Dow Retest A Surging Bull

Dow Jones Industrial Average

Expecting the unexpected can be as dramatic as the surge in stocks coming from several weeks of sliding prices. Technology and the Financials have provided the lift with investors following suit with the much needed volumes to push prices to its biggest one day gain which has covered some ground. A follow through id needed and staying above previous highs would be the key for a validation of directions.

Although, volumes were not considered a volume reversal that triggered a price reversal, it was enough as investors have been dragged again with some positive signals coming from Greece contrary to the IMF global growth outlook on the economy which included the US. However, it was to no surprise that the rally will move on both sides of the market as time and again made mentioned, that this would be the pattern for prices as they swing in both directions. 

Knowing the 'tolerable limits' and 'range parameters' on these price levels are excellent as the Dow continues to hold ground @17500 until now while the recent low on the Dow registered @17714 which pulled back on the day which provided the 1st signal of a probable price change. As a retest to hold above the 18000 on the Dow for the coming weeks would be a critical level. Although, this would be an encouraging sign for long tern trades held since the overall picture remains on the positive tone. 

Remember, that there will always a major correction within a major trend. All we need to do is to be able to pinpoint the pivotal price change on the next turn.

Identifying US DXY Price Reversal

Trend-following the US Dollar Index 'DXY' from its Pivotal price point and reversal formation since the week of July 01 has proven to be a classic pattern where the first signal came through and a follow-through breakout came after the prices stayed above the all important key price level @80.05 on the way higher.

Daily DXY & Weekly Comparative Overlay Chart

Likewise, the shortened trading week on the fourth of July have given the USD Index a typical symmetrical triangle formation on a technical perspective from the its previous corrective price move with a registered low @79.74 basis point figure as shown on the green-circled of a reversal three bar cluster-formation. This is over and above of the positive jobs numbers that fueled the US Dollar recovery and the rally on the Dow Jones Industrial Average & SP which is nearing the 2K mark.

However, the more important process of Cipher3 Analysis is comparing the DXY with the corresponding Futures prices with DXU14 & DXZ14.pdf (On Demand Subscription on Website) where the actual confirmation signal of a probable breakout to the upside was in the making; when the Price Reversal couple with volumes have shown on their respective charts in the attached link of a PDF file on the DX Futures.

NOTE: Monitoring the Futures DX is a sequence of process where the objectives of the prices can either be achieved in reaching their respective supports and resistances ahead of the spot DXY. In these two contract months, the registered lows both dated last 05.08.14 were @79.05 for DXU14 & @79.24 respectively. These reference points are part of the variable reference of importance.

Reference Analysis: AUD & AUDJPY

Benchmark Prices::

Reference Analysis dated February 05: Insight Market Update
                                            February 12: Insight: Market Update ll                                    

The Aussie Dollar & the AUDJPY cross rates; as the tandem currency pairs with the most potential market movers. As such, the relative price action already started earlier within the week where China's contraction can be seen alongside the performance of its stock prices. With barely 48.4 comparatively weaker than Taiwan and Korea PMI / export orders registering above the 56 & 51 respectively. This have dampened the Aussie for the past months until reaching its levels @0.8660 and 88.24 for the AUDJPY cross reference rate.

However, its recent recovery currently back-up to 0.8964 and 90.95 has been a welcome treat from the lows. For medium-to-long term trades have been very attractive for fresh positions anything well within 0.8500-0.8700 and 88.00-89.00 respectively on both pairs. It is actually a bargain price. And that is exactly what transpires when bargain hunting presents itself in the market. No amount of technical nor fundamental takes place specially for most institutional players in the market that applies certain benchmark prices from historical levels to trade.

Directional Trend: USD - S&P vs.

Forex Majors & Cross Rates

A true test of defining a probable trend direction for the USD compared with the S&P versus the currency majors will be confirmed within the last trading quarter of the year. The upcoming trading week would be critical as a probable breakout for these two major leading indicators will take the lead for the rest of the year.

Although, we remain more positive with the continued strength of the USD as corporate earning results may likewise be mix to moderately good as manufacturing would slowly provide a better outcome moving forward for the economy. This week's economic calendar of reports would only provide a glimpse of what some analyst & trader / investors have already anticipated and the uncertainty of global growth still taking over market sentiments in general.

