Trend trading analysis for the week beginning Sunday November 24th
The coming week’s fundamental policy decisions and high impact news events that could affect sentiment during the week are dominated by housing data from the USA, UK and Australia. Whilst durable sales orders and retail sales from the USA and Germany have the opportunity to surprise.
The UK’s latest estimate of GDP is published, whilst the BoE publishes its financial stability report and the Bank of England governor holds court.
The USA unemployment data is published, with circa 331K new claims predicted, with storage data for USA oil and gas also published.
European unemployment numbers will be carefully watched for signs of improvements as will the latest Italian claims data both numbers expected to remain at circa 12.2%.
Monday’s high impact news events begin with the publication in the UK of the latest mortgage approval figures courtesy of the British Bankers Association. The prediction is for a print of 45.2 mortgages approved by their members in the month up to November 23rd. During what’s considered the height of the UK property market activity, July/August, the approvals figure were circa 6K per month below recent approvals, suggesting that overall activity has increased over recent months. It may be too early to apportion any of the growth over the last two months to the UK chancellor’s Help To Buy scheme, analysts would be looking to see if the numbers stay above 40K over the winter months as a pointer to increased optimism and activity in the housing market. Still on the subject of housing the USA publishes its pending home sales expected in up 2.2% versus the minus 5.6% fall in the previous month.
Late evening sees the publication of the latest BOJ meeting minutes, together with the Australian RBA deputy Governor Lowe delivering a speech.
Tuesday in the UK will see the publication of the UK’s Nationwide Building Society’s house price inflation report. As one of the more modest/reasonable indices the house price increase is expected to come in up 0.6% month on month. The UK also holds inflation report hearings during the day.
The USA publishes data on building permits and housing starts, expected in at circa 0.92K for both. The Standard & Poor’s Case Shiller house price index is published with the expectations that annual house price inflation in the USA will rise to 13% year on year. The Conference Board Confidence index is published, expected in at 72.1, with the Richmond Manufacturing index expected up at 3 from the previous reading of 1.0.
In the late evening New Zealand publishes its trade balance, expected down at -345 million, whilst construction data (completed) for Australia is published.
Wednesday sees the UK’s second estimate GDP figure is published, expected to come in at 0.8%. The preliminary business investment data is published, it fell by 2.7% last quarter the expectations is for a 2.3% rise in the latest figures. The GFK German consumer confidence is published expected in at 7.1, versus 7.0 in the previous month.
Durable goods orders for the USA are expected to fall by 1.5%, the Chicago PMI is excepted to fall to 60.6, with unemployment claims in at 331K. Natural gas and oil storage figures for the USA need watching carefully in relation to the volatility of trading oil and gas.
Retail sales in Japan are scheduled to fall to a 2.2% increase month on month. The New Zealand ANZ business confidence index is published in the evening, as is Australian data concerning new homes sales and private capital expenditure, the latter expected to fall by -1.1%.
Thursday we receive data on German inflation expected to remain in a fairly static range. The Bank of England will publish its financial stability report, whilst the BoE governor Mark Carney will give a speech.
The USA has a bank holiday therefore information from the States will be less than usual. A raft of Japanese data is published late Thursday; manufacturing PMI, household spending is expected to fall to a 1.2% increase, with core CPI up 0.9% year on year. The unemployment rate is expected in at 3.9%, a small drop from the 4% previously. Private sector credit in Australia is expected to be up 0.3% month on month.
Friday sees housing starts for Japan published; the prediction is for a rise of 5.5%. German retail sales are expected to be up 0.5%. Italian unemployment rate is predicted to be at a monthly rate of 12.5%, with French consumer spending predicted to be up 0.3%. Mortgage approvals in total from the UK, including those of the BBA earlier in the week, are expected in at 68K, up from 62K the previous month, but still approx. half of the mortgages approved at the height of the UK’s housing market bubble of 2005-2007, but up significantly from the average of circa 55K per month over 20011-2012.
Europe’s unemployment rate is published on Friday, expected in at 12.2%. Canada’s GDP is published in the evening, expected in at 0.1% up, whilst later on in the evening China’s manufacturing PMI is published with last month’s coming in at 51.4.
Technical analysis of the swing trading opportunities that may occur during the coming week
In this separate analysis we examine the technical issues that may affect the performance and direction of certain major securities during the coming week. We analyse several major currency pairs, indices and commodities by using many of the most commonly uses swing trading indicators. We use the MACD, DMI, Bollinger bands, PSAR, RSI, ADX and the stochastics. We also take note of critical psyche levels, such as looming round numbers, we analyse price action by way of Heikin Ashi candles, and reference key simple moving averages such as the 20, 50, 100 and 200 SMA.
EUR/USD appeared to change trend during the preceding week, the PSAR appeared below price, the MACD and DMI, despite remaining negative, we’re making higher lows. RSI is above the median line at 52, ADX at 25. Stochastic lines have crossed, but are short of both the overbought and oversold zone. Price is above the middle Bollinger band. The 20 SMA and 50 SMA have crossed to the upside. Traders long would be advised to remain so until technical indicators advices otherwise. Similarly traders must keep abreast of any announcements from the Fed with regard to tapering and the ECB with regards to any further reduction in interest rates. Traders looking to take short trades would be advised to await many of the aforementioned indicators are negative.
GBP/USD appeared to reverse trend on circa November 13th, PSAR appeared below price on 14th, MACD and DMI became positive making higher highs on the histogram visual, RSI is at 62, ADX at 14 suggesting that the current trend is lacking strength. Stochastic lines crossed on the 14th on their adjusted settings of 10, 10, 5. The upper Bollinger band has been breached to the upside whilst the 20 SMA has crossed the 50 SMA to the upside. The preceding week’s Heikin Ashi candles were mainly positive, with Friday’s candle being closed with a significant shadow to the upside. Traders currently long cable would be advised to stay long until certain or several of the most commonly used indicators turn bearish. Perhaps PSAR reversing trend would be a signal to close the trade and consider reversing trend trades.
AUD/USD appeared to be developing a reverse of trend to the upside which was disrupted due to the belief that the RBA will indulge in an accommodative monetary easing programme, or reduce base interest rates in order to encourage increased domestic consumption and lower the value of the Aussie in order to stimulate exports. PSAR reversed trend to appear above price, the 100 SMA has been breached to the downside, as has the lower Bollinger band. The 20 and 50 SMA crossed on Thursday’s trading session. The MACD and DMI are negative making lowers lows using the histogram visual, whilst the stochastic lines have crossed and due to the explosive nature of the break out to the downside are close to the oversold zone. Looking at the price action the last two days of the preceding week saw both candles with closed bodies and shadows to the lower side. Traders short the Aussie would be advised to stay so until several indicators have turned bullish.
The DJIA finally broke the historical level of 16,000 in the preceding week. Although it took until the end of the week for the index to break this level and finally close the day out at that record level. The bullish trend which developed as sentiment and the trend changed on or around October 10th has been considerable, circa 1200 points have been added to the index. Currently price is above all the most commonly referred to simple moving averages; 20,50,100 and 200. PSAR is below price with the most recent Heikin Ashi candles being closed with upward shadows although inconclusive which is expected given the major psychological level breach the index has overcome. The upper Bollinger band has been breached to the upside. Both the DMI and MACD are positive making higher highs using the histogram visual, the RSI is in the oversold zone at 70, the ADX is at 30 indicating a strong trend, whilst the stochastic lines are both in the overbought zone suggesting that this momentum mood may have reached a point of exhaustion. Traders who have enjoyed this bullish move since early October need to remain vigilant with regards to the potential for reversal. As such locking in profits by way of trailing stops must be used. Traders considering short trend trades would be best advised to await for several of the most commonly used indicators to turn bearish.
WTI oil’s sell off, from over $100 per barrel, to flirting with closes below $90, has been one of the most enduring in the most traded securities, this security has not followed the normal correlation of mirroring an advance of the DJIA and SPX. Price has recovered its recent lows with PSAR below price, the upper Bollinger breached to the upside, the 20 day moving average has crossed to the upside with. The two days HA candles having closed bodies with upward shadows. The MACD is positive making higher highs, whilst the DMI is making higher lows, the stochastic lines have crossed but are some distance from both the oversold and overbought zones. The RSI is at 44 with the ADX indicating a strong trend at the reading of 43. Traders looking to stay long whilst looking for potential shorting opportunities would be advised to look for several of the most commonly used indicators to return to bearish sentiment.
Spot gold has continued its recent sell off. All significant moving averages are above price. PSAR is above price, with price breaching the lower Bollinger band to the downside on Thursday of the preceding week. The final HA candle of the week was closed with a small shades to the downside. The DMI and MACD are negative whilst making lower lows on the histogram visual. Stochastics have crossed and are currently in the oversold zone. RSI is at 30 with the ADX reading at 33. Traders looking to take long trades should wait until several of the most commonly used indicators turn bullish. Perhaps the PSAR going below price acting as an impetus to close the current short trade and consider changing trend.
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