Wow, that holiday rally was quite robust on Friday. It hit all of my PTs (gold, pound, but I’ve also closed my Bund trade), but more importantly, almost all risk assets have come up to major resistances. That confluence of resistances, especially amplified through so many assets, is what our PFTQ tech trader running the high Sharpe RSI 2 package.
The indicator package still shows holding short, as it hasn’t rallied back to major MAs.
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The best way to structure this would be through: Ichimoku hits, trendline hits, fib hits and finally candlestick patterns. Confidence decreases in this order too, so it’s more or less simple arithmetic to find the best asset to trade this decline.
Ichimoku hits:
Gold, the big one. Actually had my long position from 1710 limited out with that last spike up to 1753. Wiped candle at the end of the day doesn’t do good with momentum either. Additionally, all tests of a blue cloud from underneath has ended (hit, not close above) with the Span A (top line) providing a reversal point, regardless of other indicators. Price target of this one would be first the span B again at 1690, with an even lower one at 1660 (but run a probability analyzer on that).
A large cloud in this case, courtesy of QE3 speculation also gives enough room for scalping. Unless gold closes above 1753, the immediate bias will be negative.
Also look how similar to the DAX30 the technical positioning looks. More importantly if we have a reversal here, both gold and indices will have put in a local top.
The other big daddy: EURUSD. Looking for a capitulation on EURUSD, permabears? This might be your opportunity (well, the first relatively confident one so far). That Span A hit has been a powerful line of resistance, as no upward test has broken it within a week’s trading (as in, the reversal isn’t that fast), in 4/5 times this has happened (the only time it didn’t was in mid-September 2010). However, do please use stops at breakeven, or set very near price targets.
EURSEK: Don’t have much to say on this support hit, though a break of the Span A has been rejected before (remember not to confuse low liquidity gaps with actual breaks today!). Also, USDSEK has broken below that thin cloud and will likely target 6.5000 (technically). Small position? Why not.
Trendline hits:
The Nikkei 225, which has been following that channel since forever. Can’t say I’ve gotten into too many of these even though the lines have been drawn since the 2nd peak. Yes, the top line has been broken, but the fib provides quite robust resistance, especially since it was a very substantial support during April and May of this year. Plus, the bottoms haven’t picked up enough to show a true reversal, so trading this channel is still quite safe by my standards.
Also, this last run was completely caused by USDJPY. The US economy is improving, but treasury yields have exploded these past months, which naturally brings in more FOMC trading, and – not to forget – possible risk aversion due to a lame duck congress (what great timing!). Even though apparently this last drop in bond prices have been caused by foreign dumping, all sources of possible risk (remember that Greece still hasn’t received its bailout tranche even though its “rolled-over” bonds from November 16th will have to be paid on Dec 7th and 14th.)
This, along with a short USDJPY (yes, redundant and a bit dangerous) are my current trades.
AUDUSD: a bit dangerous but including it in this section as well. This pair is being wedged in, but close enough to the top line that would make a trade have slightly over 1. I still wouldn’t trade it as the range has been oddly thin over the last months, and for a similar long-dollar trade, there’s a few that give much better positioning (as in, why not EURUSD at around 1.3150?)
Fib hits:
Bunds, which I closed out after this post as momentum just died. This has stopped at a fib range rather than an actual line in the sand, as previous trading shows the actual resistance has actually been around 142.10 and 141.85. Will actually wait for a conclusive break of that range to re-target 140.40 or so (the Span A cloud bottom).
EURJPY: which has led a coordinated recovery (the Euro and the yen) back to hit the 76.4% reversal line. RSI has reached overbought area, and the HA candles are flattening. Confident? I think so.
Candlestick patterns:
Well, just the one really on USDJPY. RSI, HA and CMF (accumulation or deaccumulation) are showing weakness in the upwards run, and the last few candles (and if today’s is included), should restart the reversal pattern back to the low 79s. Hence, this is the reason for my Nikkei 225 trade, as the timing does match with the Nikkei’s channels. We do have the election coming up, but based on history (as Prime Ministers come and go), there isn’t expected to be a large change. Looks like there’s going to be something troubling in Greece again.
To the best of good buys.
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