Meanwhile, the challenging technicals from the chart formations of the foreign exchange and commodity markets have expressed a time-line for any particular good breakouts on the US Dollar and the S&P500 index. With the USDx maintaining a sustainable support level @78.50/80 is valid while daily corrective moves are taking place every trading week. As compared with the S&P500 level of 1425.00 serves as the critical extended trend line support from its 1250.00 low since the first week of June. Though, a technically bearish top configuration has been identified that led to the current correction from its high @1465.50-1470.00 range and currently at the 1425.00 levels of support. Watching these two markets would very important for the week's trading.

The EURUSD & GBPUSD

GBPJPY Advances fueled by UE-Data

With some positive note on unemployment declining to 7.8% along with NFP slightly below expectations; the market's price reaction for the USD has stalled. Barely with a few hours of trading left for the week, may lead the rest of the market action and price swing for the earlier part of next week.

Although, the USDJPY has moved higher (currently @78.64) as an immediate reaction from the release of the data; has shown resiliency as it spills-over to the GBPJPY cross rate. Currently, @127.50 the GBPJPY cross had recently corrected and recovered from its decline due to the favorable report and Cable still bullish after barely reaching its preliminary support not lower than the 125.50 levels. Which is a very good pyschological support price.

The weekly exhaustion (doji) candlestick bar was the signal for the decline; while maintaining its trend channel higher in line with the technical trend line support of Cable at the 1.6065. 

This was an excellent ...

Behavioral Price action vs.

TECHNICAL & FUNDAMENTAL - USDX, EURO & CABLE

Fed Ben Bernanke's comments have been played cautiously with the Fed still ready to do more if and whenever they need to to spur economic growth. Many have a mixed of interpretation but however more downplayed hawkish rather than dovish so to speak.

Reviving the US economy with a well controlled inflationary measures as contrary to a stimulus package of QE3 has been a tireless effort for some analyst to keep strategies on trade analysis based on their respective reports, and sometimes to a point of being overly bias. Meaning, that a report from an FX analyst would reflect their bias trade position in the market.

The reliability of an independent-minded trader/strategist where a trade position is based on a current market trend rather than a price call. Calling a currency price closest to its objective is a true to life market call versus a price call on both sides of the trade without the conviction of the market trend to be. If and whenever a market call of a trend has been made and did not achieve its objective then the analysis based on such a call is incorrect. The call can now be corrected based on the outstanding strategies available for the trader whenever the trade position is a mistake too early or a mistake where the trader has no other alternative but to wait it out until such time it goes to his favor or not. A typical trade can be viewed from our Case Study of the Euro. Where a typical good trade was once placed but was left out and still active in the market could have been simply avoided and corrected earlier.

On the Technical & Fundamental Corner: USDx, Euro & Cable continue on our website: http://www.megatrade101.com/

FOREX Technical Perspective: EURJPY

UPDATE as 02.22  While the EURUSD strength delayed reaction even after the EURO group's successful deal, it is only now that the market has gained interest due to most traders were actually back from the US President's day holiday schedule. The USDJPY's price acceleration to 80.28 high have indeed given the EURJPY the fuel to reach its 1st initial objective stated above at 106.31 high as of this writing. There is no actual straight price rally unless enough volumes and fresh risk appetite positions are initiated by renew institutional coming to the market. The only danger that may subsequently arise is a probable formation of candle bars on a day to day basis that may lead to an island formation for a major corrective move supported by some fundamental reason. But for now we do not anticipate one. However, such moves lower would enable us to improve our trailing orders for protective strategies & would be booking the gains accumulated since February 2, 2012. Although, leaving a small number of units to be risked whenever the 2nd leg higher would resume.

PIVOT Price Levels for EURGBP Cross

EURGBP DAILY as of 11.22.11

Identifying the Pivotal point for the EURGBP Cross rate after its continued downward trend momentum from the registered highs of 0.8820 down to the 0.8484 is very difficult. Although, based from our previous market view report dated the 1st of November where we called a probable low between 0.8420-0.8460. (Pls. refer to EURO, EURGBP & GBPJPY price reversal on our website)

The registered low then was at the 0.8484; not too far from our calculations and it was at the 23.6 Fibonacci support retracement levels providing a similar support. And thereafter, the 2nd re-test of that price extension dated the 10th of November and closed above the 0.8550 spinning top candlestick bar for the weekly have indicated a halt on the extension. The succeeding bar was not as signficant as the correlation with the negative news reports in the Euro Zone prevailed and still is up to this writing. As the obvious reports coming from both sides tries to outweigh trade investors to play the markets in a defensive mode. For a detailed technical outlook and analysis please visit: http://www.megatrade101.com/

Do expect some pullbacks in between trading session in Europe, Asia and the US as the coming Turkey holiday is just around the corner.

Only the best for your trades!