Futures and FX Report

US Markets

My observations below should be viewed as general advice and may not be right for you. 

Once again, trading in US markets was lacklustre overnight and the session saw equities hover within points of the unchanged line for the majority of the day. Economic data was mostly positive, but did little to inspire trading ahead of the key Jackson Hole event on Friday. As a result the S&P 500 ended higher by 0.1% on light volume. Second quarter US GDP pointed to a 1.7% increase, up from the 1.5% increase that was featured in the preliminary reading. The upwardly revised increase was better than the 1.6% improvement that economists had expected (briefing.com). 

I feel it is important to stress that we are seeing major weakness across Asian markets with most indices -1% to -1.5% today. One by one I am seeing topping patterns and breakdowns to the downside namely the Hang Seng and the ASX200. The Shanghai composite remains in a strong downtrend and continues to break to yearly lows. Risk assets such as The Australian Dollar also continue to trend lower. In my experience, Asian equities are often a lead indicator for global markets. This is because Asia is an export driven economy and a barometer for “growth”. If investors are now beginning to pull their money out of the region, this does not bode well for our offshore counterparties. There are high hopes placed on stimulus measures from Ben Bernanke and if this is not forthcoming at Jackson Hole, there really could be some turbulence ahead. 

From a technical standpoint, the S&P500 remains in a short term range from 1395 to 1415. There is a possible Double top pattern in the bigger picture but this will only be triggered on breaks of the low end of this recent range.

S&P500 Daily:

Double Top pattern is still in play. Price is clearly struggling at this level. 

Emini S&P500 60mins:

Price remains in this range from 1395 to 1415 and traders should wait for confirmed breakouts either way. However, are we looking at a topping pattern here within the bigger picture Double Top pattern?

Hang Seng Daily:

The Hang Seng looks to be forming a Daily topping pattern and breaking down out of solid resistance. Note a lower high has formed despite US indices testing their highs

S&P500 Emini Key Levels:

Support Levels: 1400/1395, 1370

Resistance Levels: 1415/1420

Europe

European stock markets ended a volatile Wednesday trading session on a downbeat note, with banks and miners leading declines, although well-received U.S. economic growth data had briefly sent stocks into positive territory.

From a technical standpoint, I have shown significant resistance in both the DAX and Eurostoxx Daily charts of late. Price action is now confirming this zone with some significant reversal candles on the Daily charts. The short term timeframes are trading within a range but the inability to hang onto recent gains after breaking out of a solid consolidation pattern concerns me. This implies a potential failed move higher which shows that there is no underlying strength behind the recent uptrend. Please see a post I put up today in regards to “failed patterns”: http://fpmarkets.blogspot.com.au/2012/08/the-most-important-rule-in-chart.html. Elliott wave traders could also now point to a potential 5 down off the recent high. This implies a higher degree trend change

2400 remains the key level in the Eurostoxx. Breaks of this would confirm a potential deeper correction lower. This same zone is 6900 in the DAX.

DAX Daily:

Price tried to break above this downward trendline but failed.

 

DAX 60mins:

After a 10 day consolidation pattern, the DAX broke out above 7000 but couldn’t hold onto gains and has now sold off right back into the previous range. This is a sign of weakness as a break to new highs was met with no additional buying. 6900 remains key support. 

Eurostoxx 15mins:

A potential 5 down and 3 waves move up. This implies a bigger picture trend change. Aggressive traders could look to short this with stops above the previous highs. However, the key point to stress is the solid 2400 support zone and until this breaks, price is within a range. 

FX Majors

The dollar strengthened against the euro and yen Wednesday, supported by better-than-expected U.S. economic data and tempered expectations for Federal Reserve policy action later this week. The Australian Dollar tried to rally but hit a high of 1.04 before selling off sharply and breaking down to new lows.

From a technical standpoint AUD remains in a short term downtrend and has triggered a potential short term Head and Shoulders topping pattern. As long as price remains below 1.044, traders should continue to focus on this downtrend with a first target into 1.02. AUDJPY, a key risk asset, continues to grind lower after the “failed breakout pattern” and the target is also still someway lower still. Interestingly at the same time EUR continues to grind higher and there appears to be a clear shift and transition going on at the moment.

AUDUSD 60mins:
Despite the FED minutes and the continued hopes of “QE3”, AUD continues to grind lower and has formed a possible short term Head and Shoulders or topping pattern. This has been triggered on the break of 1.04. 

AUDJPY 60mins:

An attempted breakout above support that has been slapped back down. Failed breakouts are indicative of underlying weakness. 

EUR 60mins:

Of late I have continued to show the bullish breakout pattern in EUR above 1.24. Yesterday traders took advantage of a small pullback to enter into this short term uptrend. Targets for this move are up to 1.2650/1.27. Only a break back below 1.24 would be bearish.

EUR 15mins:
Potential Flag pattern

Commodities

Gold had a rather turbulent night and fell $6.70, or 0.4%, to settle at $1,663 a troy ounce on the Comex division of the New York Mercantile Exchange.

This pullback now offers an interesting support zone to buy into the short term uptrend. Key support is 1650 to 1660 with the risk being on breaks below 1630.

 Gold December 60mins:

A pullback into solid support and a low risk entry into the uptrend now.