Swing-trend analysis for the week beginning Sunday January 12th

Jan 13 • Is The Trend Still Your Friend • 2938 Views • Comments Off on Swing-trend analysis for the week beginning Sunday January 12th

The week begins with a slow start from the Asian markets given that Japan has a bank holiday on Sunday. From Australia we receive data regarding home loans which is expected to reveal that home loans increased by 1.2% in the latest monthly figure. Whilst on the subject of loans we move onto Chinese data, expected to show that loans increased by 589 billion yuan in the month of December, a fall from the previous month of 625 billion. The release measures the value of new yuan-denominated loans issued to consumers and businesses during the previous month.

As Europe opens for trade in the morning session Italy publishes its official industrial production data predicted to rise by 0.6% for December. Thereafter attention turns to North America with a Bank Of Canada business survey and the USA publishing its Federal budget balance. The print for the budget is expected to come in at $44.3billion, a significant difference to the previous print of -$135 billion. The data measures the difference in value between the federal government’s income and spending during the previous month.

Late evening we discover the reading for the NZIER business confidence index for New Zealand. The last print was 38. Above 0 indicates optimism, below indicates pessimism. Source changed series from seasonally adjusted to non-seasonally adjusted as of Jul 2003. Full reports are only available to NZIER members. As the day draws to a close we’ll receive data on Japan’s lending and its current account deficit.

Tuesday reveals Germany’s wholesale inflation growth, expected in at 0.4%, whilst France’s consumer inflation is expected to come in at 0.4% month on month. In the UK CPI is expected to print at 2.1%, with RPI at 2.7%.

Industrial production numbers for Europe are published; the anticipation is for a print of 1.6% positive, an improvement of the negative 1.1% print of the previous month.

In the USA the NFIB business survey results will be published, expected in at 93.2. The retail sales figure for the USA is published, expected in up 0.2% with core retail sales up by 0.4%. Import prices are expected to have risen by 0.3%, with business inventories expected to have risen by 0.4% month on month. The USA’s high impact news and policy events concludes with the FOMC members Plosser and Fisher speaking, naturally the subject of reining in the USA markets’ addiction to quantitative easing/asset purchase schemes will be closely listened for amongst the subjects analysts will be expecting to be discussed.

Late evening we receive data regarding Australia’s car sales, the previous months’ data revealed an increase of 1.8% month on month. Foreign direct investment for China was up 5.5% in the previous month with the anticipation that this figure will be met again. Japan’s 30 yr bond auction is expected to see a rate at 1.7% with a bid to cover ratio of 4.2.

Wednesday we receive the data on retail sales in Switzerland expected in at 2.3% up, late morning Europe’s positive trade balance is expected in at €16.7 billion.

In the USA the latest PPI data will be published. It’s a leading indicator of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer. The anticipation is for a print of 0.5% up from the previous month’s figure of 0.1%. The Empire State manufacturing survey is published Wednesday with the print expected in at 3.2, significantly above the 1.0 published in December. Crude oil inventories are expected to have fallen by a similar level previously of 2.7 million barrels. The USA beige book is published. This analysis is used by the FOMC to help make their next decision on interest rates. However, it tends to produce a mild impact as the FOMC also receives 2 non-public books – the Green Book and the Blue Book – which are widely believed to be more influential to their rate decision.

In Japan the tertiary industry activity is published as is core machinery orders. Machine orders are predicted to have increased by 1.2%. Australia publishes several key data results, inflation expectations should come in similar to the previous level of 2.1%, the unemployment rate at 5.3%, with circa 10.3K new jobs created.

Thursday Germany’s final CPI figure is expected in at 0.4%, whilst the ECB monthly bulletin is published. It reveals the statistical data that the ECB Governing Board evaluated when making the latest interest rate decision, and provides detailed analysis of current and future economic conditions from the bank’s viewpoint. Italy’s trade balance is expected in at €3.88 billion positive. European CPI is expected to come in at 0.8% yearly. The UK auctions 30 year gilts, with the interest rate expected at 3.61% and a bid to cover ratio of 1.7.

Focus then switches to North America with Canada publishing data regarding its foreign securities purchases predicted up to $7.21 billion. Core CPI for the USA is expected in at 0.1% monthly, with CPI at 0.3%. Weekly unemployment claims in the USA are predicted in at 327K. The USA Philly Fed manufacturing index is expected in at 8.8, above the previous reading of 7, with the NAHB index expected in at 58, no change from the previous month. Natural gas storage fell sharply last month by -157 bn units. The USA concludes the day’s key high impact news events with Ben Bernanke holding court with one of his final speeches before handing over the reins to his predecessor Janet Yellen.

Friday we witness the publication of the consumer confidence survey for Japan, expected to reveal a figure of 43.4, up slightly from the previous month’s figure of 42.5. France’s yearly budget balance is published, expected down at €86 billion. Germany’s constitutional court will give its ruling regarding what it perceives to be the legality of the ECB OMT programme. Retail sales for the UK is expected to come in at 0.5% up on the month, concluding the major high impact news for Europe during the week.

In the USA housing starts and building permits are revealed, permits expected in at an annual rate of 1.01 million with starts at 0.99 million. USA industrial production is expected in at 0.4% month on month. The preliminary University of Michigan print is expected to come in at 83.4 just above the previous month’s print of 82.5. Finally JOLTS job openings are expected in at 3.97 million.

Swing trend analysis for major currency pairs, indices and commodities using technical analysis

Our analysis now moves to technical analysis using; the major indicators, key simple moving averages, looming round and psyche numbers, combined with price action using Heikin Ashi candles. All indicators are left on their standard settings and plotted on a daily time frame, with the exception of the stochastic lines, which are adjusted to a setting of 10.10.5 with the intention of ‘dialing out’ false signals.

EUR/USD began its bearish momentum on January 2nd. However, due to fundamental issues in the USA, most notably a very poor NFP print, the security appeared to reverse sentiment dramatically on Friday. Currently PSAR is above price, the middle Bollinger band has been breached to the upside, as has the 50 SMA with the 20 simple moving average being reached. The last week’s final Friday daily HA candle being bullish with a closed body and upper shadow. Both the DMI and MACD are negative whilst making higher lows, with the stochastic lines close to crossing on the adjusted setting, but short of both the oversold and overbought zone. ADX is at 51 with the RSI just above the median 50 line. Traders who have not reversed their direction to long may wish to await further evidence from the majority of the major indicators chosen, perhaps PSAR to appear below price and the MACD and DMI to register positive readings.

USD/JPY ended its bullish momentum on or around January 5th. PSAR is below price, the middle Bollinger line has been breached to the downside as has the 20 SMA. The Heikin Ashi candle for Friday was a doji indicating indecision between buyers and sellers despite the strong downtrend after the poor NFP data.

The DMI is positive, but making lower highs. The MACD is negative and making lower lows. Stochastic lines have crossed but have recently exited the overbought zone, the ADX is at 36 and the RSI is at 54. Traders who are short this security would be best advised to stay so until several other of the most commonly used indicators have turned bullish. As a minimum perhaps the MACD and DMI returning to bullish conditions to align with the PSAR.

AUD/USD ended its bearish momentum on January 5th, since which time price failed to break to the upside with any conviction until Friday’s sell off in the greenback. PSAR is bullish and below price, the Heikin Ashi candles throughout the week were mainly inconclusive with Friday’s of the preceding week taking a spinning top appearance indicating previous indecision followed by a break out to the upside. The DMI is negative, but making higher lows, the MACD is positive and making higher highs using the histogram visual. The stochastic lines crossed late December, but are still some distance from either the oversold, or overbought zone. The ADX is at 30 with the RSI at 50. Traders may regard the break to the upside, experienced by many currencies to the USD as a consequence of the poor NFP print, requiring further momentum to the upside to be confirmed during Monday’s sessions before committing to long trades. However, the majority of swing traders should have already been long based on the indicators and price action already highlighted since January 5th.

The DJIA index broke to the upside on December 18th, since which time the advance in terms of points has been considerable, close on 500 points. On Thursday of the preceding week price began to break to the downside and this momentum continued into Friday. The middle Bollinger band has been breached to the downside, the daily Heikin Ashi candles during the week were mainly dojis indicating indecision. Price is above all the major SMAs. The DMI is positive and making lower highs, whilst the MACD is negative making lowers lows on the histogram visual. On their adjusted setting the stochastic lines crossed on January 7th and have exited the overbought zone. The ADX is at 30 with the RSI at 61. Many traders who are yet to ‘go short’ may feel reluctant to take a short trade on the DJIA given the huge momentum experienced to the upside during recent weeks. Therefore they may consider the need to wait for several other indicators to exhibit bearish tendencies.

WTI oil began a break to the downside on December 31st. Price is below all the major SMAs having broken through the 200 SMA on January 2nd when price also breached the lower Bollinger band. Price has retraced circa $8 dollars a barrel since breaching the $100 a barrel level on December 27th, the MACD and DMI are negative, but have made higher lows on the histogram visual on Friday January 7th. The stochastic lines crossed on the adjusted 10.10.5. setting on December 31st, but are still short of the oversold zone. ADX is at 31 with the RSI at 35. Traders short WTI oil, who took the trade from late December early January, will have gained considerable points through the effective use of trailing stops. They may also consider that this trade has reached an organic point of exhaustion. Before closing and committing to the upside traders would be advised to wait for several of the key moving averages to turn bullish.