Last week: The noteworthy event of last week was the huge miss with the monthly US jobs report. Whilst there has been plenty of commentary about the reasons for the weaker than expected jobs report, my focus is on the technical impact of this data release and I saw this as twofold: weakness for the US$ and a boost for US stocks, as any thoughts of early stimulus tapering seemed to be quickly discarded. The DJIA and S&P500 closed at new all-time Highs and the US$ weakness helped to develop recent bullish breakouts on Gold and some commodity currencies. The Russell-2000 just managed to close higher for the week but the NASDAQ closed lower which has kept discussion about the stock rotation of Growth into Value active. The Emerging Market ETF, EEM, closed higher for the week and the bullish run on Copper accelerated resulting in a new all-time High for the metal. There have been noteworthy new breakouts on the AUD/JPY (now above 85) and on the GBP/USD so watch to see if these continue.

 

US NFP data: there was one bright spot for NFP with improved wages growth but note the huge miss with the number of jobs added:

 

 

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: Most of these breakout moves were aligned to US$ weakness. Updates posted throughout last week can be found through the links here, here, here and here:

 

• USD/JPY: the recent wedge TL b/o peaked at 140 pips.
• AUD/USD: a new TL b/o for 100 pips and the recent wedge b/o tally stands at 200 pips.

 

• EUR/USD: a new TL b/o for 150 pips and the recent wedge b/o tally stands at 370 pips.

 

• NZD/USD: a new TL b/o for 120 pips and the recent wedge b/o tally stands at 230 pips:

 

• Gold: a new TL b/o above $1,800 for up to $40 and the recent wedge b/o tally is now at $110:

 

 

 

This Week: (click on images to enlarge):

 

• • DXY: US$ Index: The US$ index closed with a bearish weekly candle, helped along by the miss with NFP, and note the break of the recent support trend line. Watch for any push down to 88 S/R. There is US CPI and Retail Sales data released this week so watch to see how these results impact the US$:

 

DXY weekly: watch for any push down to 88 S/R following this new momentum-based trend line breakout:

 

• • 10-yr T-Note Interest rate: The chart of the 10-yr Treasury Interest rate shows the recent bullish breakout from the triangle congestion pattern remains paused under the weekly 200 EMA region but above the Resistance turned Support region of 15.

 

• 10-yr T-Note Interest rate:  more sideways consolidation:

 

 

• • % Stocks above their 200 Day Moving Average Index: The Percentage of stocks above their 200 Day Moving Average is 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 large, bullish weekly candle and at a new all-time High. The Bull Flag remains in progress and has closed above the previous all-time High region of circa 4.65:

 

Copper weekly: a new all-time High for Copper:

 

 

 

• • Emerging Markets: The Emerging market ETF, EEM, closed with a bullish weekly candle and remains below the 12-month support trend line. There still isn’t much momentum here so watch for any Bull Flag breakout: up or down.

 

EEM weekly: watch for any new Bull Flag breakout:

 

 

• • DJIA: The DJIA closed with a bullish, almost engulfing, weekly candle and looks to be headed for 35,000. The trend remains UP, given the print of higher Highs and higher Lows, but keep watch for any shift:

 

DJIA weekly: headed towards 35,000:

 

 

• • NASDAQ composite: The NASDAQ Composite Index closed with another bearish weekly candle as price continues to hold under the previous all-time High. There seems to be ongoing Double Top hesitation here.

 

NASDAQ weekly: watch for any continued Double Top activity:

 

 

• • DAX weekly: The DAX closed with a bullish weekly candle and remains above a 12-month support trend line. As with the DJIA, the trend remains UP for now given the print of higher Highs and higher Lows but keep watch for any shift:

 

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 bullish-coloured Doji weekly candle reflecting ongoing indecision; check out the last four weekly candles! The Index continues to hold above the 61.8% Fibonacci extension of the Covid-induced Swing Low so watch for any trend line breakout and push to the 100% level, circa 2,500.

 

RUT weekly:  keep watch for any new momentum-based triangle breakout:

 

 

• • Bonds / TLT: The Bond ETF, TLT, closed with a small bullish weekly candle AND note how the Elliott Wave indicator has revised here now.

