23 August
POWERFUL WEAPONS FOR TRADING: CLARITY AND CONSISTENCY
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Plus this week we dive into GBPUSD. Is the pound a new safe haven? See our charts and commentary below.
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01 Today's EarlyBird Report – 23 August
Market Drivers
Dow Jones Cash 10,839 +0.21%
Base Metals softer
US Gold CFD: 1888
Oil WTI CFD: 84.35
Copper CFD: 393
US Dollar CFD: 74.14
EURUSD 1.4372
AUDUSD 1.0430
Dow Jones CFD 10,890
S&P500 CFD: 1,125
FTSE 100 CFD: 5100
SPI CFD 4063
US News
DJ US Stocks Keep Paring Gains; DJIA Up 21, S&P 500 Down 1
Commodities
US Gold CFD: 1888
Nearly at 1900 were we can expect a TradingLevels classic pattern, once this is complete a push higher to 2,000 (TL2).
The price should stay above 1850 in the corrective pattern from 1900, essentially finding support in SG2 1865 I 1872 I 1880.
The stock market is in a corrective rally once this is complete and pushes down, which is likely now, in turn will assist Gold to lift higher, the other element holding up is the US dollar, while the US Dollar is above 74 gold will be under pressure to correct at 1900 this is an important element in the mix as it is very real that the US Dollar can push higher from here, this means Gold would struggle at 1900. At least we know there will be trouble at 1900, let’s just allow it to play out.
The ASX GOLD product will push higher if your were long from 144 then hold to 200 (TL2) with 25% at the 180 (mTL8) While the AUD is moving down GOLD will move up, the problem is at 1.00 (TL1) which in turn will be GOLD at 180
Oil WTI CFD: 84.35
On track here as gold follows stock, the bounce off 80 (TL8) is a corrective rally and the target is the 50 – 62% around the 85 (mTL5)
I should point out the pattern of the bounce appears to have the potential to push higher so just be a little careful the US are thinking of some type of stimuli.
Base Metals
US Spot Prices (24HR in l/b)
US Copper: Last: 3.95-
US Nickel: Last: 9.49-
US Zinc: Last: 0.96-
US Aluminium Last: 1.04
Copper CFD: 393
The corrective patter at 400 MediumLevel (ML4) is completed and should move down from here if you feel like trading it. It is a failed retest of ML4, expect to see the price under 380 the first MinorLevel however also use the sublevels to add and subtract contracts. Expect a bounce off 380 but once competed the 350 is the following MinorLevel.
Forex
US Dollar CFD: 74.14
The two count on the Dollar and the Euro are still playing out and can go either way. However using the Euro and SP500 being in sync, its places the bias of the Euro down and Dollar up.
The supporting line for the Dollar is 7350 but we need to lift this up asap to 7372 then 7400, we could say if the price finds support on 7430 (SG1) then move in long on the Dollar, but be aware the supply is at 7450, another safer way to look at is wait for the Euro to retest 144 and start to fail from there
EURUSD 1.4372
TradingLevels: If the Euro trades under the 14330 then the bias is bearish, if it finds support on 144 its bias is bullish.
Trade Strategy: Short term, work the SG2 14372 be long or short from this level. would expect a retest of 144 from here. Then look for a short from the 144
AUDUSD 1.0430
TradingLevels: The price is in a corrective rally trying to retest 1.05 it is creating lower tops.
Elliott Wave: See charts, Wave (ii) rally in the later stages of the abc.
Trade Strategy: Look for weakness to short.
Indices
Dow Jones CFD: 10,890
TradingLevels: The price has created five waves (impulse structure) down from the 11500 to the 10800, so now expect a three wave abc corrective rally, once this is complete then expect further downside
Elliott Wave: small corrective rally off 1800. The 61.8% retracement is 11200 but if the price is going to move there we should bring the target to 11300 as there is no supply at 11200.
Corrections can be in price or time or a mix of both, so we may see the rally already completed at 11,000 this is a reasonable assumption, but only a break under the 10800 can confirm this.
In the bigger picture we are looking for five larger waves down, so the current small five waves down from 11500 to 1080 is just wave one. And we are looking at the wave two abc rally
Trade Strategy: Intraday traders look for the 10900 as support or resistance, then use the 10800 to add to shorts or the 11000 to add to longs
S&P500 CFD: 1,125
TradingLevels: Corrections are the weakest link in using Elliott and we are in one now, that is, we have had five waves down from the 1200 to 1120 so now we are in the abc wave two counter trend rally, which maybe complete and drop from her the 1130 or rally up to 1172 SG2 zone and drop from there
Trade Strategy: If 1130 develops support then trade to 1150, if the price finds the 1120 resistance then expect the price to move down through 1100
FTSE 100 CFD: 5100
TradingLevels: The bounce off 5000 (TL5) is a abc corrective pattern and can be complete.
Elliott Wave: five waves down from 5350 to 4950 then and abc rally close to 5200. So the rally can be complete, but corrections can simply double in size, so you always need to be very careful and use smaller position sizing
Trade Strategy: Look for a short trade from the 5100 as the resistance, but use the 5072 as resistance and trigger. if the price can find support on 5130 then it can push up, but the bias is the price stying under the last high
SPI CFD 4063
TradingLevels: The pattern over the last session at 4100 is corrective and therefor expect a break down
Trade Strategy: the night market is not closed, but you would be looking for a short trade from this overlapping corrective pattern at 4100.
