Mentioned products: SPX, RUT, DJI, EURUSD, GC, CL, TLT, EURGBP, GBPCAD, AUDNZD, TAP, KR
Last week I was writing that we still may have some time before a major top in equities will be formed but a short term correction is likely. There is more and more evidence that the latter is is happening right now. I will keep this introduction short so let’s get straight to charts.
SPX was very choppy but trending lower in the last days. Few important trend lines and supports were broken, so a very likely case is that SPX corrects to at least 2270 level. Don’t forget that RUT is also just above the crucial support and if it breaks, we could see an increase in downward momentum!
The chart I want to show you this week is the DJI chart, which broke an important short term support at around 20,510 on Thursday.
Not only US equitis are bound to correct, also European and Asian equities are at important resistance levels with momentum waning. As mentioned few times already NI225 is leading the way and is half way through reaching the target.
What does this mean for the dollar? EURUSD is squeezing between 1.05 level and a major trendline resistance level in red. The question there is: was the price action 2 weeks ago a bull trap or the first attempt of an upside break? Let’s wait for some guidance from the market..
EURUSD’s action will be very important for gold. Last week I was writing about a potential short term double top which didn’t happen. As a long term gold bull I shouldn’t be surprised to see a move higher.. which placed us just below a crucial trendline. Will we break higher next week or correct first?
Not only equities look corrective but also crude could give back some recent gains. Since I last talked about crude, WTI as expected rallied from about 48 level to almost 54 level. This week the price hit an important resistance and since moved a bit lower. If Brent moves below 55.50 level, we could retrace by 3 USD/bbl.
As discussed last week bonds, ie TLT, broke higher this week where minimal expected target for TLT is at 128. This also exposed some weakness in banks, ie JPM. Let me show you now some other interesting chart setups in equties and forex.
EURGBP is testing a lower trendline of the triangle mentioned last week. Let’s see if we get a decisive break below .8470 this week. This would imply that price could trend below .80 level. Strengt in GBP is not seen only in EURGBP, as mentioned two weeks ago GBPCAD looks like it’s bottoming. But let me highlight AUDNZD which I find quite interesting right now. It is creating a nice falling wedge after breaking above a multi week H&S neckline. One to watch!
Let me finish this week with two individual shares. Kroger is consolidating just above the multiweek H&S neckline discussed three weeks ago. Let me show another potential short candidate Molson Coors Brewing which is also forming a multiweek H&S and is trading just at the neckline.