Friday, November 20, 2015

Market Analysis for Week of 11/16/15

Dollar daily.  The dollar held the $98.60 level and remains bullish but this is a weird consolidation period.  There's way too much profit taking.  CPI is Tuesday morning and the FOMC Minutes are Wednesday.  As long as we hold above the 10-day everything is on track to test $100 and then the highs.  It would be normal to pullback from near the highs and consolidate ahead of the ECB and NFP on Dec 3rd and 4th.  The thing to keep in mind is the majority are expecting the ECB to increase their easing and the Fed to raise rates, so if they come through this is on track for a long trending move, but that makes the risk that they don't follow through.
dx daily
EUR/USD daily.   The big sellers defended the 1.0820/30 area and it's holding the 10-day.  It remains bearish.
eurusd daily
ES daily.  This selloff is what I suspected.  At this point it's just a normal pullback after 250 points straight up, but we are approaching an area that is critical for both sides.  I think the top of the flag around 1992 needs to be supported for the bulls to carve out a bottom, and being this is options expiration week with a Fed catalyst and we're oversold on the intraday charts, there are very good reasons to expect a playable bounce.  The bull market is definitively showing signs of age, so even if they manage new highs I think we're way closer to the end, but at this point is anyone really going to be surprised if the bears can't keep it down?
There's definitely vol to crush this week BUT let's not forget that in Aug and Sept the options expiration trade didn't work.  Point being we're approaching an important area that has a solid risk/reward opportunity IF the right price action supports the idea.  There's a few things I'll be looking for.  1.  I want 1992 on the ES to hold.  2.  I'll be looking for either a hammer on the shorter term time frames, even down to the 15 min chart.  If a hammer coincides with the support area it gives you more confidence that it's being supported and the risk is defined with plenty of room for reward.  3.  A double bottom or a stop run double bottom.  4.  A red to green back through the open, preferably with one of the other bottoming signs. (I will write about the intraday setups I like another time)  5.  Or a Fed minutes selloff into support that reverses (need to be careful with this one).  If none of these happen, I will wait because if 1992 doesn't hold it's possible we go all the way to the trend line from the lows closer to 1920.
Just seeing the markets gapped down Sunday evening into those support areas and are fighting back.  The ideal bullish scenario is a push higher early in the week and then a retest of this low on Fed day.  If the buyers step in and defend this area, I'll be looking for my way in to the long side.  They would have to close the week strong for confirmation of market strength.
es daily
SPX weekly for a slightly different perspective.  It was a rather impulsive week down, so if we do bottom out and make our way back up to the trend line off the highs, you can expect a battle there.
Nasdaq Comp weekly.  Note that the impulsive week down came from the dot com highs area.  If you view it from this perspective, it could be consolidating before a significant breakout.  As long as it holds the uptrend line from the August lows. the bullish view of this would be a rising wedge into a breakout.  But a loss of that trend line on a weekly basis puts that view in serous jeopardy.  So this next month thru Dec Fed is pretty, pretty important.
comp weekly
For NQ traders you want to see the 4430/50-ish area near the top of the Sept Fed day spike hold as support.  It's currently sitting on the 50-day EMA.
nq daily
Gold daily.  There's a breakdown trade shaping up.  Note how perfectly gold double bottomed at $1073.  It's a bit oversold, so the ideal scenario is a bounce toward $1100 where the 10-day lives or a little higher into the 20-day at $1115.  Let's say the Minutes are treated as bearish, a lot of times the gold market will spike upward on the release and then run into a wall of sellers.  Regardless of how the bounce part plays out, gold is setting up a solid breakdown through that double bottom.  You always have to be careful of a fake-out in these situations, but this is a very good risk/reward setup.  It's one of those trades where you are either right immediately or you bail.  And if you see a way in on a bounce like a rejection at the 20-day, even better because it pads you with some open profit.  To be clear, this doesn't have to happen right now.  Let's say the Minutes are treated as bullish because gold is kinda oversold, then it could bounce for a few weeks and the breakdown could come in Dec.  The point is when gold breaks down through $1073 it will likely make a fast move to the $1000/34 area.
gold daily
Gold monthly.  I'm not the world's biggest Fibonnaci guy, but I do pay some attention to it as a guide and if you measure the bull market in gold from the low at $233 to the top at $1923, the 61.8% retracement is $891.  As long as gold holds that level, the bulls still have hope that we see a big bottoming process and a long-term sustainable rally to follow, particularly when the Fed is forced back into easing down the road.
gold monthly
Oil daily.  Nice head-and-shoulder breakdown. Now it's just a matter of trade management style.  You have to think the shorts are going for the lows but oil likes to back test breakdown areas, which is between $42.58- $43.20.  My style is to take half off and be happy if it keeps going but have room to reload if it retests the breakdown.
Bonds.  So the trend line kept it contained for now.  If you're short you want to see the 20-day cap it just under 155.  The danger with bonds now that they're acting scared of interest rates is if the Fed does nothing again.  See this big triangle they are coiling in?  When that definitively breaks, preferably on monetary policy, it will make for a great risk/reward setup.  If it breaks down even I would be interested and you know I don't like shorting bonds.
bonds daily