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EarlyBird – Technical Analysis CFD Trading Report – The Day Ahead

Dow Jones – 12,017 -1.75%
Base Metals Negative
US Gold CFD: 1723
Oil WTI CFD: 92.60
Copper CFD: 364
US Dollar CFD: 76.20
EURUSD 1.3950
AUDUSD 1.06
Dow Jones CFD 12,070
S&P500 CFD: 1,268
FTSE 100 CFD: 5550
SPI CFD 4263

News
NEW YORK (Dow Jones) -- Japan's record intervention to weaken the yen rippled through volatile markets Monday.

The dollar jumped against a broad array of currencies after the Japanese government spent an estimated Y7 trillion -- nearly $90 billion -- on its first intervention since August. The dollar was recently at Y78.02, from a post-war low of Y75.31 before the intervention, according to EBS via CQG.

The stronger greenback in turn pressured commodities prices lower. But markets were already shaken by the fate of brokerage MF Global, which filed for bankruptcy protection Monday morning. New doubts about Europe's ability to contain its sovereign-debt crisis also worried investors.

CFD Commodities

US Gold CFD: 1723
The Elliott five waves up is completed at 1750, consider this Wave A of  an ABC corrective pattern. So the Wave B is underway and which will be in three swings, three waves abc 5-3-5 structure, the norm is an 61.8% retracement of the Wave A, but that’s not always such a good guide, I normally observe the first swing, in this case down, I look to see if this first swing down is five or three waves, as three waves is corrective and five can be either part of a larger correction or and impulse wave (five waves and direction) This is a very important point to understand, this is the time to put on the detective hat and observe.
If it is going to be five waves down in the first swing, this means after a small abc rally there will be another five waves down, which you can trade short.
So the move down so far is in three waves, but it can turn into five waves, this is time to just stand aside and observe, if it does become five waves, then observe the abc 5-3-5 wave rally and look to short, also from a trading point of view you can use the price (tradinglevels) as resistance to help with the trade set up.
For five waves down we would need to see a move just under 1700. If you wanted to move in closer then you can use the 72 / 1720

Oil WTI CFD: 92.60
While Oil is above the MediumLevel ML9 / 90 it is supported, if it finds support on top of Group1/ 93 (91 I 92 I 93) then it’s ready to move higher still, this is the next step. But while the price has not found support on to of 93 (retested support) then it’s still part of 90 and you have to wait. The trading point of view is more important than the analysis point of view, so either support on 93 for a long trade or 90 as resistance for a short trade.

Base Metals

US Spot Prices (in l/b)
US Copper:           Last: 3.58-
US Nickel:             Last: 8.83-
US Zinc:                Last: 0.88+
US Aluminium       Last: 0.98-

Copper CFD: 364
The reaction and the move down in copper from Subgroup2 (SG2) (365 I 372 I 380) so far is in three waves (abc) a bullish corrective pattern (A move under 356 would change this) From a trading point of view the resistance is 372, you would need this as support to trade long, you would also need this to be long in the Materials sector and any commodity dollars.

Forex

US Dollar CFD: 76.20
The Bank Of Japan intervention has spiked currencies, for a wave count we should allow the price to settle. The important price point for the Dollar is the 76.50 as support or resistance For the Euro the 1.40 is the line in the sand and we also should allow it time to settle into this price point as support or resistance and pick up the trend from there.

