Trading Week

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By Chris Becker

Well I’m back for a few weeks filling in for Houses and Holes who is off on a well deserved holiday. I thought I’d start by rebooting my Trading Week series, going over the important macro markets from a technical analysis point of view.

Remember, the following views are my own, do not constitute advice and are for information purposes only. As a full-time private 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 sold off strongly last week, culminating with the release of monthly NFP (unemployment rate). The weekly picture remains one of yields falling however, painting a very similar picture (in fact – too correlated) to the US dollar index (see below). There is strong support at 2.3% and for mind an upswing (i.e bond price falling) looks likely on the daily charts which means more bullishness for stocks:

tnx
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US dollar remains in a holding pattern, as measured by the Dollar Index (DXY), trading in a tight range between 79 and 81, but still in an overall bearish descending triangle pattern since mid-2013:

DDXY WEEKLY

The daily charts suggest a breakout – probably because of Euro weakness (I’ll speak to that later this week) – with a test up to the 81 resistance level on the cards:

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DXYDAILY

Gold, the un-dollar, remains in a weekly downtrend after failing to climb above resistance at $1400 per ounce earlier this year, holding below its 200 day moving average and looking like testing the $1200 support range. I’d only be bullish on VERY short timeframes here (like 1 min and 5 min charts!)

GOLD
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Aussie dollar seems to be forming a bear trap, at least on the weekly charts with a bearish descending triangle clearly forming with strong support at the 92 handle:

AAUDUSD

Last weeks RBA inaction at keeping rates steady (amongst other “positive” releases, like GDP) have kept a floor under Aussie, but like Euro, it has no business trading at such a level. A break of the 92 support level will probably result in a 500 pip plus drop – I think its almost patriotic to do your duty and short the “battler”! (I’m long but on hourly charts with a small weekly short in place – this is an easy setup with no fuss, no muss)

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Chinese share markets are a bit confused at the moment. The Shanghai Composite remains in a deep bear market and barely ticking over terminal support at 2000 points:

SHCOMP

The picture is different for the Hang Seng China Enterprises (HSCE) Index, which has been rallying off support since March this year. But this move needs to be placed in context – the HSCE has been range trading since mid-2012 – but that also means a big move up to 11,000 or so cannot be discounted. Volatility abounds here.

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HS E

Crude oil was flat for the week, trying to break out of a short term resistance level to continue its run up to $110 per barrel, where long term resistance abides. Its counterpart, ICE Brent remains in an extremely tight range (perhaps reflecting European demand or lack thereof?), but both market bear (sic) watching over the Northern Hemisphere summer:

WTI
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US stock markets continue to soar higher and higher. You don’t even have to change the trendline since August 2011 – with the S&P500 up nearly 100% since the nadir. Last week saw a possible short term top as it bubbled up just before the usual pre-summer correction. Whilst this might suck in a few bears the bulls remain firmly in charge here:

SPX

Heres a closer look, using daily charts and my preferred momentum indicator – way overbought!

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SPXDAILY

The ASX200 (XJO) is forming a bearish rising wedge pattern on the daily charts. Read: exhaustion, mainly caused by everyone buying consumer stocks and bank stocks, while mining stocks – moreover, mining services stocks – are abandoned.

XJO
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Consumer stocks, with rate cuts marked:

XDJ

Bank stocks, with the broader (sic) market in green:

XXJ

And as my nearly 3 year old daughter would say, “Oh dear”, materials stocks:

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XMJ

I’ll be talking and analysing more mining stocks (and services stocks – oh the pain!) later this week, including iron ore pointing out the risks and opportunities available, plus a lot of other markets (including precious metals, the Euro, energy commodities).