Sunday, October 28, 2018

Week Ahead 43

SP500 closed bellow the support area defined by the June-July lows whereas NQ closed at the April high/May low support. There is a bullish RSI divergence for both indexes on the 4h chart that might result in some bounce back. Price action on Monday will be important. The next strong support zone is around the January-February lows. The textbook view is that price should retest those levels and form a range  there on.

The EU50 touched the October 2016 high. 

The almost engulfing bar on Thursday and the pinbar on Friday could trigger some bottom fishing trades.  

The lower swing high in VIX after a double top supports this scenario. (Also Gold false breakout) VIX breaking bellow 22.00 would give some more comfort for this trade.

US Yields corrected sharply due to flows to bonds.

Gold could not break the Dec 2017 low strong resistance, though it formed a very nice buildup structure. On the other hand such a strong risk-off mood should have triggered the breakout. 

DX bounced back from the 96.50 strong resistance on Friday.

Sunday, October 14, 2018

Week Ahead 42

- biggest dip bellow the 200d SMA since January 2015

- on Friday formed a s/t swing higher low probably due to some short covering 
- price closed just above the 200d SMA on Friday
It might retest the resistance around 2800 early next week, but a lower low is well in the cards. It could even go to 2550. Earnings season could be the main catalyst. Technically the new high is not a very likely scenario unless earnings would be very positive. The previous record was just above the January high and could not even hold for two weeks. Tax cut seemed to be the last fuel for the rally and headwinds as trade war, interest rates, emerging markets and Italy started weight on the sentiment and also on fundamentals. 

- Formed a double top
- Dipped bellow the 200d SMA
- June low provided support

- Closed at a s/t resistance on Friday
- 6800 is the key level to watch. Should that fail decisively things could turn very ugly.

- double top in June well bellow the record high 
- the 200d SMA was broken in June and retested only once in July
followed by three lower highs
- March low was broken without any bounce on Wednesday
October 2015 high provided support on Friday. Actually it is a very strong level.

It is interesting to look at some sectors relative performance. It looks that defensive sectors are gathering some relative strength. This kind of asset rotation is not a good sign for the market as a whole.
- Staples: could be bottoming that is a sign of overall weakness. It is important to note that it has started in June. So market started to be more defensive well before new highs.

- Discretionary: topping, the same applies.

Technology: stalled.

Utilities: Gathering some strength.
Health Care: massive out-performance since April.
Materials: under-performance accelerated. 
 Financials: under-performance since January.
Real Estate: I think this is where interest rates bite the most, though did not under-perform since January. 
Finally Growth/Value:

Yields retreated but bounced back on Friday.

First of all Mr. Copper: surprisingly it was a little bit up despite the equity selloff.

WTI after the false breakout week before now retested the September high as risk-off mood prevailed. 
Brent is retesting the breakout, the bull bias is clearly stronger here.
As equity selloff accelerated gold rallied nicely on Thursday that stalled on Friday. Price broke out from 11180- 1212 range and did not retest yet the breakout.

USD was not the save heaven of choice as DX is back bellow the 95.25 level.

EUR/USD broke the 1.1525 resistance and back to a range. Nice chart symmetry here as it broke out from this range in the opposite directions.

USD/JPY moved in line with equities.