US Markets
My observations below should be viewed as general advice
and may not be right for you.
It was another lacklustre session in the US markets
overnight with indices trading in a tight range on thin volume. After reaching
lows during the first hour of trade, stocks staged a slow recovery that lasted
for the remainder of the session. As a result, the major indices ended flat. The
defensive sectors were the day’s standout performers, most notably Healthcare.
Some of the biggest losses were registered in the homebuilder and material
stocks. This is not indicative of a “risk on” type scenario.
From a technical standpoint, US indices are now
challenging their April highs which should provide short term resistance.
Indeed, these markets are setup for possible “Double Top” trades that many
technicians and traders will be watching. Waning momentum, breadth and volume
figures support this trade setup. Furthermore, I continue to see
non-confirmations across markets, with some indices making new highs whilst other
markets such as the Hang Seng, Copper and the Australian Dollar all struggling
at these levels and well off their previous highs. To me, this is not
indicative of a healthy trend. However, the simple point to make is that it is
tough to fight a rising market until the price action confirms. Markets can
trend higher and for longer than most people can deem imaginable. The key
marker for me remains 1395 and only breaks of this level would confirm a
pullback and possible new move lower.
S&P500
Daily:
The S&P500 is now testing its April high. Price has
broken out above the wedge pattern I have been showing. Some technical traders
would deem this a potential double Top trade setup if we saw confirmation from
here.
Emini
S&P500 60mins:
The Eminis remain in an uptrend and sitting right on the
previous April highs at 1415. Note there is a potential trend channel resistance
target at 1420 area that was almost hit last night.
Emini
Nasdaq 60mins:
The Nasdaq is also testing its previous highs. Note that
APPLE made a new high overnight and almost touched the “666” level. For
entertainment purposes, “666” was the S&P500 bottom back in March 2009. Are
we now looking at a possible inverse and market high at this level? We will
soon find out.
S&P500
Emini Key Levels:
Support Levels: 1395/1390, 1350
Resistance Levels: 1415/1420,
1450
Europe
There was some interesting price action overnight in
European markets. Stocks were initially
strong in mid morning action after German magazine Der Spiegel reported that
the ECB was considering a program of aggressive government bond buys when
yields moved above a certain level versus German bunds. Germany's Bundesbank,
however, killed stock gains and dented hopes of unlimited bond purchases as it
reiterated its opposition to the ECB buying more government debt. In its
monthly report, it warned that any move to share "solvency risks"
should be decided by governments. A spokesperson from ECB further called the
Der Spiegel report misleading. As such, national benchmark indexes fell in 16
of the 18 western European markets. U.K.’s FTSE 100 Index dropped 0.5 percent. France’s
CAC 40 Index lost 0.2 percent and Germany’s DAX Index fell 0.1 percent.
Greece’s ASE Index was the worst performer, falling 2 percent.
From a technical standpoint, last night we saw meaningful selling for the first
time in a while right into the Daily resistance zone as shown on the DAX Daily
chart of late. A strong move back below DAX 7000 and EUROSTOXX 2400 would
signal a potential reversal and end to this uptrend. For now, the short term
trend remains up. Note that there are a whole host of meetings this week between European officials
that could prove to be potential catalysts.
DAX Daily:
A shooting star candle was left yesterday right into a meaningful
resistance area. Shooting stars represent a potential reversal in an uptrend.
DAX Daily
2:
Here I have zoomed in to focus on yesterdays closing
candle. Some technicians which call this a shooting star and the first warning
signs of a potential exhaustion in the uptrend.
Eurostoxx
60mins:
Price retested the key neckline breakout area at 2450 and
held overnight. A move below here would signify a failed breakout and possible
new trend lower. Keep this key level on your radar.
FX
Majors
The Australian dollar was relatively
lacklustre again overnight, trading in a range of $1.043 to a high of $1.047.
Much of the action in currency land overnight focused on the EURO which fell
sharply initially as European officials dismissed a report that the ECB was
planning to cap peripheral euro-zone bond yields. EUR hit a session low
of $1.2295 but the currency climbed back to end the New York trading day at
$1.2346. This was certainly a strong recovery and EUR continues to be accumulated
under this all important $1.24 level. For a number of days I have been showing the AUD at the top end of the range and strong resistance levels at 1.06. There has now been a consecutive Daily reversal candle out of this level which shows that price is failing to push higher. It has taken time but slowly we are seeing exhaustion and a move lower. Price is now testing a key upward sloping trendline on the Daily chart which could provide some initial support. A break below $1.04 would a bigger picture topping pattern and increase momentum to the downside.
EURUSD remains within an interesting base pattern BUT
this would be only triggered on a strong break above 1.24. For now the Daily
chart is still in a downtrend and I envision it will be tough to breakout for
now given the price action in the Australian Dollar.
AUDUSD Daily:
Price failed at this key resistance zone. There is now a key test of the upward sloping trendline in the short term.
AUDUSD 15mins:
Possible short term Head and Shoulders or topping pattern is forming.
AUDJPY
Daily
This pair remains in a solid resistance zone from 83.00
to 84.00
EURUSD
60mins:
Potential short term base pattern but this will only be
triggered above 1.24. Sellers remain in control with price below this key
level.
Commodities
Gold
Daily:
Gold remains in a short term trading range and testing
the upper boundaries. Trading may well remained subdued until the Federal
Reserve meeting at the end of the month.
Copper
Daily:
Price is now testing the upper end of this consolidation
pattern. If risk markets are really going to breakout to new highs, this
commodity needs to follow suit. For now, this market remains in a downtrend.
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