Summary
Copper is our guide stick into resources and its moving down out of its corrective pattern. This will drag heavily on the AUD and the XMJ Materials Sector, so we will continue to hold short. The European session closed higher based on energy, but that is only a corrective rally in line with stock rally and will be short lived, so look to short any rallies, do not be lured into longs – take control!
The pattern on the SPI will also see lower ground with the next step being for the market to develop 4000 as the resistance, and once the retested resistance has developed at 4000 (ML4) we can add to current short positions.
The US markets are still bearish on all fronts and expecting lower levels over the sessions ahead while the current intraday patterns are also suggesting downside. As you know (Members get to know the TradingLevels patterns!) the 10,000/ TradingLevel1, is the magnet in psychological terms and this would also deliver the impulse wave of Minor degree (ElliottWave), meaning five waves down from the 12800 high. Once the five waves down are complete, expect a ABC rally then another five waves down in the next leg to around 7,200.
PS Check For ASX Ex Dividend & Reporting Dates.
Quote for Traders
"There are no certainties in this investment world, and where there are no certainties, you should begin by understanding yourself."
Today's Financial Events
Time Currency Detail Forecast Previous
1:00pm NZD Inflation Expectations q/q 3.0%
2:00pm AUD RBA Deputy Gov Battellino Speaks
4:00pm CHF Trade Balance 1.83B 1.77B
5:00pm EUR French Flash Manufacturing PMI 50.4
5:00pm EUR French Flash Services PMI 53.1 53.2
5:30pm EUR German Flash Manufacturing PMI 51.2 52.0
5:30pm EUR German Flash Services PMI 52.1 52.9
6:00pm EUR Flash Manufacturing PMI 49.7 50.4
6:00pm EUR Flash Services PMI 51.1 51.6
6:30pm GBP BBA Mortgage Approvals 32.3K 31.7K
7:00pm EUR German ZEW Economic Sentiment -24.6 -15.1
7:00pm EUR ZEW Economic Sentiment -6.2 -7.0
8:00pm GBP CBI Industrial Order Expectations -13 -10
10:30pm CAD Core Retail Sales m/m 0.4% 0.5%
10:30pm CAD Retail Sales m/m 0.6% 0.1%
12:00am EUR Consumer Confidence -12 -11
12:00am GBP MPC Member Weale Speaks
12:00am USD New Home Sales 316K 312K
12:00am USD Richmond Manufacturing Index -7 -1
3:00am CAD Gov Council Member Boivin Speaks
NOTES:
1. Check the Dividend & Reporting section for your stock on this site before trading
2. Prices may change as this report is written while markets are closing/trading
3. Always think things out for yourself, we are only here to bounce ideas around.
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02 Forex: ElliottWave count for GBPUSD
GBPUSD 1 Hour Chart
Monday, 22 August 2011 at 6:17:00 PM
If we take a look at the GBPUSD chart and compare that to weakness on stocks and commodities, then we can see that the pound is acting as new safe-haven currency. Pair is showing a nice bullish structure, which may easily continue if we consider that move into a new high on Friday was in three waves, so its likely wave (b) as labelled on the chart; part of incomplete wave 2 flat correction.
Wave c is in process, which may test levels below wave (a) region, but should not fall lower than 1.6345!
GBPUSD 4 Hour Chart
Monday, 22 August 2011 at 4:50:00PM AEST – bullish continuation
Cable recovered very sharply, through 1.6475 resistance in the past week, from where we may see more strenght in days ahead as pair could be trading in start of a red wave 3). Thsi leg may even reach levels above 2011 highs once/if the upper line of a base channel is taken out.
A current minor reversal from the top appears to be only a corrective wave 2, sub-wave of a red wave 3).
*Only a fall below support line of a trading channel will suggest that pair has reached a temporary top!
GBPUSD Daily Chart
21 August 2011 – third leg higher underway
Pound has moved nicely higher in the past two weeks after bouncing from 1.6100 support region, where wave 2)/B) found a bottom. As such, third leg of recovery from 1.577 took place as expected, but notice that prices are still trapped within a trading channel so wave 3) acceleration is still unconfirmed. We know that in many cases a break through the upper side of a trading channel is a very strong evidence for a third wave scenario, which is still not the case here. But generally speaking pair is trading higher, and this may easily continue while 1.61 critical region holds!
*If support line of a trading channel will be taken out from any reason, then we will focus on one of the Alternate counts!
GBPUSD Weekly Chart
15 July 2011 – sideways within wave (B)
A huge decline from 2.1160 is unfinished as we can count only one impulse move down that bottomed at 1.3500, labelled as a blue wave (A). With this being said, dollar has still a lot of room to move higher against the sterling in the future, before a Gbp weakness can be completely reversed. As such move below 1.3500 is expected, the only question when a corrective blue wave (B) will finish!?
Well, a powerful reversal from 1.4200 region seen in May 2010 suggests that a decline from 1.7014 was just another corrective leg, a possible wave X), or leg that is part of a contracting triangle. Currently we are monitoring a double zig-gaz possibility with 1.70 test yet to come.
If pair will reverse sharply from any reason down wave C support then we will keep an eye on a triangle count.
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