Sunday, 3 April 2011

Weekend Observations

Happy Weekend All,

The Eminis hit my 1330 target zone on Friday night post the jobs number and showed an interesting reversal late into the session. The cash market gapped up on the open but couldn't hold onto its gains, closing just off the lows for the day. I believe this is all evidence of a tiring trend at key resistance levels. Note that this reversal in price came about despite "good" fundamental news. I believe we will see a pullback next week into good supports offering a great longer term buying opportunity.

Emini 60mins:
Price continues to wedge into overhead resistance with momentum clearly waning.

S&P 500 Cash 5mins:
Price gapped up on the open, trended higher for the first few hours but was unable to hold onto gains.

Dow Jones Industrial Average 60mins:
The double top pattern is still in play. An aggressive entry for this pattern is on a break of the upward trendline or Thursdays lows.

The scenarios I am following next week:
i) Look for the June Eminis to retest 1330/1333. Get short on a bearish reversal candle out of these levels. This is an aggressive fade trade against the trend thus must use tight stops
ii) Buy support at 1319/1320. Use a 4 point stop and if price cannot hold, look to join momentum to the downside targeting 1305/1300
iii) Look to buy deeper pullbacks into key support area at 1300/1295.

Note that if there is no sell off or meaningful move lower, we must look for consolidation patterns to get into the trend.

Interestingly, Copper is once again testing key support. I believe these levels have to hold to keep the bullish scenario intact. If we see a strong bearish closing candle, this is a possible Head and Shoulders pattern and get short. This market has been well called by Jack at:

Copper Daily Continuous:

In currencies, the USD futures rejected the 77 level. Only breaks above 77 trigger the double bottom pattern I have been following on the June contract. This was a bearish rejection candle and if we see momentum increasing to the downside next week, follow this trend lower. EUR hit the top end of the range I have been talking about, albeit in a very volatile fashion. Breaks of 1.4250 and 1.430 are bullish indeed but for now we are still at the top end of the recent range.

DXY June Daily:

AUD is one of the strongest patterns I have on my radar currently. Price has spent some 5/6 months consolidating at its previous highs. We have now seen a strong breakout with momentum increasing and a possible completed "flat" in Elliott speak. There are 2 possible trades here:
i) Look for short term consolidation patterns (15min or 60min) to join this breakout and follow the momentum higher. This market may not retrace for a long while thus we have to be prepared to follow the trend.
i) Buy a pullback to the 1.03/1.025 level. This is a key support level and a great buying level for those who missed the intial breakout.

A strong breakout from overhead resistance. Ranges lead to price expansions. This has been a big range and thus anticipate an equally big range expansion.

AUDUSD Weekly:
Price has consolidated ABOVE previous resistance for many months now. This is a bullish pattern. We just had a weekly closing candle out of this consolidation pattern.

In sum, I believe the short term trend in US market is tiring and thus look for a possible retracement next week. Short term resistance is 1330/1335 in the June Eminis with support at 1320. The DXY futures failed at the 77 level and if momentum increases to the downside next week, join the downward trend. Equally, AUD is breaking out and look to either join with wide stops or look for a pullback to 1.03 spot

Thanks and I will have the Asian run down later