Trend trading fundamental and technical analysis for week starting December 23rd

Dec 23 • Is The Trend Still Your Friend • 2315 Views • Comments Off on Trend trading fundamental and technical analysis for week starting December 23rd

trend-analysisDue to the holiday period the volume of fundamental policy decisions and high impact news events due for publication this week are restricted.

Monday we receive the publication of Canada’s latest GDP figure, the print is expected to come in at 0.1% positive down from 0.3% positive the previous month. Traders and investors will also get to see various figures from the USA concerning personal expenditure data – key indications of overall consumer sentiment over this critical holiday period. Personal spending is expected to come in at 0.5%, above the 0.3% the previous month. This spending may be supported by personal income which is expected to come in at 0.4% positive, above the -0.1% of the previous month.

The revised University of Michigan sentiment report is published on Monday, a slight rise from 82.5 to 82.9 is predicted. There are 2 versions of this data released about 15 days apart – the Preliminary and the Revised. The Preliminary release is the earliest and thus tends to have more impact. This sentiment index of approximately 500 consumers asks respondents to rate the relative level of current and future economic conditions.

Tuesday we’ll receive the latest BOJ report. It contains the statistical data that the BOJ Policy Board members evaluated when making the latest interest rate decision, and provides detailed analysis of current and future economic conditions from the bank’s viewpoint.

Tuesday sees the publication of the French consumer spending figures, expected in at 0.3% positive from the -0.2% negative figure published in the previous month’s data. The UK publishes its latest data on mortgage approvals courtesy of the BBA, the British bankers’ association, in which the expectation is for an increase from 42.8K to 44.2K, a significant rise year on year from the 33.6K published December 2012.

From the USA we’ll receive several key data releases in the afternoon trading session, core durable orders are published and the anticipation is for a rise to 0.9% from the previous month’s figure of 0.4%. Durable goods orders are expected in at 1.7% positive from the previous month’s -1.8% negative. This data measures the total value of new purchase orders placed with manufacturers for durable goods. This data is usually revised via the Factory Orders report released about a week later. Durable goods are defined as hard products having a life expectancy of more than 3 years, such as automobiles, computers, appliances, and airplanes.

New home sales data is published in the USA, the expectation is for a moderate rise from 444K to 449K. The Richmond manufacturing index is also published, expected in at 15 from the previous month’s figure of 13. It’s a survey of approx. 100 manufacturers in the Richmond area which asks respondents to rate the relative level of business conditions including shipments, new orders, and employment. Above 0 indicates improving conditions, below indicates worsening conditions. The index tends to have a muted impact because there are earlier regional indicators related to manufacturing conditions.

Thursday the latest weekly unemployment claimant count from the USA is published; analysts are anticipating a print of 382K from the previous month’s 379K which may be adjusted upwards. It must be noted that, despite protestations otherwise from the USA financial mainstream media, this weekly claimant figure has consistently risen throughout 2013. The corresponding claimant count on December 27th 2012 was 350K suggesting that unemployment is still a significant issue within the USA domestic economy. Thursday sees a raft of data from Japan; household spending is expected to rise 1.9% from 0.9% the previous month. The unemployment rate for Japan is expected to come in at 3.9% for December a tick lower than the 4.0% of the previous month. Preliminary industrial production data from Japan is anticipated to come in at 0.6% from the previous month’s figure of 0.5%. Retail sales in Japan are expected to rise to 2.9% monthly from the previous month’s figure of 2.4%. National CPI is expected in at 1.1% from the 0.9% the previous month.

Friday is a thin day for data and concerns mainly gas and oil storage data for the USA. Crude oil inventories are expected to repeat the previous month’s fall of -2.9% whilst gas storage is expected to fall by a similar amount to the previous month’s figure of -285bn metric therms.

Technical swing trading analysis for the week beginning December 23rd

This analysis will concentrate on identifying key swing/trend trading opportunities by using several of the key indicators favoured by swing traders. These include: PSAR, Bollinger bands, RSI, ADX, DMI, MACD, and stochastics. Only the stochastics are adjusted from their standard setting to a revised 10,10,5 in order to attempt to ‘dial out’ false signals. Looming round and psyche numbers are also observed, whilst the key simple moving averages such as the 20,50,100 and 200 are also noted. All observations are compiled from a daily chart with the occasional reference to the weekly.

