What’s Ahead – Technical & Intermarket Analysis View

Most of the blog postings I have done have been in a macro view on US equities (aka S&Ps) along with some intermarket analysis with a look at crude & gold. In foreign exchange (aka FX), due to its volatility & 24/5 nature, I find it tough to do analysis, post on the blog, in a timely fashion.  Right now though, we are in an interesting time frame, with a possible turning point in the immediate direction of several FX pairs, equities & commodities (crude oil, gold).

By trade, I am a FX trader. I use fundamental, technical & intermarket analysis. In technical analysis in the FX market, I see what is in front of me at the time (15 minute charts mainly), factoring in what US equities are doing & at times, commodities.  The basic rule of thumb in intermarket analysis is US equities up weakens the US Dollar, in turn when US equities are down strengthens the US Dollar.  The past couple of weeks, crude oil has been in correlation with US equities as well, while gold has been on it’s own. Like anything else in intermarket analysis, correlations do not always hold & can change.

The EURUSD is providing some conflicting & maybe arguably uncertain signals. On the daily chart, there is an inverse head & shoulders on a primary downtrend.  Technical analysts belief is when there is an inverse head & shoulders on a downtrend, it will go higher at the break of the neck line (1.2670) on higher volume. It was the view of many technical analyses to go long at the break.  That did not occur.  Some technical analysts argue this was a valid head & shoulders, yet some did not like it due to its symmetry.

The EURUSD broke though the 1.2670 level twice.  The first time, it was on extremely thin volume (some of the thinnest of the week). 2nd time, it went through (on higher volume for the one 15 minute bar). It then went lower.  It went below 1.2680 Friday beginning of the US session, on higher volume & formed a bear flag.  The flag broke in the last 30 minutes of global FX trading the past week.  Confirmation is needed Monday.

Full disclosure: I bought it when it went though the first time, but got stopped out -15 pips. I did not trade it rest of the week.

Cable (GBPUSD) has been in a downtrend, but has been forming a bear flag.  It also has been in a sideways channel the past week from 1.5080-1.5228. Trading in the sideways channel, on the top part of the bear flag was on lower then normal volume, signaling a topping formation. It finally broke both the sideways channel, broke the lower trendline & breaking the bear flag.  Confirmation is needed on Monday, or a whipsaw will be formed.

All of the elements are showing the trend is reversing in favor of the US Dollar for both pairs, but how does it translate to other parts of the financial markets, such as US equities, crude oil & gold?

As stated on my previous blog posting, all the elements say we are in a relief rally in the S&P.  My basic view has not changed.  It will turn downward at the 38.2 fib or at the touch of the trendline, if not earlier.  The RSI is at 61 (below the over bought 70) & volume has been decreasing day by day (zerohedge.com reported via twitter trading was 40% below average Friday) on this relief rally, which should not last too much longer.

Gold has been it’s own animal.  One day it is a flight to safety, while the next day it is sold when crude oil, US equities are sold with the US Dollar strengthening.  Technicals are the key. It broke a rising wedge on declining volume. Higher volume came when it broke & has touched a lower trendline.  There has been some consolidation, as expected after the move downward, around the trendline, on low volume.  At the break of the lower trendline, expect a big move down with a lot of volume.

Crude oil has all the elements of more downside.  If you look at the crude chart with US equities as of late, you will notice a correlation.  Both go up, both go down, at the same time the past couple of weeks.  A symmetrical triangle has formed, so expect a big move at the break on the upside or downside.  I see it down side, as it will continue to correlate with S&P & there is also a decline in volume.

From the way things are appearing, it looks like risk is being taken off the table again (or will shortly).  The signs not only point to the price action in US equities with the US Dollar starting to strengthen, gold heading lower and the possibility of crude heading lower.  It should be an interesting week ahead!


About Clair Wyant

I am a foreign exchange & stock/ETF trader in Boston, MA. This blog will be dedicated to my out look in the economy, the financial markets, with an emphasis in foreign exchange. When I am not working, I enjoy watching sports, participating in recreational sports leagues, travel & spend good times with my friends.
This entry was posted in Crude, Energy, Equity Markets, FX, Gold, SPs, Uncategorized, US Dollar. Bookmark the permalink.

1 Response to What’s Ahead – Technical & Intermarket Analysis View

  1. Rafael Rosa says:

    The question becomes whether you believe the dollar will continue to track the S&P 500 if a downturn occurs.

    Last week, to the surprise of many, the dollar was falling together with the S&P.

    I say that our old pal inverse correlation steps back in if a downturn occurs. Long USD/CAD would be my play.

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