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Please be aware that our views may change throughout the course of the week, and we do not publish updates of such changes.
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AUSTRALASIA
ASX – 5351
The ASX continued its late rally from last week and has now entered back into the standard deviation chanel by breaking a key level of 5315.
For the up trend to continue, we would like to see 5315 hold as a strong level of support and then lead the ASX back towards 5385. If 5385 is broken with solid momentum we could see 5427 reached (this would complete the range set back in August). If the upward momentum is strong with long up bars then we could see an extension past 5481 and possibly reach 5500.
For another down move to start we would like to see a solid break back down past 5315 with long down bars and solid momentum. Once this occurs then 5250 and 5207 could be challenged next. If they provide no level of support then the down move could extend to 5144
EUROPE
FTSE – 6617
The FTSE started last week with a strong upward move to finish up 100 points higher than THE previous weeks close. In just 2 weeks it has put on over 300+ points.
For the upmove to continue, we would like to see the range met at 6657 which is also a FICM level. Once this is reached a breakthrough with long up bars and solid momentum would allow the FTSE to reach 6714, and if the move is strong enough our next FICM level of 6739 could also be reached.
If 6657 becomes hard to break and we see a move back down, then 6598 and 6531 could be the first downward targets. If 6531 is broken with long solid down bars then 6483 could be next. If it does not provide any support and is broken with strong downward momentum then we could see 6421.
DAX – 8842
After all the hype and rhetoric by the US politicians the DAX has not shown the same level of enthusiasm about the moves. It did rally 200 points but not with the same veracity. It is also near the end of its process and range which we will be watching closely.
For the DAX to continue higher we would like to see the range met (8912) and broken with solid long up bars. Once this level is broken it needs to hold as strong support which would allow a new upward process to take place which could then lead the DAX towards 9190.
If the DAX finds 8912 difficult to break then a move back down to 8744 will be the first step of a short term reversal. If 8744 is broken with long solid down bars then 8674 could be seen. If this is broken then 8548 could be reached quickly and if it does not hold then 8428 needs to be watched.
US
S&P – 1742
Now that the politicians in the US have agreed on a short term fix and have given the markets a direction forward, it is time for the markets to get back to what they do best (price discovery). The S&P kept going up last week and it is now once again at new highs.
If the agreement was what the markets needed, then for the up move to continue higher we would like to see 1752 broken with the same momentum we saw towards the end of last week. This would give the scope for 1776 to be reached and if the momentum is strong enough then 1797 is possible. However, we would not be surprised if 1800 is touched.
If somehow, this is seen as a negative for the markets, then the down move could occur if 1726 is broken with solid down bars. Once this occurs we would like to see 1712 – 07 area also broken with solid long down bars which would then lead the S&P to fall towards 1696 and eventually 1680.
NASDAQ – 3352
The NASDAQ followed the lead of the S&P last week and displayed a strong rally. The NASDAQ is now only 20 points away from the full range set back in April – May. The important thing to watch here is that once a range is met it needs to be broken with a solid move, otherwise a reversal could occur quickly.
If this upmove is to continue and take full effect, then we would like to see 3373 broken with solid up bars, once this occurs this level needs to become a solid level of support before a move can be made towards 3400.
If the range highs are hard to break then a solid move back down could see 3256, if this level does not hold then a break though it could allow the NASDAQ to reach 3217 and 3198 respectively.
FOREX
AUD.USD – 9675
The AUD regained its upward momentum last week and rallied 200+ points to finish stronger and close above its range, and it has now restarted its process.
For the uptrend to take another leg higher we would like to see 9754 broken with long solid up bars early in the week followed by a solid move past 9797 and 9817 before upward revisions are made.
For another down move to restart, we would like to see 9651 broken with solid downward momentum which could lead to the 9576 – 34 area being tested. If this area is broken then 9464, which would be the lower end of the Standard deviation channel would be the next level of interest.
EUR.USD – 13684
The EUR began the week flat but found strong upward momentum at the end of last week to close 150+ points higher and is almost back to a full retracement of the highs set back in Jan.
If the EUR continues to gain strength then we would like to see 13708 – 30 area broken with solid upward momentum. Once this is achieved the next level we would look for is 13847 and if this too is broken with long up bars then the potential upper target could be 13933.
If the USD finds strength against the EUR this week, then 13624 needs to be broken early and the area between 13585 – 25 needs to show no support. If this area is broken then 13432 could be reached on the way down where some support might be found for the EUR at this level.
GBP.USD – 16162
The GBP started last week flat, but as other major currencies against the USD found strong upward momentum, the US might not taper for longer than expected.
It is important to remember that the US is thought to recover quicker than the European countries, and if so then the moves could be sharp the other way. So be prepared.
For the up move to continue, we would like to see a strong move towards 16225. Once this is reached then for the next leg to take full effect we would like to see 16260 broken with long up bars and strong momentum, which could then lead to an ambitious extension of 16422.
For another leg down to start, we would like to see an early break of 16112 followed by a strong move past 16073-33 area. If the downward move has strong momentum and the levels mentioned are reached quickly then 15841 and 15722 will be the next levels monitored.
USD.JPY – 97.63
In last week’s brief we mentioned that this pair is competing with each other back and forth, and this week it was the USD at the start and the JPY at the end.
For the new up leg to restart we would like to see strong long up bars through 97.91 and 98.11. Once these levels are broken then 98.81 will provide the stepping group for a push up past 99.14 and possibly an extension into the 100 area.
If the medium term downtrend restarts then 97.55 needs to be broken early in the week with long down bars before 96.73 is reached. Once this occurs, then 96.20 will become an important level for this move, as if it holds then it may go back up, but if it doesn’t then 95.40 is a target in sight.
COMMODITIES
GOLD – 1315
In last weeks brief we mentioned that GOLD is finding it difficult to rally in the current market environment. This week it is the short term traders who are finding it difficult to trade as we have seen calls from traders to go short GOLD near 1250, which was then closely followed by a rally. It’s important to remember that In 2009 – 2011 GOLD rallied in line with the S&P.
For an upmove to restart we would like to see 1351 broken with solid upward momentum followed by a solid break past 1380 and 1393. For the possibility of a longer term uptrend to form then 1391 – 93 needs to become a solid level of support.
Even though we are not out of the long term downtrend yet, for it to continue we need to see a solid break past the 1289 – 82 area before we can see 1255 again. For this level to be broken we would like to see long down bars towards 1225 and if this happens we will revise lower targets.
US LIGHT CRUDE OIL – 100.79
OIL continued its move down last week but in a hesitant way, but it seems that it does not want to go back below 100.
For the up move to restart then we would like to see an early break past 101.87 followed by a strong break above 102.99 could lead OIL towards 103.67. If the upward momentum is strong then 104.12 will be an important level to watch as it will either act a strong resistance (bottom of Standard Deviation Channel ) or be the precursor for a continued rally.
If the down move continues and the full range is achieved, then 99.42 needs to be broken early in the week. Once the range is met at 98.60 then for further down moves this level needs to be broken with long down bars which could lead to 97.44 being reached. Any breaks below this level could see oil back in the 94’s.
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