Sunday, June 14, 2015

Market Analysis for Week of 6/15/15

Whether they play out or not remains to be seen, but there's a few things you have to be thinking heading into this week.

1.  The Fed will not raise rates and Yellen will continue to be market friendly in her remarks.   This should be dollar negative, gold positive, equity positive, oil positive, and bonds who knows-ish.

2.  It's option expiration week.  We've seen this movie many times now.  If we get continued equity weakness into Wednesday you have to be looking for a vol crushing bottoming reversal that afternoon, or Thursday morning.  

If the dollar breaks down below the $93 double bottom area it will be interesting to see if it runs into a wall of buyers around the 200-day EMA at 92.41.  A close below there makes this look like a top and opens the door to the high $80s or $90 area.  

If the EUR/USD spikes up and closes above its swing high peak at 1.1530 post Fed, it will look an awful lot like an inverted head-and-shoulders bottom and should lead to a retest of the multi-year breakdown in the lower 1.20s.  If the big sellers are serious they will defend that swing high.  Seems more likely they're waiting for higher, but we'll see.  It's down on Greece news at the moment. 

Here's the monthly EUR/USD triangle breakdown.  If this does roll back over post Fed my plan is to buy the dollar on a break of the downtrend line off the highs.  I'm thinking the dollar is going to selloff though, so I'd like to find a way into long Euros for a few weeks if it allows.  The Greece situation makes this a bit tentative, but if they follow the American script they will wait until the last moment and then concede to make a deal.

I'm interested in getting long gold.  But not until the Fed announcement for a hold longer than a day trade.  There's a trendline that could break tonight or tmrw for a short-term trade, but I'm looking at the trendline that cuts through the $1205 area for a play to somewhere between $1250-$1280.   It has to respond to the Fed in order to work.

Oil is consolidating into a tight range.  Whichever way breaks and closes beyond it should run a bit.  It would be helpful if it waits until Wed.  I would like to trade it long if the dollar is selling off post Fed and oil breaks upward.

The ES, or more likely the NQ, is also interesting to me if they repeat the same vol crushing movie we've seen so many times.  If we get the sharp reversal, it needs to run to new highs and not form another lower high on the chart, though.  I will be highly suspicious of it the whole way.  

Look where bonds stopped.   A breakdown and close below the lower trendline would be a big deal, partly because it just acknowledged its existence.   It will be interesting to see if this fills up the triangle first.  A breakout in either direction is playable.  Just don't let it go against you in case it's a fake-out.