Time To Consolidate?

US Markets

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

In Fridays futures report I was looking for continued strength into the weekend and a retest of the recent highs in the S&P500. Certainly, US equities got off to a positive opening with quadruple witching leading to a volume surge at the start of the day. However, the indices made their highs within the first few minutes of trade, and the major averages spent the rest of the day drifting towards the unchanged line. The S&P500 fell short of my idealised target levels yet the DOW Industrials did retest its spike highs. We seen continued pressure during Asian trade today. 

Gold also staged a rather bearish reversal right out of the 1790/1800 resistance zone. Indeed, the December contract spiked from 1778 to a high of 1790 come the open of US trade, but couldn’t hold onto gains and sold off right back into the previous range. This is a bearish reversal and we have seen further losses during Asian trading today also. The Australian dollar failed to break above the key 1.050 resistance line on Friday and has pulled all the way back to 1.040.

So now many traders are now beginning to ask- is this the top? I do find this question rather amazing given we have seen but one down day after a prolonged trend higher. Markets take time to transition from uptrend into new downtrend and there are more often than not plenty of warning signs before the real break. For now, there is no topping pattern or distribution pattern in place in US indices. In the bigger picture, given the breakout above the April highs, I continue to believe that following this uptrend and looking for low risk long setups into the trend is the play. Only a break back below 1420 would be a major waning sign to me. It really all depends on your timeframe.

Certainly I can see a number of markets testing important short term resistance levels, and a period of consolidation is probably more than likely before the next move higher. The key support in the S&P500 remains 1450 with breaks of this opening up a deeper retrace into 1435. Aggressive traders could potentially look to short vs Fridays spike highs into the target zones cited.

S&P500 Daily:

The Market remains in a strong uptrend having broken out above the recent April highs. However, price is testing the top end of this trend channel and struggling.

Emini Dec S&P500 15mins:

These are the levels I am looking at in the short term. Traders could enter aggressive shorts against Friday’s highs or potentially looking to buy pullbacks into 1450/1440.

DOW Industrial 15mins:

Potential Double top pattern. This would be triggered on a breakdown through the blue line shown here. 

Emini S&P500 Dec Key Levels:

Support Levels: 1440/1445, 1430

Resistance Levels: 1465/1470, 1515

Europe

From a technical standpoint, The Eurostoxx does appear overextended on the Daily chart and is struggling at the key 2600 level. I think a period of consolidation may be needed in the bigger picture before a strong breakout can occur above 2600/2625. Aggressive traders could be looking for short signal confirmations with stops above the recent highs. This rising wedge type pattern concerns me.

The DAX broke out of the short term consolidation pattern as shown here on Friday and now is approaching big overhead levels at 7450 to 7500.

Eurostoxx Daily:

The market is retesting and struggling at its previous highs. 

DAX Daily:

This is the overhead resistance zone I am looking at. The DAX may well need to consolidate for a period before a more meaningful move higher. 

Eurostoxx 15mins:

These are the short term levels I am looking at. Clear support comes in at 2520 to 2535. Breaks of this open up a deeper move lower into 2450/2460. I thought this market could re-challenge the 2600 previous highs but there was little follow through on Friday. 

FX Majors

The Australian dollar climbed strongly during European trade on Friday night but struggled to break through the 1.05 resistance zone. With the pullback across risk assets, the Aussie has slipped from a high of 1.052 and is now retesting the key 1.040 support zone. This is rather bearish price action.

On Friday’s report I wrote:
“From a technical perspective, as long as the Australian Dollar can hold above last night’s lows of 1.0380, I believe there is potential for continued strength and a resumption of the uptrend. Confirmation will come on a breakout ABOVE 1.05 as I stated yesterday.”

Well the battler couldn’t get through this 1.050 zone and breaks of 1.0380/1.040 would now concern me. If this level goes, there could be weakness to 1.028/1.030.

AUDUSD Daily:

Price remains within this big picture triangle pattern. 

AUDUSD 60mins:

These are the key short term levels I am looking at. Traders could look to buy the low end of this range and this support zone at 1.040 with tight stops. A breakdown through this level could turn the trend to down.

NZDUSD Daily:

Breakout and retest of the downward sloping trendline. 

NZD 60mins:

A potential flag pattern into the 0.82 support zone. 

Commodities

On Friday I wrote:

“We are not far off my bigger picture target levels but for now traders should continue to follow the trend until we see a clear topping pattern or exhaustion. This is not the case currently.”

Well given Friday’s bearish reversal, we now have the confirmation of price exhaustion. Thus, I think Gold will need to consolidate and possible correct deeper into 1730/1740 before a more meaningful move higher once more.

Gold Daily:

Bearish Daily reversal candle right out of my resistance zone. 

Gold 30mins:

Attempted breakout that was sold into with genuine strength. A breakdown through this 1760/65 zone would open up increased selling into 1740. Traders could look for bounces back into the low 70s for short setups with stops above 1780.