EUR/USD finally appeared to reach a point of bullish exhaustion on December 18th, a momentum move that began to develop on November 15th, with further confirmation arriving on November 19th. PSAR is above price, the middle Bollinger band has been breached in the preceding week to the downside; the DMI and MACD are both negative and making lower lows when observed using the histogram visual. Price has closed in on the key moving averages of the 20 SMA and the 50 SMA. The stochastic lines have crossed in the overbought zone and are taking on the appearance of an indicator threatening to break out to the downside. Looking at the price action displayed by the last daily candles of the preceding week the candles were closed with ‘full’ bodies and shallow shadows to the downside suggesting that the bearish momentum move may have more energy. The RSI has fallen below the median 50 line, whilst the ADX is registering a reading less than 20 which could suggest that the current trend may be weaker than other indicators are suggesting. Traders short would be advised to stay short until several of the other indicators have turned bullish. As a reason to close the short trade traders may prefer to use the PSAR indicator as a reason to stop and then await further bullish indications in order to reverse their trade direction.

USD/JPY has experienced an upswing since November 1st, despite threatening to break out to the downside during this time on several occasions; the long term trend has remained intact. Currently PSAR is below price, in the last three daily candles of the preceding week the upper Bollinger band was breached to the upside. Price is above all of the major simple moving averages; 20,50,100,200. The last daily candles of the preceding week were closed with upper shadows. DMI is positive and making higher highs using the histogram visual, as is the MACD. Both stochastic lines on the adjusted setting of 10,10,5 have crossed, but are just short of the overbought area, the RSI is just short of the overbought area at circa 66, whilst the ADX is at 36 indicating that the trend may still have some momentum energy remaining. Traders who are long this security will have no doubt locked in significant pips profit since November 1st, traders looking to short would be advised to wait for several (if not all) of the indicators previously mentioned to align before considering taking a short trade.

AUD/USD began its trend/swing to the downside late October, since which time, despite threatening to break to the upside on occasion, the trend has remained intact. Currently PSAR is above price, the lower Bollinger band has been breached to the downside on successive days since December 12th, and despite the majority of the preceding week’s Heikin Ashi daily candles being full bodied (with shadows to the downside) the week ended with a classic indecisive sentiment doji candle on Friday. The DMI is negative, as is the MACD, but both indicators are making higher lows using the histogram visual. Both stochastic lines have crossed, but are short of the oversold territory. The RSI is reading at 34 with the ADX at 39 suggesting that this trend may have some energy remaining or alternatively could suggest that combined with the doji candle the security could be positioning for a reversal of sentiment. Traders who have profited from this long trend sell off must have gained significant pips. Traders would be well advised to stay short until single or several of the afore-mentioned indicators register a reversal to bullish sentiment.

The DJIA broke to the upside on December 18th having been caught in a range since late November due to the anticipation of the FOMC taper. As news broke of the taper sentiment violently swung to the upside to reach record highs. PSAR is below price, the upper Bollinger was breached in the last three daily HA candles of the preceding week. Price is above all the major simple moving averages, whilst the price action displayed by the last three days’ full HA candles indicate a strong bullish sentiment with all three being closed with upper shadows. Both the DMI and MACD are positive and making higher highs using the histogram visuals, whilst the stochastic lines have crossed and are some distance from the overbought zone. ADX is at 22 RSI is at 65. Traders who are long this index would be advised to stay so until such time several of the indicators mentioned have reversed to bearish sentiment.

WTI oil broke to the upside on December 3rd, since which time the security has risen from circa $92 per barrel to threatening the critical psyche level and handle of $100 per barrel. Currently PSAR is below price and above several of the major simple moving averages with the 20 crossing the 50 early in the preceding week. The upper Bollinger was broken to the upside towards the week’s end. Price is still just below the critical 200 SMA but threatening to breach it. The HA candles of the preceding week were mainly bullish with full bodied candles with upper shadows being prevalent from Wednesday onwards. The MACD and DMI are both positive with higher highs being printed on the histogram visual. The stochastics have crossed and are just short of the overbought territory. RSI is at 62, ADX is at 28. Traders long would be advised to stay long whilst noting the increasing volatile of this security given the seasonal factors. Traders looking for short opportunities would be advised to look as minimum for the PSAR to reverse sentiment.

Spot gold began its latest break to the downside on December 18th following the announcement by the FOMC to reduce their asset purchasing by $10 billion per month. As a consequence gold lost its safe haven status appeal as investors once again favoured the dollar. Gold broke the psyche level of $1200 per ounce towards the end of the preceding week. Price is below all the significant simple moving averages whilst the lower Bollinger band has been breached. Both the MACD and DMI are negative and printing lower lows on the histogram visual. The stochastics have crossed, but are still short of both the oversold and overbought area; RSI is at 38 with the ADX at 30. Traders short spot gold would be advised to stay so until such time several or all of the indicators suggest a reversal of sentiment. As a minimum PSAR turning bullish would be the encouragement to stop and potentially reverse trade direction.
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