Thursday, 12 May 2011

Daily charts for the downside leaders

Now that the markets which I track have developed strong down trends at hourly chart level, it is time to step up to daily chart level to see if down trends will develop there.

I like to trade the strongest movers, so with potential new down trends forming, I like to focus on the downside leaders. Amongst the markets I track, the weakest currency looks to be the EUR/USD, and the weakest stock index looks to be the ASX 200. Silver is weaker than Gold, but you'd need bigger gonads than I have (or larger risk tolerance) to trade Silver at this point. So I will focus on Gold, while keeping one eye on Silver. If Silver stops leading Gold to the downside, that in itself would be a warning that risk appetite is increasing, and that the infant down trends may not get out of nappies.

Looking at the EUR/USD first. I find with this market at daily chart level that price action relative to the 40 day moving average (MA) defines the trend as well as anything else, certainly in the early stages of a trend. So for now, while the EUR/USD remains below that 40 day MA, I'll consider the trend to be down at this timeframe. If (IF!) the down trend develops further in coming days and weeks, trend lines or other indicators may be useful, or even a step up to weekly charts level.

The ASX 200  is further in to its down trend than the EUR/USD. The 18 day MA has made a bearish cross below the 40. Every market is different, but in the early stages of an ASX 200 down trend, once that particular bearish cross has been made, we can remain confident in the new down trend so long as price stays below the 18 day MA. If (once again IF!) the new down trend develops further in coming weeks, it would be my preference to track it on the weekly chart. We'll have to wait and see if the market will afford us that luxury.

Silver is leading Gold to the downside. I see no edges at this timeframe, but wow, what a chart. It is arithmetic scale of course, log scale would sugar coat the key fact. Silver is down more than 1/3 in less than two weeks. Lock it away it your memory, such things can happen to any market that rises in a parabolic fashion.

For mine, Gold is not yet in a down trend at daily chart level. A break below the trend line formed from the late January lows would strengthen the possibility of a down trend developing, but price would have to get back inside the previous trading range for it to become likely ie. a move below 1450. 

USD up again

The USD surged upwards overnight (Oz time) against other currencies, against Gold, against Silver, against stocks. Clear hourly chart upwards corrective patterns ended across the board and lead to thrusts lower in every market that I follow. Before I show the hourly charts, first have a look at the daily chart of the EUR/USD, to see the longer term context for the latest surge of USD strength.

The EUR/USD broke the up trend line formed from the January lows, did a retest, and has now thrust lower. There is possible support around current levels (1.42) from previous highs and lows. So long as today's high remains intact, it looks like the trend has changed to down. 

Now to those hourly charts, mostly showing the action since the beginning of May, though a couple show a little more history to provide context.

EUR/USD corrective channel break as foreshadowed last night (Oz time).

AUD/USD corrective wedge break.

GBP/USD corective channel break as foreshadowed last night (Oz time).

S&P 500 corrective channel break.

ASX 200 close to a corrective channel break.

FTSE 100 thrust lower from corrective wedge as foreshadowed last night (Oz time).

Gold thrust lower from a corrective channel as foreshadowed last night (Oz time).

Silver breaking lower from corrective channel.