$USD SNAPS OUT OF A DOWNTREND -- THE CURRENCY PITS WERE YELLING YESTERDAY -- $XEU THE EURO HEADS LOWER AFTER A FAILED BREAKOUT -- $COPPER PRINTS A BULLISH OUTSIDE DAY -- $GOLD PULLS BACK LOOKING FOR SUPPORT -- THE BONDS WERE QUIET THROUGH THE FED MEETING
$USD SNAPS OUT OF A DOWNTREND ... The $USD started falling the week after the last Fed meeting. Chart 1 shows a 2 hour chart of the UUP which gives us intraday data for the $USD. The six-week downtrend was relatively smooth and consistent. Two weeks ago, the dollar dropped below the October low. After breaking below support, the price stopped declining. With the surge yesterday, it was a bear trap where investors expecting the $USD to decline would have been selling. With the sudden reversal, they were trapped on the wrong side of the trade.
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Chart 1
THE CURRENCY PITS WERE YELLING YESTERDAY... The Fed Meeting seemed to dramatically alter the currency charts yesterday, which is not abnormal, but bonds were relatively stable. Whenever I think of the live trading pits going wild with arms waving and yelling, I can imagine all the trading pits breaking out in huge outcries. Many of the major crosses had dramatic moves. The $CDW was pushed to a new multi year low as an example.
$XEU THE EURO HEADS LOWER AFTER A FAILED BREAKOUT... The $XEU is up against major long term trend line resistance as shown in Chart 2. So we will continue to watch whether or not it fails here. It is at an important inflection point. Chart 3 shows the bullish wedge pattern for the $USD. The current pattern for the $XEU appears to be a failed breakout.
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Chart 2
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Chart 3
$COPPER PRINTS A BULLISH OUTSIDE DAY ... $COPPER had a huge outside day on Wednesday. With all the correlations in the market, $COPPER was whipped to new multi-year lows and then reversed higher with the Fed announcement. In Chart 4, the intraday chart of JJC shows the whipsaw from low to high that created this outside reversal.
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Chart 4
Chart 5 is the daily $COPPER chart. Today it is off 5 cents so it is back inside the two-week trading range. The plunge in $COPPER is a bearish signal for commodities and the $USD surge is usually bearish for commodities. In order for this outside candle to be considered bullish, it still needs to confirm it with price action today or it is negated. Each candle in $COPPER at this point is important after the breaking of major support.
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Chart 5
$GOLD PULLS BACK � LOOKING FOR SUPPORT... $GOLD has pulled back for the last few days. It pulled back very hard yesterday and continues to move today. First of all, the five-year view is important here. Chart 6 shows the price of $GOLD in an area chart. The dotted red line was resistance on the way up in 2010. It became resistance in 2013. Here we are, testing it again. The blue line shows a possible long-term area of support/resistance. The short blue dotted line on the right is a head/shoulders neckline for the July top. Lastly we have the major band of support from 1185 to 1250. It was support resistance in 2009 and 2010. It was support in June and in December 2013. Notice the behavior of the PPO. It has put in a divergent top right at the point where it usually tops out. I have circled that in red.
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Chart 6
Zooming in on the right side of the chart makes it a little busy, but Chart 7 shows a zoomed in view. We have broken a simple 11 EMA so that is a short-term sell signal. We have the blue line, the 200 DMA, the blue dotted head/shoulders support line and the major support area between 1185 and 1250 all below us for support.
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Chart 7
I wrote about $GOLD recently, so let me include a different view.
Below in Chart 8, is an area chart of $GOLD. We can see the two black triangles at the top of the chart. After breaking out to the upside from the first triangle, $GOLD retraced. We have seen this same pattern construction appear recently. While the 38.2% Fibonacci level was slightly higher at $1412, it is important to note we might see similar price action to the first triangle. On the big picture, typically $GOLD and $COPPER move together. Currently we have short term topping structures in the Euro as well, and a $USD move higher that looks impulsive. This would mean $GOLD would struggle to go higher here. Also, the $BPGDM- Bullish Percent Gold Miners Index has rolled over. We can also see on the PPO chart of the $BPGDM, that it is marking a momentum high and may need to rest here. Lastly, the RSI for the $BPGDM has dropped meaningfully.
We do have a higher low in $BPGDM so that is supportive.
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Chart 8
THE BONDS WERE QUIET THROUGH THE FED MEETING... The intraday chart of the bond market's TLT was very interesting yesterday and this morning. The bond move is almost negligible relative to the moves over the last month. Chart 9 is a 30-minute chart that does not reflect any wild anxiety in the bond market. The area circled does not look more volatile than other areas of the chart. After rallying this morning, TLT is giving it back this afternoon. Unchanged really.
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Chart 9
3D PRINTERS PRINT #DOWN... The 3D printer space has been a wild one lately.
Some of the more prominent names in the space have built topping structures. Chart 10 shows the printer stocks building head/shoulders tops as well as a double top for the newer IPO XONE. DDD and SSYS have been the market darlings in the sector.
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Chart 10
HPQ BUILDS AN INSTITUTIONAL BOTTOM... Apparently the sleeping giant for the sector is Hewlett Packard. They are planning their own line of 3D printers. Hopefully the stock will print a pattern of higher highs and higher lows. The large H/S bottom structure shown in Chart 11 is definitely bullish.
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Chart 11
$BRENT IS AT A CRITICAL JUNCTURE... Lastly, I want to include a chart of $BRENT annotated in Chart 12. $BRENT is the crude price that is more reflective of world demand than $WTIC. It has been in a large pennant formation. Recently it appears to be creating a bearish triangle shown in red. The price of crude continues to underperform the $SPX. The volume is diminishing, the MACD has gone negative again on the weekly charts and the full Sto's are barely above 50. As well, $WTIC is below the 200 DMA. With Dr. Copper's drop, the commodities should be watched for bear market behavior. The surge in the $USD didn't help. In general, I have a big red flag out about commodities now with the $USD surge yesterday. This would include $GOLD, $SILVER, $WTIC, $BRENT, $COPPER, $LUMBER. $LUMBER fell below the 40 WMA this week. Maybe they all reverse here, but my macro correlations are starting to show linkages of general commodity weakness. The exception would be $NATGAS.