 

TLT weekly: still holding above the 135 level and the 61.8% Fibonacci:

 

 

• • Commodities: this bullish descending wedge breakout remains in play and the index printed a large, bullish weekly candle:

 

DBC weekly: the bullish wedge b/o continues:

 

 

• • USD/CAD and USD/CNY: keep an eye on these two weekly chart Descending Wedge patterns for any bullish breakout and / or follow-through.

 

USD/CAD weekly: still drifting lower BUT watch for any new breakout:

 

USD/CNY weekly: watch for any support from the recent Low:

 

 

• • VIX: the Fear index closed with a bearish weekly candle and remains below the 20 level.

 

VIX weekly: watch the 20 S/R level for any new make or break:

 

 

Calendar: Courtesy of Forex Factory:

 

Earnings: Courtesy of Earnings Whispers:

 

 

Market Analysis:

 

S&P500:  The S&P500 closed with a bullish weekly candle and at a new all-time High following the disappointing US Jobs report as investors shrugged off the headline news to focus on hope for continued supportive monetary policy.

The index closed just under the 4,250 level making this the resistance to monitor for any new make or break.

Trading volume was a bit higher last week but is still below the 200 MA and bear trend line so watch for any new breakout.

 

S&P500 ETF: SPY weekly: watch for any new volume trend line breakout.

:

 

There are revised 4hr chart trend lines to assess with any new momentum breakout.

NB: The second weekly chart shows how the 61.8% Fibonacci extension of the Covid-induced Swing Low is up near 4,150 so watch to see if this region continues to offer support.

Bullish targets: any bullish breakout above 4,250 would bring 4,300 into focus.

Bearish targets: any bearish retreat from 4,250 would bring a recent support trend line into focus followed by 4,200, 4,100 and the 12-month support trend line.  After that, watch whole-numbers on the way down to the weekly chart’s 61.8% Fibonacci retracement level, now near 3,000.

• Watch 4,250 and for any new 4hr chart triangle breakout:

 

 

 

ASX-200: XJO: The ASX-200 closed with a bullish weekly candle and still above the pre-GFC High of 6,851.50, pre-2020 High of 6,893.7 and the whole-number 7,000 level. Price closed just below 7,100 so that will be the resistance to monitor next week.

Trading volume was a bit lower last week and is still below the 200 MA and bear trend line so watch for any new breakout.

 

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

 

 

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

Bullish targets: Any bullish breakout above 7,100 would bring the 2020 High of 7,197.20 into focus.

Bearish targets: Any bearish break of the 4hr chart support trend line would bring 7,000, the pre-2020 High of 6,893.70 and the pre-GFC High of 6,851.50 back into focus followed by 6,800 and 6,700.

• Watch 7,100 and for any new 4hr chart trend line breakout:

 

 

 

Gold: Gold got a boost from US$ weakness last week and closed with a large, bullish weekly candle and just under the 4hr chart’s 61.8% Fibonacci level, near $1,850, The recent bullish wedge breakout got going again last week and has now given up to $110.

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

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

• Any hold above $1,900 would support the Cup pattern thesis.
• Any move back 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.

 

Gold closed near $1,830 making this the level to watch for any new make or break. There are revised Flag trend lines on the weekly chart that have been added to the daily and 4hr charts as well. These present as a triangle pattern on the 4hr and daily charts and note how the apex is near the 4hr chart’s 61.8% Fibonacci, circa $1,850.

Bullish targets: any bullish 4hr chart hold above $1,830 would bring $1,850 into focus as this is near the 4hr chart’s 61.8% Fibonacci. After that, watch the upper Flag trend line and the key S/R level of $1,900.

Bearish targets: any bearish 4hr chart break below $1,830 would bring the lower Flag trend line, $1,800 and $1,700 into focus followed by the $1,670 support level.

• Watch $1,830 for any new make or break:

 

 

 

EUR/USD: The EUR/USD closed with a bullish weekly candle and the recent 4hr chart wedge breakout tally has reached up to 370 pips.

Price action is back up near 1.22 so will be the one 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.

Bullish targets: Any bullish 4hr chart breakout above 1.22 would bring whole-numbers on the way up to a previous weekly chart High, circa 1.26 into focus. After that, watch for any continued push up to 1.40.

