This market brief is an overview of the week ahead and some of the events we see as being important to the markets.
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Net Long. AUSTRALASIA ASX – 5157
After a move up at the beginning of the week we eventually saw the ASX finish range bound by the week’s end. 5125 is playing an important part in the overall direction at the moment, as this level was reached twice during the week and each close was higher. Now that the election is over and the Liberals are back in power, this could have a positive effect on the growth of business and the removal of the carbon tax which was a negative for the mining industry.
If an uptrend forms then we would like to see 5125 hold as a solid support level, and any move past 5189 early in the week with solid long up bars could lead the way to 5270 and a completion of the range that was set back in August.
For a down move to occur we would like to see 5136 broken early in the week with a break past 5125. If the downward momentum is strong and should it continue past 5096, then we will be looking at our previous target area of 5087 – 5073. If this area is broken with solid momentum then it could lead towards 4983 as a short term level.
EUROPE FTSE – 6526
The FTSE moved back out of the Standard Deviation Channel early in the week and continued higher to reach a high point of 6544 which was only 10 points short of the range set back in July.
If the up move is to continue, then as mentioned in last week’s market brief, we would like to see 6555 – 6599 broken with solid long up bars. If momentum continues and is strong then we could see 6699 and ultimately 6740 reached.
If 6599 proves to be a solid level of resistance and the down move continues, then an early break past 6494 – 6465 area could lead the way to 6358 and potentially reach 6306.
DAX – 8251
Last week we saw several 100+ point swings in the DAX before it eventually closed higher. It also had another attempt at the 8106 level with a low of 8093 followed by a bounce back up. We will be watching the DAX closely over the next few weeks.
If the DAX is to continue higher, we would like to see a solid break past 5276 early in the week followed by strong moves towards 8341. Once this level is broken then 8459 – 80 would be the next target.
If the DAX continues a longer term down move, then a break past 8191 could lead the way to 8106. If 8106 cannot hold the move and a long down bar takes place, then we could see 8057 – 34 area reached with a possible extension to 8007.
US S&P – 1655
The S&P is now showing signs of volatility as we are seeing 30 point daily moves as the norm. This could be due to the realisation that the Fed may actually stop or reduce capital injection into the markets. The market participants are trying to adjust accordingly, but are possibly unsure of which way to adjust.
If we are to see a move higher, then we would like to see 1663 broken with strong upward momentum, which could lead to 1691 – 93. If there is no bad news released into the markets then 1707 could be tested.
If the longer term down move is to commence, then 1643 needs to be broken with long down bars. This could then be followed by an aggressive move past 1633 which is also the long term uptrend potential support level. If this occurs then we could potentially see a dip below 1600 quite quickly.
NASDAQ – 3133
In last week’s report we mentioned that: “The NASDAQ continues to defy the moves made by the S&P, and is trading in a range at the moment. The big question is, which of the two indexes is correct?” Well, It looks like the NASDAQ was correct as it lead the way up, as did the S&P.
If this is the start of a more substantial up move, then we would like see a solid break past 3170, which would mean that the range set back in July is also broken. If this occurs we could see an extended move to 3194 and even 3200.
If the NASDAQ was wrong and a substantial move down occurs, then we would like to see 3094 broken with solid long down bars which would lead to the 3053 – 33 area. If this area does not provide support then the NASDAQ could see itself fall below 3000 and possibly 2986.
FOREX AUD.USD – 9176
After dipping into the 80’s territory the AUD enjoyed a strong rally to close above the all important 9083 – 9096 area. The question for now; is the AUD entering a new rally phase?
For a new uptrend to start and continue, we would like to see the 9083 – 9096 area hold as strong support before a strong bounce past 9256 occurs. For the continuation to occur, the important area between 9370 – 9395 needs to be broken with strong upward momentum.
If the longer term downtrend is to continue, then we would like to see another break below 9083 followed by a long down bar past 9012. If this is broken then 8889 could be tested and possibly 8780 reached.
EUR.USD – 13175
The EUR took a further leg down last week and reached a low of 13104, which was only 20 points above our lower target of 13084. The current move is also in a potential slowdown process.
If the down move is to continue this week, then we would like to see 13084 broken with long down bars followed by a solid break past 13007. If the downward momentum is strong then we could see 12955 with a possible extension to 12837.
If we are to see a reversal and a move up, then we would like 13177 to provide a solid level of support before 13285 is reached with an extension to 13318.
GBP.USD – 15626
The GBP is showing signs of strength at the moment, even though the USD seems to be strengthening against some of the other currencies. The GBP moved higher and closed above 15597 which is a key level.
If the up move continues then we would like to see a solid move past 15722 with long up bars.Once this occurs and the USD weakens and if the GBP momentum is strong, then we could see the level of 16067 reached very quickly.
If the down move is to continue, then we would like to see 15722 hold as solid resistance, followed by a move back down past 15597. Once this occurs then 15510 will need to be broken with long down bars before reaching 15420. If the momentum is strong then 15282 could provide some support.
USD.JPY – 99.09
After a strong rally last week past 98.63 the USD reached a high of 100.22 which was 30 points short of our upper target of 100.52. On Friday we saw JPY strength come back and the pair moved 167 points from the high to low which was 1.5 times the average daily range for the year.
If the uptrend is to find momentum then we would like to see the USD strengthen early in the week and break past 99.56 before reaching 100.52 with long up bars. Once this is achieved we could potentially see 101.43 being reached.
If Friday’s move was the start of a bigger downward move, then we would like to see another long down bar breaking past 98.63 before reaching the 97.90 – 56 area. If this level is broken then the pair will be back inside the longer term downward Standard Deviation Channel, which could see the pair reach 96.14 if the momentum is strong.
COMMODITIES GOLD – 1391
After almost reaching its range GOLD had a breather and moved back down to a lower level. Last week we saw it dip back below the Standard Deviation Channel before closing above it. The important thing to observe is that it has also closed on the previous level of resistance which it was not able to hold as support.
If GOLD is to continue its move higher, then 1391 needs to be broken and hold the level as a solid level of support this week. Once this is accomplished, then a solid move with strong upward momentum needs to break past 1436, which could ultimately lead GOLD towards 1455 and 1476.
If another down move commences, then we would like 1391 hold as solid resistance followed by a break below 1373. Once this occurs we could see a move back down towards 1353 and eventually 1324. Depending on the momentum 1282 might be reached.
US LIGHT CRUDE OIL – 110.23
With a potential US strike on Syria looming, OIL made some aggressive moves up towards the end of the week and is now above 109.37 which was an important level that needed to be broken on the way up. The one thing to note here is that the range has been met.
For the up move to continue we would like to see a solid start to the week with strong up moves. If OIL breaks through 112.13 we will be watching the levels 114.06 and 119.11.
If the up move slows down, then we will be looking for a break past 108.50 followed by 107.21. If this occurs, then we will be looking at 106.43 where OIL could potentially find some support.
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