The USD/JPY pair managed to eke out a bit of gains during the Friday session as we closed above the 90 handle for the first time in ages. This pair looks extremely bullish, and we believe that a run up is in the cards still. The Bank of Japan meets late in the week, and as a result we could see a bit of profit taking after their announcement, but in reality we think this is a very bullish market, and will be buying pullbacks as they come. Signs of support after a slight drop are exactly will be using to enter this market over and over.
The USD/CAD pair surged during the Friday session as we closed above the 0.99 handle for the first time in roughly 2 weeks. The markets continue to stay under parity though, and as a result we think that overall this is a bearish market. However, we have obviously seen a bit of a spike in this pair on Friday that simply reminds people that the market can and will pullback from time to time. But as you’ll notice, the candle for the Friday session gave up quite a bit of the gains towards in the day. That being said, we are still bearish of this market and willing to sell it here.
The NZD/USD pair fell slightly during the Friday session, but bounced enough in order to form a little bit of a hammer. Frankly, this candle isn’t enough to make us worry one way or the other, and we believe that the 0.83 level is going to continue to offer support. We see the 0.85 level above as the barrier that we have to break out of, but we think that range bound trading could be the order of the day for the next couple of sessions, and as such would be willing to go long on a break of the highs from the Friday trading day. As far as selling is concerned, there is far too much noise below in order to think about it.
The GBP/USD pair fell extremely hard during the session on Friday in order to test the 1.5850 level. However, we see significant support below at the 1.58 handle, and think that perhaps the downside is somewhat limited at this point. Because of this, we certainly cannot sell now because it would be “chasing the trade”, but buying at this point without some type of supportive price action would be reckless. That being said, we are going to see how the spare reacts to the 1.58 handle before you make a decision on where to go next.
The EUR/USD pair fell during the session on Friday, but remains above the 1.33 support level in order to stay relatively bullish. The pair looks like it’s trying to continue climbing higher, and as a result we think that a bounce is more than likely going to come. We are one willing to start buying here, for short-term gains but we think that the 1.34 level will be resistance for the next couple of sessions. Once we get above the 1.34 level, we think that the 1.35 level will be targeted and a move above that would be a massively bullish sign as it would be breaking the neckline of an inverted head and shoulders. The inverted head and shoulders measures for a move up to the 1.50 level, which of course would be a massive move indeed.
Because of this, we sincerely hope that the pair can break out and look to hold onto any trade that shows inclinations of that. Taken a couple small losses in the process will be nothing compared of the reward that could be had if this trade triggers.
We see the 1.3250 level is extremely supportive below as well, and as a result is going to be almost impossible to short this pair in the meantime. In fact, we think that the pair has plenty of support all the way down to the 1.30 level, and as a result we think that any pullbacks will offer buying opportunities in the near-term.
The European Central Bank has suggested recently that they have no intentions on cutting rates and as a result we should see the Euro continue to be bid up in a fairly healthy manner. This pair should continue to chop along and no fluid movement will probably be seen until we get above the 1.35 level, however there seem to be plenty of headlines that affect this pair every few days, so a sudden move could possibly happen. Again, as for selling we have no interest in doing so until we get below the 1.30 level, and at that point time we would have to think about it a little harder.
The EUR/JPY pair had a fairly quiet session on Friday as we continue to meander around the 120 handle. This area is obviously a big resistance barrier, but the fact that the market continues to hang around it suggests to us that we should see a breakout yet again. The weekly candle was a massive shooting star, and as a result it appears that pullbacks will be used by the buyers in order to finally break through the resistance above. Remember, the Bank of Japan has a meeting later this week that will determine what their next step is, and the market is anticipating quite a bit of monetary action. If we get some disappointment, a selloff in this pair is possible, but would more than likely offer a buying opportunity down the road.
The EUR/GBP pair rose during the Friday session as we aim for the 0.84 handle. We’ve recently seen Euro strength of the last 48 hours, and as a result it appears that this pair is going to continue higher and possibly on to the 0.85 level. Looking at that, we think that pullbacks should be thought of as buying opportunities, as is pair has certainly changed its momentum to the upside, making selling almost impossible. In fact, we see a significant amount of support at the 0.83 handle that should continue to offer a floor for this market.
The AUD/USD pair fell during the Friday session as the market tested the bottom of the hammer from Thursday. We broke below the 1.05 level at one point in the session, but bounced back above in order to close there. However, the candle does look fairly bearish so we think a pullback in this pair is certainly possible. There is a ton of support and noise below though, and we feel that any pullback at this point in time is a buying opportunity for the Australian dollar. That being said, we are looking for some type of supportive candle in order to go long and interesting to break out above the 1.06 handle that should send this pair much higher.