Bearish targets: Any bearish 4hr chart hold below 1.22 would bring the monthly 200 EMA, 1.21 and 1.20 back into focus.

• Watch 1.22 for any new make or break:

 

 

 

AUD/USD: The Aussie closed with a bullish, almost engulfing, weekly candle and the recent 4hr chart wedge breakout tally is now at 200 pips.

Price action closed just under the 0.785 level so this will be the one 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.

Bullish targets: Any bullish 4hr chart breakout above 0.785 would bring 0.79 into focus. After that, watch whole-numbers on the way back to the 12-month TL and, then, whole-number levels on the way up to the weekly chart’s Descending Wedge breakout target of 0.90.

Bearish targets: Any bearish 4hr chart hold below 0.785 would bring 0.78 back 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.

• Watch 0.785 for any new make or break.

 

 

 

AUD/JPY:  The AUD/JPY closed with a bullish weekly candle and has finally broken out from a multi-week sideways consolidation triangle and above the key 85 level. The weekly close above 85 is quite significant as this is a major S/R zone for the pair; it is the first weekly close above 85 since early February 2018!

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:

 

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

Bullish targets: Any bullish continuation of the recent 4hr chart triangle breakout would bring 85.50 and whole numbers on the way up to 90 S/R into focus.

Bearish targets: Any bearish retreat below 85 would bring the 12-month support trend line 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 85.50 and for any continued 4hr chart triangle breakout:

 

 

 

NZD/USD: The Kiwi closed with a bullish, almost engulfing, weekly candle and ended the week just below 0.73 so this will be the level to watch for any new make or break.

Bullish targets: Any bullish breakout above 0.73 would bring 0.74 and 0.75 back into focus.

Bearish targets: Any bearish hold below 0.73 would bring 0.72, 0.71 and 0.70 into focus followed by the monthly 200 EMA and 0.69. 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 0.73 for any new make or break.

 

 

 

GBP/USD: The Cable closed with a bullish, almost engulfing, weekly candle and back up near 1.40 making this the next horizontal resistance level to watch for any new make or break.

Price action has also broken up and out from a multi-week sideways consolidation triangle giving the daily and weekly charts the appearance of a Bull Flag breakout.

NB: The longer-term target for any bullish continuation above the previously broken 14-yr trend line, noted here in my article on December 20^th, 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!

Bullish targets: Any bullish break above 1.40, and continued 4hr chart triangle breakout, would bring 1.41 and the recently broken 12-month support trend line into focus followed by whole-number levels on the way up to 1.50 as this 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 hold below 1.40 would bring 1.39 back 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 1.40 and for any continued 4hr chart triangle breakout:

 

 

 

USD/JPY:  The USD/JPY closed with a bearish, almost Inside, weekly candle reflecting indecision but note how the recent 4hr wedge breakout peaked at the 61.8% Fibonacci before reversing.

Price action is back near 108.50 so this will be the level to watch for any new make or break and there are revised 4hr chart trend lines to monitor.

NB: The bullish weekly-chart descending wedge breakout was first noted in my article of January 31^st. 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!

Bullish targets: Any bullish hold above 108.50 would bring 109 and the upper 4hr chart trend line into focus. After that, watch whole-numbers on the way up to 115.

Bearish targets: Any bearish retreat below 108.50, and break of the lower 4hr chart support trend line, would bring 108 and 107 into focus.

• Watch 108.50 and for any new 4hr chart triangle breakout:

 

 

GBP/JPY: The GBP/JPY closed with a small, bullish weekly candle and spent most of the week consolidating in a sideways triangle under 152 making this the resistance 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 3^rd, 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 153, a move of around 1,200 pips, and so is another trend line breakout that has proven to be worthwhile monitoring.

Bullish targets: Any bullish 4hr chart triangle breakout would bring 153 into focus. After that, watch 154 and the 20-week support trend line followed by whole-number levels on the way up to the weekly chart’s 61.8% Fibonacci, near 170.

Bearish targets: Any bearish 4hr chart triangle breakout would bring 151 back into focus. After that, watch whole-number levels on the way down to 135 as this is near the 61.8% Fibonacci of the March 2020 – March 2021 swing High move.

• Watch 152 and for any new 4hr chart triangle breakout: