This market brief is an overview of the week ahead and some of the events we see as being important to the markets.
Please be aware that our views may change throughout the course of the week, and we do not publish updates of such changes.
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We may take multiple trades throughout the week. Currently Trade View is light Net Short.
AUSTRALASIAN SESSION
ASX – 5217
The ASX has made its move past the March high of 5165 and has not looked back on its way towards last week’s target of 5301.
The pattern that is forming is one of recurrence, which means that if the current upmove repeats the previous move made from Nov 2012 – March 2013, then we could be looking at 5703 as a possible longer term target.
Having said that, 5236 needs to be broken with good momentum in the short term, and our target of 5301 needs to occur before we re-evaluate the continuation of the upmove.
In the short term if 5236 and 5301 prove to be elusive targets then a break below 5195 could see 5126 reached and tested depending on the forcefulness of the down move. If we break below 5126 then we will be looking for 5006.
EUROPEAN SESSION
FTSE – 6633
The FTSE has made a strong move past all levels of interest last week, especially breaking through February’s high of 6550 and settling just 20 points below our momentum target of 6654 outlined in last week’s brief.
Once again the strength of the up move is creating a pattern similar to the ASX and could extend well into 7212 territory before slowing down.
For this to occur it needs to produce some solid up moves and reach 6796 in the short term.
If it is not able to break through 6654 this week with solid upward momentum then a possible down move could occur if 6478 is broken, then a target of 6381 could be possible.
DAX – 8293
The DAX’s strength is formidable at the moment. Back in March the DAX was down by approximately 3% for the year of 2013, so it was only a matter of time before it made its aggressive up move from the bounce off 7435 and reaching a high of 8357. This was approximately 20 points above our target set from last week’s brief, and the total move equated to 922 points in only 13 trading days, or 12%, which brings it back to 8% up for the year.
Unlike some of the other setups the DAX tried to create a pattern of recurrence back in February 2013, but was unable to produce the necessary up move to follow through.
If the move is to continue to our next ambitious target of 8670 then it needs to make moves early in the trading week and hold onto them towards the end and also take out last week’s high of 8357.
If this does not occur, then a break below 8262 with the same momentum shown in the previous moves up then we could see 8003 reached pretty quickly.
US SESSION
S&P – 1632
The S&P made a solid move last week and reached a high of 1635 which was only 2 points away from our last week’s target of 1637.
Other factors that assisted the strength of the S&P were JPY weakness and a solid break above 100 on the USDJPY, and US treasuries not recovering from last weeks damaging down move.
The current up move is actually 1.38 times the length of the previous up move from June 2012 – Sep 2012 which indicates that the strength of this move has overshot the previous move and if the strength continues then we could see 1718.
For this to occur then we need to see 1637 broken with strength and the move to continue past 1660 with solid up bars.
If this is the end for the move and a slowdown takes place then a break below 1617 could see 1595.
NASDAQ – 2978
The NASDAQ continued its up move last week but not with the same strength. Our proprietary trading model FICM indicated a potential slowdown towards the later stages of last week and could pose a potential reversal of the current up move.
On the other hand, a solid start early in the week could prove to lessen any chance of a reversal, and our short term target of 3044 on the upside could be reached.
No strength on the upside and a break below 2961 with strong down bars then the level of 2909 followed by 2897 are real possibilities.
FX MARKETS
AUD.USD – 10024
The AUD found 10353 difficult to break last week and the hint of the RBA cutting rates proved too much for this currency, as we saw 10164 broken and well on its way down to a low of 9961.
If the AUD is going to find its way back up anywhere near 10353 then it will need to break 10095 first before it is met with further resistance at 10179 and 10250.
If it cannot get past 10080 and the RBA hints of more rate cuts then 9621 is our next target.
EUR.USD – 12987
The EUR is trying to break free from its current range – two weeks ago it attempted to break past 13230 and last week it tried to break down past 12927.
This week If a break above 13084 occurs then the next level we will be looking for is 13230.
Otherwise if the break occurs below 12927 then we will be looking for 12814.
Any moves need to have strength behind them with long continuous bars.
GBP.USD – 15348
The GBP’s upmove didn’t continue last week, and as we’ve previously mentioned, if a move didn’t occur early then a potential slowdown could occur. This did happen and we saw our downward target of 15362 reached with a low of 15314.
If the upmove tries it again then the short term levels that need to be broken are 15400 and 15492.
If the down move is to continue then we would like to see 15326 broken again and then 15270 breached before the 15184 plays out.
USD.JPY – 10160
Once the JPY broke through 9941 it was almost a case of how quick can the USDJPY break through 100. It was less than an hour, so if you blinked you would have missed it.
On the 22nd April we mentioned that if the USDJPY broke 100 we will be looking for 10136, well this has certainly come about.
If this upmove continues past 10190 with strength, then we could be in for a bit of a ride, but we’re not even going to try to attempt a target on the upside just yet.
But if we don’t break past 10190 and a solid down move plays out, we would like to see 10055 broken before a possible 9892 is reached. Only if 100 does not hold.
COMMODITIES
GOLD – 1448
After a week of sideways movement GOLD made an aggressive down move on Friday and it looked like it did not want to stop. Eventually it found support at a unique level 1419 before a bounce back to 1448.
The reason why 1419 is unique to us, is it shows no relevance in our mathematical models compared to 1436 and 1444 which was mentioned last week and GOLD closed above it.
If GOLD is to move up from here it really needs to test and break 1468 before moving towards 1504.
If this down bar from Friday is any indication of this week’s move then 1444 needs to be broken with a solid aggressive down bar before we see April lows tested and possibly broken.
Just like the USDJPY we could be in for a bit of a ride, but we’re not even going to try to attempt a target on the downside just yet.
US LIGHT CRUDE OIL – 9596
Last week. instead of ranging 500 points like the previous week, we saw approximately 350 points. After a sideways move all week LIGHT CRUDE fell on Friday down to a low of 9336 which was 10 points below our support level of 9346 and we then saw a bounce back to current levels.
For LIGHT CRUDE to reach 9744 we will need to see our short term level of 9659 broken with a good level of momentum.
If LIGHT CRUDE is to make another attempt at a down move towards 9346 then we would like to see 9440 broken first.
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