This week I'll just run through some charts that are on my radar...
Stocks
US equity indexes continue to consolidate. Below are charts of the Nasdaq 100, the S&P 500, the Dow Jones Industrials and the Russell 2000 futures. Notice where each index is consolidating in relation to their respective all time highs (ATHs).
Like much of 2020, the Nasdaq appears to be leading the way with Thursday's price action putting in a small gap on a breakout of an area of consolidation. A close above 12,200.00 would confirm the breakout, and put in play the reasonable target of 13,600.00 and new ATHs.
The S&P 500 futures are still consolidating around early 2020 highs. A close above 3,543.00 would signal a breakout, and set the next target area of 3,900.00 and new ATHs.
Dow futures are still stuck under an area of resistance set in early 2020. However, it did find support last week and another test of overhead supply could be in the near future.
The Russell 2000 is not only below early 2020 highs, but also below (ATHs) set in early 2018. This small cap index has a lot of work to do, and last week managed close back above an important area of resistance around the 1,600.00 level. The next big test for the Russell will be the 1,715.00 - 1,720.00 area.
Bonds
I want to be short the 30yr. T-Bond below 171^00.
I've tried trading the 10yr. T-Note over the last couple of weeks to no avail. A break and close below 136^30 would be constructive. However, if the T-Note is topping, I believe more consolidating above the 137^00 level lies ahead.
Currencies
The Dollar Index is making a run back down to support in the area of 91.75 - 92.00. Once that area of support is broken, the 88.00 level could come quickly.
The consolidation on the daily chart dating back to July appears to be breaking down. I will be watching the 91.75 level this coming week.
It appears the Euro has made its mind up, but Friday's close wasn't nearly as convincing as other markets like the Swiss Franc. I would like to see a strong close above 1.19000 next week.
And the beat goes on in the Swiss Franc...next stop .85000.
Price in the USD/JPY decisively broke the 104.000 level, and could quickly reach 100.000 in the coming weeks.
Some of the best opportunities exist when the completion of a pattern on a shorter timeframe launches price into the breakout of a pattern on a longer timeframe. This allows for a better defined risk opportunity, with tighter protective stops. The USD/JPY is a great example. A 3+ month Descending Triangle on the daily chart (below) launched the completion of a 46+ month Descending Triangle on the weekly chart (above).
The .77000 level is very important in CAD$ futures. A close above this level could spark a rally to 2017 highs, around .8200 - .8300.
The AUD$ has found support at an area of prior resistance. Supply and demand appear on price charts.
The NZD$ is forming a H&S Reversal on the weekly chart with an abbreviated right shoulder. A close above .6800 would complete this pattern.
The USD/NOK has been consolidating for 9 weeks just above an area of support. Could the 9 week consolidation act as a reversal, or is price headed back down to support? My bet is on the latter given USD weakness, and the fact that recent highs have been unable to get back to highs established earlier in June.
Ascending Triangles carry a bullish sentiment, but this pattern could go either direction.
Hard to be bullish USD when the South African Rand is showing relative strength. Those bags of biltong are getting lighter for US tourists.
Looks like a Double Top in the making. USD/RUB daily chart.
The Pound is basing against the Aussie. A right shoulder could form in the coming weeks.
Daily chart of EUR/NOK. A base and consolidation worth keeping an eye on.
I like this chart because it could provide a launching pattern into an area of overhead supply. I would want to be long this cross before heading into a boundary that contains such long spindles. EUR/CAD daily chart.
I drew a couple lines to show varying neckline interpretations of a possible H&S Bottom on the AUD/JPY weekly chart. If the right shoulder low is in, the symmetry among the shoulders would give credence to the upward slanting neckline. However, I always look for horizontal boundaries, and focus on executing trades based on horizontal boundaries. 76.000 is my level based on the shaded grey area.
Commodities
Precious Metals
One of the big questions in precious metals this week is whether or not Thursday's price action commenced the next leg higher. I think price has more work to do, and that more consolidation is in store.
Below is the daily chart of Gold futures. I can see price continuing to consolidate above the 1,940.00 level over the next few weeks. I would love to be wrong and watch price rip.
The Silver chart looks very similar to the chart of Gold. I see price action since mid-September as a possible head in a developing H&S Continuation pattern. Silver closed the week above an AVWAP anchored to the high of the recent rally. I find this very constructive for the next leg higher and for Friday's low as a possible area of support that coincides with another AVWAP from a lower high.
Grains
The main story in grains this week is, "Digesting Overhead Supply on the Weekly Charts, While Finding Support on the Dailies."
Soybeans had a strong week, closing out at levels not seen since 2016. A key area of resistance between 1082^0 and 1086^0 (shown in grey) has been broken. Next stop lies at a confluence zone of Fibonacci levels with lots of price memory.
Beans have found support on the daily chart, and the 1173^0 - 1184^0 zone remains a logical target on both weekly and daily charts.
Soybean Meal found support this past week at a key Fibonacci retracement level. It would make sense for price to remain range bound between 375.0 - 415.0 while absorbing overhead supply.
I would love to see Soybean Meal form a pennant on the daily chart before heading to the 261.8% Fibonacci extension level around 414.
It still appears that Soybean Oil bounces within a range, but this last week it had its highest close since September 2017. I want to be long.
Below is the daily chart. I might put in a small order just above Friday's high. The problem lies in finding a reasonable stop level.
***Note: COT Data not shown. Currently, Commercial Hedgers hold an extreme short position similar to the position held in late 2019. This positioning could act as a stiff headwind for price at current levels. I will pass and wait for some sign of capitulation by Commercials, but at that point it will probably be too late.
Chicago Wheat found support on the weekly chart around 595^0. Which happens to be the 38.2% Fibonacci retracement level from the 2016 lows.
Minneapolis Wheat found support on the daily chart at the neckline of a completed H&S Bottom.
Corn continues to digest overhead supply found around 420^0. I love that it found support on the weekly chart right around the AVWAP in red. I mentioned in past posts the importance of identifying areas of support and resistance that price repeatedly respects. The AVWAP in red is a great example. Former resistance turned support.
The December contract of Corn has found support along an upward sloping trendline. I couldn't pull the trigger on Corn last week, so I will wait patiently.
Crypto
Bitcoin has broken out and is headed back to 2017 highs and beyond. Past advances indicate wild price swings. However, once 2013 highs were cleared at the beginning of the 2017 rally they were never retested.
Below are a series of Fibonacci extension levels that may come into play.
I think the first stop for Ethereum will be around 570.00 - 590.00.
I know Litecoin is a laggard, but the weekly chart exhibits a large, well defined coil. I like Litecoin above 65.00.
A brief overview:
- Stocks remain range bound
- Bonds remain range bound
- Commodities still eye overhead supply
- USD weakness continues
- Crypto readies for blast-off
Thanks for reading! If you have any questions or comments, please feel free to contact me at ianculley@culleycharts.com
DISCLAIMER: All information and opinions expressed by Culley Charts are strictly that, and should not be construed as investment advice. Market participation comes with inherent risk, and the responsibility of managing this risk lies solely with each individual investor.
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