By Chris Becker
Here’s some charts that you should be watching at the moment, with my own notes and thoughts attached.
Remember, the following views are my own, do not constitute advice and are for information purposes only. As a trader, I may have positions in any or all of the below and their associated markets both long and short, on an intra-day, daily and weekly basis for my own account. Please seek advice from a licensed adviser before making any investment decisions.
The US bond markets rallied last night after the release of monthly NFP and a fall in the unemployment rate. It seems 2.75 to 2.8% is a resistance level for 10 years to push through, both on the weekly chart (shown below) and daily chart, but there is no sign yet of the bond selloff stopping:
US dollar moderated this week, rising slightly against its crosses, again according to the script, coming back to the bullish trendline since August 2011. Sterling, Yen and of course the Aussie (see below) struggled against the might of King Dollar – and are likely to continue to do so:
I previously cautioned that there was a dead cat bounce (a futile rally in the midst of a bear downtrend) for gold, possibly back up to $1400USD per ounce. Here’s my weekly chart with original trendlines and notations, with a sharp reversal (note the bearish engulfing candle for this week):
And here’s the daily chart. You don’t need to trade intraday (although I admit it is fun with gold in the morning and post Asian lunch session) to work this out. It was pretty obvious that gold needed to get above $1350USD per ounce – the stall of price (look at all those cross candles, signifying no direction) and the break of the uptrend were clear signals as gold collapsed on Friday arvo. The road is clear back down to $1200 an ounce, easy:
Time to look at the other so-called “golden” or safe haven currency, the Aussie dollar. Analysis of weekly charts had shown a possible bottom recently, but I noted this was only possible on a reversal in US strength – remember that trendline from August 2011? This week’s action is very bearish indeed and clears the way to the 81 to 83 cent zone:
The daily chart continues to look very similar to that of gold, doesn’t it? Again, this is has remained a simple setup – albeit one that requires psychological fortitude to literally hold on to your shorts (Betashares noted that their USD ETF (effectively an unleveraged short position in AUD) was at record inflows – probably to continue):
Chinese share markets continue to consolidate this week this time with equal amounts of buying and selling pressure. Check out the daily chart of the Shanghai Comp below, which the ASX200 Materials (in red) continues to lead, overbought and getting ahead of itself on the back of a lower AUD. Resistance at 2150 for the Shanghai Comp is obvious:
Unfortunately for US consumers, crude oil rose 3% this week after a similar size reversal last week, but as I said last week “I fear this rally isn’t quite over. This market is ruled by speculators, first and foremost”. Guilty as charged – but rallying as USD strengthens does not bode well with support building here on the weekly chart:
This week the major US stock market – the S&P500 – rose 1.1%, probably on expectations that “milky wilkies” will continue. The bulls have entered again and it seems there’s no bears left here as the market accelerates up and away from its short and medium term moving averages and trendlines:
The local bourse, the ASX200, completely shaked off the deposit levy news with its major component – the Financials (XXJ) pushing the market further either, again adding weight to my “we are just following NZ” thesis. With a rate cut all but certain next week, lower rates are pushing shares ever higher – and EVERYONE is on board here:
The daily chart shows what is a nearly perfect trend in the last couple of weeks, capped off by a monster Friday – a little too perfect, but not that overbought as you’d think. For now, the target is obvious at 5200 points, former resistance, and it we break through there, we follow our NZ cousins?
Til next week, manage your risk first and the returns should follow.