EURUSD 1.3950
TradingLevels: The 1.40 is the main theme here and in the slightly bigger picture we should expect the price to swing across this price again once the move down is completed. The current low is supported from a trendline support from the 20^th and 26^th
Sublevel, support on the Midpoint 13950 would see the retest of SG2 (13965 I 3972 I 13980) this is where the supply (sellers) start into the 140, this is the price action would get messy, so level it alone here.
Elliott Wave: The move down from the high above 142, the waves structure appears to be five waves (impulse) once its completed expect an abc rally then another five down.
We were expecting a top in the Dow/SP500 but the SP500 has not moved down as much as the euro so there is a parting of the ways here, this markets will pull back in line
Trading Strategy: In the weekly and daily charts we know there is supply above the 140 with the 144 being pivotal and the BOJ was a catalyst at the 142, so in this slightly bigger picture of Minor degree we should be looking for the next lower high, the retest of supply, we are currently completing five waves down and once completed should see and abc rally with the resistance on both sides of the 140, so just allow the retest into this zone and look for a series of retests into resistance as weakness to short. In the meantime just trade the sublevels and scalp between the sublevels

AUDUSD 1.06
TradingLevels: The move down from the 28^th 10752 to the current low is in three waves so far not five, we need to allow this move down to play out to see if we get five waves, which is likely and if this is the case then we have a high in, as this can also line up with the US Indices having a high in place and the ASX200 with a possible completion of a longer term corrective pattern. Regarding the levels the 105 is it, the next step however is the 106 as support or resistance and this will take a little time to develop as support or resistance
Trading Strategy: The 2:30pm  AUD  RBA Rate Statement      
Apart from the Cash Rate at 230PM, on the intraday chart the move up from the current low appears to be an impulse wave, so the corrective pattern at 106 would be an abc correcting the impulse wave up, so if the 106 and find support then be on that side, you should also work through the SG1 and you know if the SG1 10630 develops support you can use that step up, the supply is not until the 10672 area. On the down side if the 10572 SG2 zone developed the resistance you need to look for short trade set ups back into 105.

Indices

Dow Jones CFD 12,070
TradingLevels: As you know, I have been mindful of a top here at the 12,272 SG2 and 12300 based on the Elliott count and we needed it to play out and it is playing out, the tradinglevels point of view is the 12,000 as support or resistance and this will take two or three sessions to play out, so patience is required
Elliott Wave: The Wave (2) rally can now be completed? But of course we would require evidence, and this would come from the structure of any move down, in the meantime even though we are considering a serious top to be in play, we should allow the price to play out across 12,000 as support or resistance.  The 12,000 is not really an important number, it’s not like the previous level 11,500 MediumLevel or the 13,000 MajorLevel, the 12,000 should be treated as a MinorLevel, that’s not to say it’s not important, as we will use it as support or resistance as the price swings across it and eventually finding balance
Trading Strategy:  The move down, it is in three waves (corrective) will it develop in five waves Impulse? Will the 12,000 develop as support or resistance, we should be patient, if you  have been short from the 12272 are then continue to hold short and look to add on the failed retest of 12,000 if and when it comes and support back in top of 12,200 is bullish to 12,300

S&P500 CFD: 1,268
TradingLevels: basically a reaction at 1300 and in terms of timing the 1272 is the turning point, the wave structure down is like all other markets it’s in three waves not five so at this point in time the move down is bullish corrective until proven otherwise, the otherwise would be a move down through the Midpoint 1250
Wave count: even though we have been looking at a top here, the current move down is not confirming a top as yet and may not we simply have to wait
Trading Strategy: Allow the move down to complete, so we can see if its five or three waves, three waves would see new highs above 1300 and five waves would see the price lower

FTSE 100 CFD: 5550
TradingLevels: Looks like the 72/5772 and 5800 have done their job; there is good support into 5,500 and lower as you can see, but there is also strong selling.
Elliott Wave: The move down is an impulse wave, even though it’s not completed, this certainly helps confirm a top being in place. The price will work lower just not as quick, firstly because the wave structure will be a series of fourth and fifth waves and the generals support from 5400 to 5500. The Dax is in the same boat but not as severe, the Dax’s resistance was, is the MediumLevel 6,500 which lined up with the 5800 on the FSTE, The Dax would need the 5800 as resistance
Trading Strategy: Once the five waves down are completed we will see three waves back up (abc) we can look to gain some longer term short positions there if the other markets line up to

