Sunday, November 8, 2015

Market Analysis for Week of 11/9/15

I knocked the ball out of the park with this dollar trade.  If you were writing a textbook about perfect technical breakouts, this would be in the chapter called Wow, really?  I did hold through NFP but that's only because I had so much room from my original entry and I was looking to buy it if it spiked against me anyway, which are my two rules for holding through a news event.

Dollar weekly.

Dollar daily.  I'm thinking it will test the highs, but also the horizontal support back at $98.50-ish and I don't know which is first.  So I took half off and I'll look to reload on the next pullback.  There's not really any major news event to derail this from testing the highs until the Dec 2nd ECB meeting and the Dec 3rd NFP.  I could see it forming a flag between somewhere near the highs and somewhere around $98.60-ish over the course of November.  It seems unlikely to me that it breaks out to new highs before the Dec 2nd ECB meeting because it's come quite a ways in a short period of time so it could use some time to consolidate.

Euro daily.  I expect this to test the lows but it could flag out for a few days and backtest the 1.0817 previous low first.  

Gold daily.  I guess waterfall was an apt description.  This is a bit oversold but I wouldn't be trying to play a bounce.  Better off looking to short the bounce.  Maybe a backtest of the downtrend line or the moving averages.   I was more focused on the dollar so I currently only have a small position, but I'd love to add to it.  A reasonable target is somewhere between $1000 and $1034.

Bonds daily.   I had the right idea about bonds but for some reason I shy away from the short side.  I guess I just don't believe in the sustainability of bonds on the short side due to the fact that raising interests rates in a weak economy will cause a faster path toward the inevitable recession.  But if bonds selloff because essentially they decide to get this wrong for awhile it will set up a great buying opportunity because a path of tightening is not going to last.  But big macro things take longer than you would think to play out, so this could unfold for awhile.  I don't know how far the Fed can get before they're forced to retreat but it's only a matter of time.

Bonds are a bit oversold and sitting on support that is the precipice of a significant medium-term breakdown.  If they bounce here it's likely setting up for the Dec central bank meetings.

Bonds weekly.  Look how far they can fall and still be in a bullish uptrend, though. All the way to 135.  

Oil daily.  I wasn't interested last week, but check out the head-and-shoulders pattern forming.  It's not at the end of an uptrend, but there's a clear left shoulder, head, right shoulder.  I think oil is heading for new lows but I haven't decided whether I'm going to play this potential breakdown yet.  But here's an area for your consideration if you're into this sort of thing.  It might be better to wait for the breakdown and the retest of the underside of the neckline, which oil tends to do.  In which case you could use that strength to sell calls above the right shoulder if you're an option seller.  The reason breakdowns and breakouts can be tricky is they often come back and test that area which forces you to decide whether you're going to deal with that or try to take profits and reload.   

The good ole' daily ES.   Look how perfectly it tested the trendline off the highs.  I don't want to discourage anyone from trading this long if that's your thing but the way I look at it we're overbought on the daily charts and bumping our heads into resistance at the highs of a 7-year bull market that just sold off nasty and bounced as much from short-covering as a real big money bid.  So it makes sense to me that the big buyers from the lows would be letting em' out real slow up here and if they want to make a serious run at a new leg higher, they would accumulate again at a lower level after they shake out all the chasers, maybe the 2030s or the top of the flag near 2000.  I just don't understand why the big buyers would be buying up here, but sometimes the degree of risk equities take on surprises me due to the Wall St forced bias and the fact that they're trading OPM.  This is the most abnormal market of them all, so if we go higher without me, I'll just wait for a pullback.  I'm in no hurry.  I'll be here until I'm dead.  It will pullback at some point.  The right play is probably selling a big wide strangle in Dec since whatever move happens over the next few weeks will likely not be sustained. 

Apple weekly so far is a fake-out breakout since it closed back beneath what I consider the inflection point.  I did buy this but closed it on Fri to wait for more info.  One scenario I'm thinking about is a consolidation period for several weeks, especially if the broad market pulls back.  But I'm watching closely.  I just want this to line up with the market as a whole.  A legit breakout will look closer to how the dollar looked.