Sunday, August 30, 2015

Market Analysis for Week of 8/31/15

The dollar just put in my favorite reversal formation where it breaks down from a range, finds support, and then reverses back into range.  It even closed in the middle as a weekly hammer.  In fact, the level it found support at was the level I was tracking in the Spring at $92.50 which was previous highs on the monthly chart.

I still think the safest way to play it is to wait for the breakout which will likely happen along with the Fed on Sept 17th, but I  snuck early this week as a starter position and I'm looking to buy pullbacks.  I'm hoping for a spike down on NFP day or the next ECB day to around $94.70-ish.  If this does breakout and the Fed raises rates, my target for the dollar would be somewhere between $115-$120.   

Dollar monthly.  $92.50 support.

Dollar weekly.  Hammer time.

Dollar daily.  Hoping for a pullback to add.

EUR/USD  daily.   A pullback would test the upper trend line of the triangle.

ES weekly.  The degree of carnage on Monday was a bit shocking.  I had no idea it would get that bad.  It made me regret posting that dancing video because I'm sure some people got caught on the wrong side, so it probably got misinterpreted.  I was just trying to express the emotions of both sides of a trade in a humorous way.  Not the best timing.  Sorry about that.

I still think we're going to test near the neckline of the breakdown around the 2020-2040 area, then we need to see how aggressive the sellers are and the degree of the pullback they can accomplish.  We'll likely pullback first before going higher to test that neckline though. I'm flat now and will likely take some time off after last week.

I need to see the bears prove themselves before I have any conviction in the sustainability of the short side.  I could explain with lots of words but this 20 second video sums up my concern:

ES weekly.

Bonds weekly.   You have to be concerned that they didn't have much of a bid while equities were in freefall.   And the whole China devaluation forcing them to sell treasuries is potentially trouble too.  If the Fed actually hikes that could worsen the China unload as the dollar soars and they struggle to keep their currency down.  So it's possible that bonds, which would normally be bid due to the fact that the Fed is tightening a slow economy and will cause a recession, might selloff due to China pressure.  Not interested in either side of this trade until it becomes clear.

Oil daily.  Oil finally saw some short covering from the Yemen invasion news and knocked out all the trailing stops beyond the 10 and 20-day MAs.  I'm thinking oil will test the downtrend line off the highs around $51/$52.  It might even poke through and get rejected.  IF it does manage to establish itself on the other side, we'll talk.  But until then I expect oil to roll back over once the weak shorts are flushed out, and especially if the dollar breaks out to the upside.

Oil weekly.  No doubt it's a serious reversal candle.  It's just a matter of why and how much staying power it can have.

Gold daily.  Not much to say about gold.  I'm hoping it strengthens into Sept so there's a better shorting opportunity.  I caught a piece of this pullback but I'm just going to wait now.  There will be a lot of excellent opportunities coming out of the Fed meeting in Sept.