The EUR/USD is trading sharply lower at the mid-session. The move was fueled by heavy selling pressure triggered by the inability to take out a high from earlier in the week at 1.3403.
Expectations of a close near the low of the day mean that the market will be in a position to challenge the latest swing bottom at 1.3256. A trade through this level will turn the main trend to down on the daily chart.
An uptrending Gann angle from the 1.2997 bottom is at 1.3197. This is the next downside target. Based on the main range of 1.2997 to 1.3403, the main downside target is the retracement zone at 1.3200 to 1.3152.
The most interesting formation is being created on the weekly chart. Following a prolonged move in terms of price and time, the EUR/USD is in a position to post a weekly closing price reversal top. This pattern typically indicates the start of a 2 to 3 week break equal to at least 50% of the current rally.
The current rally is 1.2660 to 1.3403. This makes 1.3032 to 1.2944 the next potential downside target. An uptrending Gann angle from the July 2012 bottom at 1.2042 comes in at 1.3082.
Although the longer-term charts are suggesting the possibility of a major sell-off, the intraday 60-minute chart indicates it won’t be straight down, but a series of lower-tops and lower-bottoms.
The March E-mini Russell 2000 futures contract surged to a new high on Thursday without much fanfare. This may be a sign of a tired market. Overnight there was no follow-through to the upside which leads one to believe that the rally may have been option-expiration related.
Near-term support is at 875.10. A break through this level will put a bearish spin on the index. From a weekly standpoint, a close under 878.10 will send out a bearish signal.
The inability to follow-through to the upside and the general sluggishness of the overnight trading action suggests an overbought market. Although this appears to be evident, the absence of a clear bearish signal is helping to maintain the upside bias.
Although the U.S. debt ceiling issue is a major concern, investors aren’t expressing the feeling of doom and gloom that they showed last month when the U.S. was debating the fiscal cliff. This feeling of complacency could turn around and bite traders next week, it there are signs that the debt issue is at an impasse. Until then enjoy the uptrend as long as the market continues to make higher tops and higher bottoms.
The March E-mini NASDAQ-100 futures contract continues to remain the weakest of the major indices. This is probably because of the poor performance in Apple (AAPL) stock. Because of the weight this stock carries in the index, it is exerting a major influence on its direction. As long as Apple remains weak, the index is going to struggle. Apple is called lower this morning and has once again broken below the psychological $500 level. This is fueling the selling pressure on the opening.
The main trend is up on the daily chart, but the inability to pierce the 2750.00 area with conviction is a sign that short-sellers are still in control of the index. The daily chart indicates that a break through the last swing bottom at 2705.25 will turn the main trend to down.
The longer the index stays in a range, the greater the chance for a volatile breakout. Traders have to be patient at this time because there is a sizeable move coming. If Apple challenges its recent low near $483.00 then the NASDAQ could be under pressure. The longer-term view of the market suggests that a failure to hold 2700.00 could trigger a break into a major retracement zone at 2664.50 to 2644.25.
Besides Apple, traders are also worried about the U.S. debt ceiling issue. This could weigh on the market next week as negotiations are expected to be a forefront.
Traders should look for the March E-mini Dow Jones Industrials futures contract to open steady-to-better this morning. There was very little follow-through to the upside following Thursday’s strong surge. This could be an indication of overbought conditions.
Overnight China posted strong growth numbers which failed to ignite another surge. This could weigh on the market early in the session. The focus remains on earnings but since the earnings season is winding down, traders will once again shift their attention on the U.S. debt ceiling issue.
Technically, the contract made a new multi-year high on Thursday when it took out the September top at 13486. There was strong volume on the move, meaning that it wasn’t all short-covering, however the inability to rally overnight could mean shorts are re-entering. The old top becomes new support. A break back under 13486 will be a sign of weakness.
The March E-mini S&P 500 is called steady-to-better despite a stronger U.S. Dollar. Following yesterday’s strong rally, it’s understandable if investors hesitate about getting aggressively long at current price levels.
On Thursday, the index reaffirmed the uptrend on the daily chart when it traded through the previous top at 1471.50. This price is now new support. The inability to hold this level could bring in some profit-taking which could drive the market even lower.
Last week’s close at 1467.25 is also an important support level. Although this price is not in danger of being tested at this time, a close under it will create a weaker reversal top which could turn the market bearish next week.
There is no outright resistance at this time. We have said several times that this is a momentum driven market and that it will move higher as long as fresh short-sellers are will to feed the market new money. In other words, the March E-mini S&P 500 contract is likely to move higher until the weakest short is taken out.
Despite the current strength, there is still a little hesitancy on the part of traders because of the linger debt ceiling issue. This could slow down the pace of the rally next week.
Sharp sell-offs in all major currencies triggered a strong surge in the March U.S. Dollar Index. Traders should look for a higher opening although the index is testing a major 50% level which could trigger a technical bounce.
