Sunday, August 9, 2015

Market Analysis for Week of 8/10/15

I kinda had a feeling it was a little early for the dollar breakout.  I wouldn't be surprised to see this bang around for several weeks, even getting below last week's low to run some stops.  But the bottom line is I will trade the breakout in whatever direction it chooses.  I believe it will be up.  Ideally, it will be driven by a news event like the Fed raising rates.  Btw, another non-economic reason to raise rates is that they don't even know if the new policy tool of using Reverse Repos instead of Fed Funds will even work, and there's only one way to find out.

It's entirely possible the Euro makes it to the other side of the triangle.  This is very much like the oil range from earlier this summer.  The downtrend line is from the highs last year.  It should not go through there if this is going to eventually rollover and breakout to the downside. The closer it gets to there the smaller the risk.

Gold is currently using the 10-day to keep the pressure on it, but if the dollar comes off a little, this could certainly backtest the breakdown.  I have no interest in this right now.  I expect it will go lower, but I'm not shorting it here.  If it bounces and tests the downtrend line or the breakdown area around $1130 then I'd be interested.  

Oil is also using the 10-day to keep the pressure on.  I'm thinking we could see some profit taking near the March low.  

Oil weekly.  If we get the dollar breakout, most likely oil will trade down to the 2009 low at $33, however it would be nice to see a bounce at the March $42 low and a test of the downtrend line.  That would create some buyer exhaustion profit taking and a low risk entry.  If oil just barrels through $42 full speed ahead, I'd wait for the retest of that low and look to enter there.

When trying to figure out what might happen next, I find it helpful to consider the nastiest thing that could possibly happen, and that's probably going to happen.  In the case of the ES, the big line in the sand that would knock a lot of longs out of the market is 2032-ish, or 2040 in the SPX.  So it wouldn't surprise me to see a washout below that area that gets bought up like crazy.  The key would be when it happens.  If we're crashing through that level early in OPEX week, I'd be looking for signs of the bottom to buy.  This could very easily turn into a bear trap.  Also, don't forget the uptrend line thru last Oct's low is a monthly trend line, which means it's all about the close.  

I'm liking bonds to test the upper channel line in the 160s, then it depends on whether stocks are sustaining a downside technical breakdown or whether it was a bear trap.