Mid-Week Chart Analysis 25 April 2012

A view of selected charts to watch ahead of the FOMC rate statement and the UK GDP announcement. All charts are 4 hour charts unless stated otherwise

SPX Futures


The /ES is rangebound at the moment in a 30 handle area between roughly 1360 and 1390. My usual plan is to wait until the range is breached in either direction before making a move, and I see no reason to do otherwise here. A move higher will open up the 1420 yearly high, while a move lower will open up first the 1340 area and then the 1320-25 region. Having broken down the trendline from the last October bottom, I’d be inclined to play for a move lower to finalize the correction.

Light Sweet Crude Futures

Also in a range here, trapped between roughly 101-105 after falling out of bed from the 105-110 of earlier this year. Once again, I’d wait until a breach in either direction before buying or selling. Below 101 there isn’t much until 98 and then 95, where I think we’ll see some support come in. Prices rising above 105 could lead the way for new yearly highs to be made.

10 Year Treasury Futures

Since falling out of bed in the middle of last month, there has been a nice recovery. It has petered out though, with the spike from 130 settling into a nice channel in red. It slowly eased its way up into the yellow band, which represents the top prices of the year. Ominously price has both leaked out of that yellow band to the downside, while failing to reach the top of the red upward channel. I wouldn’t be against a short here at prevailing levels, although I got it wrong last time looking for the move from 127′ 26/32 to peter out much sooner.

Copper

Copper has broken down from the range it’s been in since the start of the year. I’m looking for a decline here to at least match the length of the range (roughly 26 cents). That would take us to 3.45 on the downside, which coincides nicely with some support. The circled area in gray is a potential area from which to short should the price travel back into the range. I’m leaning towards selling here at the market, getting out if the price gets over 3.73 and trying again in the circled area.

Gasoline Futures

The upper red channel represents the lower bound of a range established by a huge breakout move in late February. Price has now broken down from there and is seeking to test that lower range from which the original breakout commenced. I’d be a buyer in the range. Should price get below, the big test of the longer term uptrend in gasoline would be how prices react to the 2.85-2.95 area on the chart. It isn’t pictured, but this area was prior resistance for the longer term move, and should be support if the trend is indeed intact.

Gold

Gold still seems to me in a longer term correction of the overall 10 year bull market, so I’d be trading it from the short side. The yellow channel provides a decent guidance, although it’s been a choppy ride over the last month or so.

Selected Currency Pairs

EUR/JPY is in the midst of a corrective up move in my view, one that could last until the yellow line at 108.5. It could also extend further to the red range above that. It’s large enough that I would consider taking a long position, but only a small one. The down leg that began at the start of the month seems to have exhausted itself, but I think we are on the last leg of a corrective move that will reverse and resume the trend lower.

EUR/USD has been incredibly frustrating to trade. As it stands, we’re in a big flattened triangle, which has held 1.30 very nicely. The rallies from 1.30 have been weakening, and this could portend downside eventually, however it’ll be prudent to see how the pair reacts to the FOMC statement before taking a position.

USD/JPY exploded from the lows of 76 in late January to run to 84.17 before correcting. The correction has been roughly 50%, which, along with yellow line support being held, and the pair seemingly making a higher low, suggest that a move higher is on the cards. This is partly the basis for my contention that the EUR/JPY might have some upside to it, even if it is limited. The red downtrend line needs to be broken however.

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