The Dollar Index popped when the market failed to react to strong Chinese growth data. The bullish number should have fueled more demand for higher risk assets. When currencies hesitated, traders saw this as a sign of weakness and pounced on the dollar, driving it sharply higher.
Technically, the March Dollar Index futures contract reached the objective we had pinpointed earlier in the week. Based on the main range of 80.99 to 79.40, expectations were for a rally to at least 80.09 to 80.25. Overnight the index reached a high of 80.13 before profit-takers took control, triggering a slight intraday break.
Although there may be a slight pullback to an uptrending Gann angle at 79.90, there is still a strong bias to the upside. If momentum continues to build, then the index may take out the retracement zone and reach a downtrending Gann angle at 80.37.
WTI Crude unexpectedly managed to break through 94.65/95 as we bought back in to longs looking for the next target at 96.17. We got pretty close as we topped at 96.04 and then fell back towards the 94.95 level, bouncing just above at 95.12.
We are very overbought on the daily charts but we need to ignore this for now. The break higher should keep the momentum going and 95.12/94.95 should remain good support. A retest of resistance at 96.04/17 looks likely today and although we are also over bought on very short term charts it is unwise to fight the two month uptrend. Go with a break higher therefore looking for the next target at 96.92. Here we exit all longs and try shorts with a stop above 97.30.
If however we cannot hold on to 95.12/94.95 support, look for selling pressure down to 94.31. Exit shorts here and buy in to longs with a stop below 94.00. We then look to buy in to longs again down to excellent support at 93.48.
Nat Gas did test support at 3.385/3.375 again and headed high from this low to reach the 3.481/500 resistance level. We warned of a high for the day, exiting longs and trying shorts with a stop above a small gap at 3.539. The market topped at 3.529 and fell back to 3.473 as the scenario played out as predicted.
Today however it does look like we can break higher. Watch the 3.529/539 resistance and be ready to buy in on a break through here looking for the next target of 3.596 for profit taking on our longs. It is very unlikely we can make it any higher at this stage so we look then to sell in to shorts from here up to 3.613 using a stop loss above 3.626.
Gasoil is hanging on to gains but has not gone anywhere in the past week. We may be running out of momentum, although a test of recent highs at 964.50/966.00 could be on the cards today. This should remain very tough to beat and failure here today would confirm a short term top for the one month up trend.
However any shorts need a stop above 967 which should signal another leg higher towards 972.25/75, possibly 974.00. A push through here would then keep the momentum going for a test of tough resistance at 979.19 which may trigger some profit taking.
We have support at 955.59 then at 952.00 below where it could be wise to exit any shorts in case of a low for the day. It should be worth attempting longs down to 948.83 but need a tight stop below 946.50. If we move back below here this breaks a two week up trend and we will be looking for a test of 943.38 next before better support at 939.95/937.92. Here we can exit all shorts and try longs for a bounce with a stop below 936.
Brent Crude managed a good rally yesterday but the daily outlook has now turned negative and the upside does look limited. We have resistance today at 111.37 and failure to break higher should see a return to 110.92/86. If we cannot bounce from here look for 110.36/28 as the next downside target. A break below here could lead to a retest of the week’s lows in the 109.60/45 area.
If we do manage a push through 111.45 go with the move looking for 111.82 to take a profit. We should struggle here but if attempting shorts we need a stop above 112.00 for 112.47 as the next target.
March Schatz could not beat 110.55/57 as expected but we then collapsed breaking 110.38/37 for 110.30. There is not much sign of a bounce and if we cannot beat resistance at 110.39 look for a retest of 110.30. A break then sees 110.26 then 110.20 with excellent support below at 110.15.
If we can beat 110.39 look for 110.45/46. This could cap any rally but if we push higher look for 110.49 then 110.54/56 to sell in to shorts.
S&P March broke the 1468/71 area and did trade above 1479 at 1480 but quickly pulled back. This is not the bullish signal you might think it is and failure to hold above 2012 highs of 1475 would be a concern. The weekly close tonight will give us a better clue to next week’s direction. A close below 1474 leaves a bearish double top in place and a close below 1467 also forms a reversal week. This would signal a move to 1459/57 next week, possibly 1447.
For today we have support at 1472 but below here we could fall to 1467. Remember a close below here could be negative going in to next week. Next support is then 1463 with 1459/57 very likely to provoke strong buying at this stage.
1479/80 is obvious resistance. A sustained break and preferably a close above here will make the severely overbought oscillators irrelevant and trigger another wave of buying. We will be looking to buy in to longs again in the expectation of further strength towards the next target of 1489. Above here we can then push on to 1503 and probably as far as 1511 to take profits on longs.