch for any new make or break.

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 as far as 156, a move of around 1,500 pips, and so is another trend line breakout that has proven to be worthwhile monitoring.

There are 4hr chart trend lines to watch for any new breakout.

Bullish targets: Any bullish break above 154 would bring the upper 4hr chart trend line into focus. After that, watch 155 and whole-number levels on the way up to the weekly chart’s 61.8% Fibonacci, near 170.

Bearish targets: Any bearish chart trend line breakout would bring 152 into focus. After that, watch whole-number levels on the way down to 136 as this is near the 61.8% Fibonacci of the March 2020 – March 2021 swing High move.

  • Watch for any 4hr chart trend line breakout: