Trend/swing trading analysis for the week beginning October 27th
Monday. Despite it only being a medium impact news event many investors will be watching for the UK’s CBI data on realised sales on Monday in order to observe if the poor export print published by the CBI last week has had an overhang effect. It’s a leading indicator of consumer spending as retailer and wholesaler sales are directly influenced by consumer buying levels. The realised sales is a survey of approx. 150 retail and wholesale companies which asks respondents to rate the relative level of current sales volume. The anticipation is for a data print of circa 33, the index has been as low as -11 in May 2013, therefore the index does have the capacity to shock, which is why despite being ranked as medium impact, sterling could come under pressure if the print misses expectations, particular on an otherwise quiet day for news regarding the UK.
There are several other USA high impact news events for Monday that could affect market sentiment. Pending home sales is expected to increase to 0.5% month on month from a surprise fall of -1.6% last month. Industrial production data is expected to increase to 0.5% month on month.
The RBA governor Stevens speaks later in the afternoon, investors in AUS and speculators in the Aussie will be looking for any clues regarding a base interest rate cut which appeared to be off the table in last week’s notes from the RBA.
Japan issues a raft of data on Monday; retail sales, unemployment and household spending which if poor the Nikkei could fall with a corresponding rise in yen as a safe haven. Retail sales are expected to rise, unemployment to fall to 4% but household spending is also predicted to increase by 0.7%.
Tuesday’s net lending figures for the UK are predicted to reveal an increase by £2.5 billion, with mortgage applications to rise to 65K per month. Retail sales and inflation figures for the USA are published, retail sales are expected to rise by 0.3% with PPI expected to come in at 0.2%. The USA Conference Board confidence number is expected to print at 76, a 7 month low. Doubtless the temporarily USA govt. shutdown will be blamed for the poor print should it come in below expectations.
Wednesday is a very busy day for policy publications and high impact news events. German unemployment figures are predicted to show a rise of 1K. In the USA the monthly ADP private job numbers (non NFP) are published with the expectation for an increase of 151K in the latest month, down on 166K previously. Core CPI data from the USA is expected in at 0.2%. The FOMC statement ranks as high impact, it’s the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.
New Zealand will reveal its base interest rate (cash rate) which is expected to remain at 2.5%. The accompanying statement from the central bank may offer clues as to monetary easing, or reduction of the rate which the NZ central bank has so far avoided. The ANZ business confidence survey is published on the same day concluding the filing on high impact news events for NZ.
Building approvals in Australia will be keenly watched, the fall of -4.7% the previous month will be expected to be a blip, a rise to 2.9% is expected. The day’s high impact news events are concluded by Japan’ monetary policy statement, keenly watched given the huge monetary stimulus programme Japan is currently engaged in.
Thursday witnesses the BOJ statement and the outlook report, combined with housing starts this flurry of high impact news events could prove decisive on the direction of yen. German retail sales numbers are published, Europe’s unemployment rate is expected to remain at 12%, with the flash estimate for inflation predicted to stay at 1.1%.
Canada’s GDP is expected in at 0.2%, USA unemployment claims are expected in at 344K. China’s PMI manufacturing data is expected in at 51.2, a slight improvement on the previous month. The HSBC final manufacturing PMI is expected in at 50.7.
Friday sees manufacturing PMIs for the UK and USA. The UK is predicted in at 56.5 with the USA at 51.1. The member of the USA FOMC Bullard speaks, whilst the USA manufacturing ISM PMI print is expected in at 55.3
Technical analysis for major indices, commodities and major FX pairs over the coming week.
This swing/trend trading analysis is compiled using many of the most favoured swing trading indicators such as; Bollinger bands, RSI, stochastic lines, PSAR, MACD, DMI and ADX. Heikin Ashi bars are used to establish price action. Key psyche levels, such as looming round numbers and significant moving averages, are also observed…
EUR/USD broke to the upside on October 17th, on the day the USA debt ceiling impasse reached a temporary conclusion. Currently PSAR is below price, the DMI and the MACD are positive and making higher highs using the histogram visual. The upper Bollinger band has been breached to the upside in the last trading sessions of the preceding week, the RSI, at 74.7, is still short of the overbought area. The ADX is at 35 indicating that the trend is strong. Stochastic lines crossed on the 17th on an adjusted setting of 9,9,5 and at 80 and 67 are still both short of the overbought zone. Recent HA candles are closed with upward shadows suggesting that the price action is still bullish in relation to this security. Traders long would be advised to stay long and perhaps look for the PSAR to appear above price in order to stop and potentially reverse their trade.
AUD/USD saw the trend, that had begun on or around October 1st, come to an end on October 23rd courtesy of the RBA of Australia suggesting that circa $200 bn AUD could be used as monetary easing. Traders long since the 1st should have enjoyed a considerable pip gain if they closed courtesy of the PSAR on October 24th. Despite several indicators turning bearish many traders may prefer to wait for further confirmation before committing to shorting the security. The Aussie had hit the 200 SMA in the preceding week to then reject this critical level violently. ADX is indicating a strong trend at a reading of 37, RSI is at 60, out of the overbought zone. The DMI is still positive, but making lower lows using the histogram visual. The MACD is close to the zero line but making lowers lows. The middle Bollinger has been breached to the downside. The last two days’ HA candles are closed with downward shadows indicating that the negative sentiment is still strong. The stochastic lines have crossed whilst in the overbought zone, but are yet to exit the zone on the adjusted setting of 9,9,5. Traders may be best advised to look for further bearish indicator confirmation before committing to a short trade. Many traders will instinctively avoid short trend trades when the 200 SMA has been rejected. Traders wary of taking a short position should perhaps await the DMI to turn negative as an extra security measurement before committing to the short side.
USD/JPY turned bearish on October 23rd as price breached the 200 SMA. Price also breached the middle Bollinger band to the downside. The DMI and MACD are both negative and printing lower lows on the histogram visual, whilst PSAR is negative and above price. The RSI has fallen below the median fifty line at 43, whilst the ADX is not indicating a strong trend at 16. Stochastic lines have crossed and exited the overbought zone. The HA candles are closed with shadows to the downside suggesting that this down trend may have some sentiment behind it. Traders currently short would be advised to wait for a sign, such as a PSAR reversal, to stop and then potentially reverse trend trade direction.
DJIA began its bullish move and break to the upside on October 10th, since which time the bullish sentiment has remained unbroken. The positive news, regarding the debt ceiling impasse, is helping the positive sentiment to propel price to recent record highs. PSAR is below price, DMI is positive making higher highs, MACD likewise. RSI is at 62, with ADX at 20 suggesting that the trend is perhaps beginning to tire. The stochastic lines have crossed and are very ‘deep’ into the overbought area which has been adjusted to 9,9,5 suggesting that this movement may be reaching a point of exhaustion. Traders who are long will have enjoyed considerable points gain since October 10th. Traders must lock in their profits by way of a trailing stop possibly by trailing the PSAR.
WTI oil began its down trend on October 9th finally breaking the critical 200 SMA level once the critical $100 psyche level was breached. PSAR is above price, the DMI and MACD are negative, but making higher lows. The last day’s HA candle was inconclusive. RSI is at 35 with ADX at 25, a relatively week reading suggesting that the trend may be at an end. Stochastic lines have crossed mid trend, both now in the oversold zone looking potentially for a break out. The lower Bollinger band has been breached to the downside. Traders short this security should lock in their points gains by way of trailing stops. Traders looking to close their short trade should be looking for key indicator signs such as PSAR to become positive. Traders looking to take a long trade would be best advised to await for several key indicators to become positive whilst being mindful of the key 200 moving average and the critical psyche number of $100 per barrel.
Spot gold arrested its slide on October 16th, since when the breakout to the upside has been significant. PSAR is below price, MACD is positive making higher highs as is the DMI using the histogram visual. RSI is at 58, ADX at 21, with the middle Bollinger band breached to the upside. Stochastic lines have been breached with both reaching for the overbought zone on an adjusted setting of 9,9,5. The 200 SMA is still some distance from current price with the 50 SMA now breached on the past several days’ trading sessions. Traders long should be mindful of gold’s volatility and it’s on/off safe haven appeal. Traders currently long should lock in profits by way of trailing stops and should close their trade should several of the key indicators turn bearish.
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