Mentioned products: SPX, RUT, NI225, USDJPY, GBPUSD, EURUSD, GC, CL, NG, BABA
It’s really hard to write something exciting in the equities world because we’ve been trading in a range for the last couple of weeks. The most important thing right now is to be patient and wait for a signal from the market. There are some bullish and some bearish signs, but nothing very decisive and clear. So in this kind of market is better to stay patient and on the sidelines.
This week I won’t post a SPX chart as there is nothing too exciting to see. Both, break to the upside and correction to 2270 area are still in play! We saw a rally on Thursday, but then lacked a follow through on Friday. Let me rather show you chart of Russell 2000 which is also stuck in a range, but it’s range is much more clearly defined as in the SPX. One important fact to note is that hedge funds have built a huge short position in RUT, so a decisive break above 1385 level could trigger a lot of buying. Confirmation would be a daily close above 1394. Bears better hope the price doesn’t break the range to the upside!
One to watch is also Nikkei 225, it bounced from 200d MA, and is sitting between support and resistance lines. This is a play with a very tight stop loss if it doesn’t work.
The dollar is still deciding where it wants to go, at the moment not a clear picture for sure. USDJPY could go higher from where we are now, I wouldn’t be surprised to see 111.50 in the next couple of days. On the other hand we saw a very strong rally in GBPUSD this week; I was writing that GBP might be forming a bottom, so rally is not a surprise at all. And then we have EURUSD, which is like a hot mess right now.. Was the action few weeks ago a bear trap or premature break? Similar to equity indices it’s better to sit tight and wait for a hint from the market. Similar to the one we got last week in EURGBP; for more info please check last week’s report.
Gold hit an important trendline resistance last week and we are now trading just below it. Very likely we will correct lower now, and some time later break higher. I am not expecting an imminent break, but market often surprises. Don’t forget that we have a French election this weekend and a surprise there could ignite a rally.
This week WTI&Brent crude fell almost $4 as expected. What to expect from now on? We are still in an up trend creating higher lows. We weren’t able to create a higher high which is somewhat worrying but still… I would expect a selling pressure to start waning now, the price could fall a bit more to touch the rising trendline, but I’d expect at least a short term bounce from there. In any case, do not try to catch a falling knife!If you didn’t sell oil last week it might be too late now or you might want to wait for a better setup.
But there is a nice short setup developing in US Nat gas for which is still not too late to place a trade on. On H4 you can see a H&S developing and we are below an important resistace with upward momentum waning and just starting to turn.
Let me finish this week with Alibaba which broke above its small consolidation triangle resistance pattern which was formed above cup&handle support. I’d expect the price to rally to about around 126 with possible extension to 136.