SPI CFD 4263
TradingLevels: 4300 is the top of Minor Group 1 and is critical for any longer term bullish move up, the current move down is retesting support 4200+, if it cannot find support then there is no Bullish move and instead a top would be in place, a top from large corrective pattern we have been working through since Aug, but this is too early to tell.
On a degree smaller, the move up from the last low 4 Oct, has it’s 61.8% retracement roughly around  the 4000, so until the 4000 is resistance we can treat the current move down as corrective but only for that time and space
Elliott Wave: We should focus on the moves down in all markets, work out the leaders and followers, the main objective is to work out if we have five waves down or three waves down
Trading Strategy: be on the right side of 4272  2:30pm  AUD        RBA Rate Statement      

Summary

Friday’s assumptions seem to be correct as we now see weakness creeping in, but we don’t have enough evidence to call a top in for the US markets as yet.
All markets are moving together as you know (fear based), the Bank of Japan’s 90 billion intervention has distorted the last of the intraday wave structures up we were looking at, that is we did not see the last five waves up for the Indices local and global, but we should not worry about that, but spend time counting the structures downwards, simply to work out if they are in five waves or three waves.
On Fridays report it was mentioned to tighten up stops lock in profits, if you haven’t done so then I suggest you do and exit long trades, let’s not think of being long until we see more of the current down structure, if we are indeed only seeing a pullback we will have plenty of time to position for long positions.
With Monday being negative, this places the weekly cycle into a negative cycle, this was also apparent on Friday.

Last week we were wondering which skeleton would fall out of the closet next and it appears to MF Global, If you have accounts here, now is the time to exit  

Trading Quote
Opportunities change, strategies change, but people and psychology do not change. If trend-following systems don’t work well, something else will. There’s always money being lost, so someone out there has to win.

Today's Financial Events
Time     Currency   Detail     Forecast    Previous
  
8:45am  NZD        Labor Cost Index q/q    0.9% 0.5%  
9:30am  AUD        AIG Manufacturing Index     42.3  
10:50am  JPY        Monetary Policy Meeting Minutes      
Tentative  AUD        HIA New Home Sales m/m     1.1%  
11:00am  NZD        ANZ Commodity Prices m/m     -1.3%  
11:30am  AUD        HPI q/q    -1.4% -0.1%  
12:00pm  CNY        Manufacturing PMI    51.9 51.2  
12:30pm  JPY        Average Cash Earnings y/y    -0.3% -0.4%  
1:30pm  CNY        HSBC Final Manufacturing PMI     51.1  
2:30pm  AUD        Cash Rate    4.75% 4.75%  
2:30pm  AUD        RBA Rate Statement      
Tentative  JPY        BOJ Gov Shirakawa Speaks      
4:30pm  AUD        Commodity Prices y/y     26.6%  
All Day  EUR        French Bank Holiday      
All Day  EUR        Italian Bank Holiday      
6:00pm  GBP        Nationwide HPI m/m    0.1% 0.1%  
1st-4th  GBP        Halifax HPI m/m    0.1% -0.5%  
7:15pm  CHF        Retail Sales y/y    2.3% -1.9%  
7:30pm  CHF        SVME PMI    47.8 48.2  
8:30pm  GBP        Manufacturing PMI    50.0 51.1  
8:30pm  GBP        Prelim GDP q/q    0.4% 0.1%  
8:30pm  GBP        Index of Services 3m/3m    1.4% 1.3%  
1:00am  USD        ISM Manufacturing PMI    52.3 51.6   \
1:00am  USD        Construction Spending m/m    0.4% 1.4%  
1:00am  USD        ISM Manufacturing Prices    55.1 56.0  
All Day  USD        Total Vehicle Sales    13.1M 13.1M

NOTES:
1. Check the Dividend & Reporting section for your stock on this site before trading
2. Prices may change as this Technical Analysis report is written from 3.30 – 6.30AM
3. Always think things out for yourself, we are only here to bounce ideas around.

Good Morning & Good Luck!