Market Views 27 January 2014

The theme for this week seems to be various markets in corrective mode, the depths of which remain to be seen.

Click the charts for a larger view

S&P 500 Futures

Weekly View:

ES weekly

The above chart is a weekly look at the bull uptrend since the depths of the financial crisis. The bottom  trend line begins in the summer of 2009, and has been respected ever since. The top red trendline has defined the price action in 2013.

The action last week has potentially broken the 2013 trendline, which heralds  a correction, perhaps ultimately reaching the bottom red trendline which defines the larger recovery. The time frame would be sometime in mid 2014, but we’re getting ahead of ourselves here.

Four Hour View:
ES 4h

This closer view of last weeks action clearly shows the possible break of the 2013 trendline. It is interesting to note that the bottom from early October seemed to violate the trendline before snapping back, and the same thing may happen here. In the extreme short term (Monday-Wednesday), I’d be looking for a bounce. I do believe that as the week goes on we’ll see an ultimate settling in one of the price bands outlined by the three yellow price lines. They are all 20 points apart, with the lowest of them being at 1740. For me, 1740 is a line in the sand which will, on a medium term basis, confirm whether or not the corrective period will continue further down to the longer term trendline from 2009, as intimated in the weekly chart. A hold there, and I believe the market will attempt to make new highs. But for this week, a relief rally followed by testing 1740-1780 seems to be the order of business. Breaking past 1820 to the upside invalidates this.

10 Year Treasury Futures

Weekly View:

ZN Weekly

What jumps out for me is that in the latter half of 2013, the long term trendline that began in 2007 seems to have broken down, and as such I’m particularly bearish. Having said that, the failure to break below the September 2013 low suggests that there is still some upside. The yellow line at 128 is clearly an important level,having served as such in the past, but I believe it may be breached to the upside, in the context of a corrective rally to the 130 area. My longer term view is that we’ll see the /ZN at 118 or thereabouts towards the end of hte year, but the road there could be an interesting one.

Four Hour View:
ZN 4h

As you can see, the September low to the left has not been broken, and both trendlines defining the subsequent down trend have been breached. I believe this above chart merely represents a corrective phase in the context of a larger bear, as described above, however there is plenty of upside still remaining. Those with Elliott Wave persuasions may see the makings of a clear C wave. This would portend a move to above 128, seeking 130.

Crude Oil Futures

Weekly View:
CL Weekly

Oil has been in a multi year triangle formation, which has recently been hit on the downside. It has double bottomed there, as shown in the closer four hour view below. Usually, these patters are continuations, meaning the trend that preceded it will prevail. This means that crude is more likely to resolve to the upside, which is past the $112 area. Similarly, below $91 represents a possible breakdown in the triangle to the downside. Below is the four hour view.

Four Hour View:

CL 4h

Gold Futures

Weekly View:
GC Weekly

For me gold is still in a down phase, even though I’m a longer term bull on gold. The red trendline defines this down move.

Four Hour View:

GC 4h

The failure to break down below the lows of last summer should be slightly worrying to the bears, as is the nascent break of the teal trendline. The red trendline is the main trendline from above. It isn’t out of order for gold to rally towards that red trendline over the coming weeks and months, perhaps capping out at $1350-1400

USD/JPY

Daily View:

usdjpy daily

The red triangle above encompassed much of 2013, and was breached late in the year. The rally to new highs was expected, and the current reaction equally should have been expected.

Four Hour View:

usdjpy 4H

Much like the SP500 futures, I do believe that we’ll see a bounce early in the week which gives way to a lower low, or at the very least a test of the current levels. I did not draw the levels on the chart, but I am looking for the price to ultimately settle between 100 and 101. It wouldn’t be surprising to blow through those levels and go even lower, as 99, 98 and 97 are all levels which make for logical support points given they represent levels from which the triangle break began.

That’s it for this week, good trading. Until next time.

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