Monday, June 28, 2010
Weekly Outlook 6/28
There are alot more bullish short term patterns in the markets than most people think right now and that's why I have a upside bias for the week. The move higher in copper last week was the key imo and I think copper should lead us higher this week as it broke out above 3 bucks. Also, the EUR/USD is hammering out a nice inverted H&S on the 4 hour chart. The dollar on the opposite side looks to be forming a H&S top short term and could be the catalyst to get commodities bid higher into July and the markets grinding back higher to the 1130 area as a first target.
The resistance above remains the same as last week but now we have a few gaps on each side of the current market. In the $ES futures we have a unfilled gap down at 1055 and also up at 1087. I think the upside gap here is likely to fill this week. I mark down all open gaps on my ES chart as they almost always come back into play and act as a magnet for the market price. Above 1110 I will get even more bullish as that is key resistance and should propel us into the 1140s. On the downside I think we hold the support levels for now until later in the summer but if for some reason we test 1040 again look for a failure and large selloff to own puts for. For now I think the market goes slightly higher.
Sentiment is still tilted to the fear side and this is what I think could unwind the bearish shorts into buyers as they realize the market can't make new lows with every new pieces of bad news hitting the wire lately. Traders are now basically waiting around for earnings season to start in mid July and the market is likely not going to take a deep dive before we hear about earnings from companies, which I think are bound to be negative.
Currencies- EUR is forming that inverted H&S and needs to break 1.25 for a confirmation breakout move to 1.28 and then 1.30. Critical support in the DX is at 85.50 and if that breaks then the dollar index should fall fast down to 83. GBP has been rallying for weeks now and is up about 900 pips since it started a month ago. Impressive move there and I think it could test 1.53 next. The USD/CHF has had an amazing move down and has met support at 1.09 so downside is probably limited here for now. Maybe a bounce back to 1.11 before any continued move. USD/JPY is back down to 89 as the yen gets stronger and this pair is just off recent lows at 88 which was met during the flash crash. Could go either way here longer term it look like it wants to bottom here in the upper 80s on the weekly chart but a break of lows at 84.8 could tell otherwise.
Commodities- Copper is the leader and what I am watching this week. It tested 3.10 after breaking the inverted H&S pattern and looks ready to go to 3.25. Oil is pulling off that 79 level once again today but still looks strong and is likely to test 82 on the upside this week as the next level of resistance on the charts. Gold is being very tricky lately as it keeps on making new highs and then pulling sharply off them almost instantly. Last week it hit 1266 and then closed lower near 1240. Today it rallied in the morning to 1263, a few bucks within that high and then sold off over 20 bucks back to 1239 where it is now. This is not the way a bullish trend should act. If gold continues this pattern this week be careful on the long side because it could be telling us that an important top is just weeks away.
Buy the dips>> BIDU, FCX, NFLX, OXY, AKAM, FFIV, TIE, SFLY, NENG, CMG, CRM
Sell the rips>> AMZN, GOOG, GRMN, QCOM