US DOLLAR / TURKISH LIRA (USD/TRY)

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We are getting closer to exciting times in financial markets. In several asset classes we are likely to see sharp movements in the following days/weeks. Low volatility suggests strong moves for the upcoming weeks.

USD/TRY was one of the cross rates that I analyzed back in February.

http://techcharts.wordpress.com/2012/02/13/us-dollar-turkish-lira-usdtl/

At that time the currency pair was testing 1.75-1.76 area (200 day moving average) and I was expecting a rebound. Rebound took USD/TRY to 1.8250 but it was short-lived. In the past one month currency pair consolidated in a tight range. Though still holding above the long-term moving average and the intermediate term trend support, USD/TRY should move in one direction sooner or later. Low volatility on the daily chart suggest high volatility is on its way… The direction is not clear yet but we should closely watch two important levels. 1.81 as a strong resistance and 1.7850 as a strong support. A break above 1.81 will push USD/TRY towards 1.85-1.90 area and a break below 1.7850 will target 1.75 in the short-term.

SUGAR

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Symmetrical triangles are usually regarded as “continuation patterns”. This very common technical chart pattern contains at least two lower highs and two higher lows. Trend lines converge and take the symmetrical triangle shape. Though symmetrical triangles often mark a continuation of the trend, they sometimes mark major trend reversals. A safe way to analyze and trade these patterns is to wait for a valid breakout from the symmetrical triangle.

Sugar has been contracting in a range for the past one year. 200 day moving average has been flat at 25 levels and price has been volatile around the moving average. Over the past one year trend lines converged. Boundaries were at 23.60 and 28 levels. In the past one week Sugar price breached the lower boundary at 23.60 level. This could be the first signal of a multi-month downtrend and a symmetrical triangle marking a trend reversal. Intermediate/long-term technical outlook turned negative. With a stop-loss between 23.60 and 25, we can expect lower prices in the intermediate term. Unless we see the price reversing back above 23.60, negative technical outlook will remain intact.

CORN

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Rising wedge or bearish wedge begins wide at the bottom and contracts as prices move higher. Prices are expected to move in trends and form parallel trend channels. However, when price loses momentum on the upside, it fails to reach the upper boundary of the trend channel. This type of price action is due to sellers being more aggressive than buyers. As a result bearish wedge pattern forms with contracting trend lines. Opposite is true during a downtrend where price fails to reach the lower boundary of the trend channel and forms a falling wedge (bullish wedge).

Since October 2011, Corn price has been moving upwards in a choppy trading range. The slope of the uptrend is extremely weak and suggests a possible “major” breakdown to lower levels in the following weeks. Over the past 6 months corn has formed a bearish wedge pattern and failed to stabilize above the long-term moving average (200 day exponential moving average). RSI has also failed to sustain its move above 50 levels. Technical data suggest lower prices towards 500 levels in the coming weeks/months.

ARGENTINA MERVAL INDEX

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Symmetrical triangles usually form during a trend as a continuation pattern. There are instances where symmetrical triangles mark trend reversals but in general they are part of a larger trend as a continuation pattern.

Symmetrical triangle on Argentina’s MERVAL index is one of those continuation patterns. Index broke down the lower boundary at 2,630 levels and since then it has been sharply lower. Since 2009 MERVAL had a good run. We are probably in a counter trend that is correcting the previous uptrend (827-3,680). 50%-62% fibonacci retracement levels are at 2,270 and 1,920 levels respectively. We should expect continued weakness after such breakdowns and this weakness is likely to pull the index towards the support area between 2,270 and 1,920.

SPAIN IBEX 35 – ITALY MIBTEL – PORTUGAL PSI 20

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It has been a challenging week for the equity markets. Especially in Europe, fears on Spain’s debt triggered heavy speculation in the equity and bond markets. Yields have jumped and equities sold-off. Weakness in Spain spread to Italy and Portugal. We have seen clear technical sell signals in Spain, Italy and Portugal. These were the weak markets of euro zone and as a result they were the first one to experience further set backs.

In this post I’m updating Spain, Italy and Portugal’s equity indices. On the 3rd of April, I reviewed all the European equity indices and since then there has been major breakdowns that needed to be revisited. Spain’s IBEX 35 index is now breaking down the 7 month-long consolidation range at 7,800 levels. Sideways consolidation was a symmetrical triangle and breakdowns from these type of continuation patterns are usually followed by weakness. Next support for IBEX 35 is at 6,700 levels.

Italy’s MIBTEL Index is also breaking down its sideways consolidation at 15,000 levels. 7 month-long choppy sideways consolidation is likely to be followed by a downtrend towards the next support at 12,300 levels.

Portugal’s PSI 20 index is another poor performer that is now breaking down its bearish wedge pattern. Unless the index moves back above 5,670-6,000 area, PSI 20 will experience more selling pressure.

CHINA SSE 50 INDEX & CHINA GDP

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Yesterday markets were strong with the expectation of a better than expected Chinese GDP data for the Q1. Today markets were disappointed by the worse than expected data at 8.1% for the quarter. Expectation was around 8.3%-8.5% but 8.1% growth was clearly below expectations. Q4 2011 growth was at 8.9%. This is the lowest growth in almost 3 years and from the chart below you can see the downtrend over the past three years.

In this post I’m analyzing the China SSE 50 Index and the quarterly GDP growth for China. The two charts are self illustrative with their correlation and trending periods. Downtrends on the equity markets were accompanied by lower growth and vice versa. Major trend reversals (in this case price breaking above/below long-term moving average) on the equity index was a good indicator and confirmation of better/worse GDP growth.

Given that the SSE 50 Index is trending lower in a clear parallel trend channel since mid-2009, expecting a downward trend on GDP is reasonable. Though anticipating a reversal on GDP is more difficult. For this reason I will use SSE 50 Index as a leading indicator or a confirming indicator to expect higher growth in the world’s second biggest economy. Both 1 year-long moving average and the upper boundary of the downward trend channel are overlapping between 1,800 and 1,900, making this area a strong resistance. Before we see SSE 50 Index breaking above this resistance we should expect weak growth. We need to see confirmation in equity markets that usually anticipates the future of the economy.

 

 

EURO BUND & US 10 YEAR T-NOTE

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It was mid-March when U.S. CPI data was higher than expected and everyone feared from a possible inflationary environment. Bonds sold-off and equities rallied with commodities. On the 17th of March I reviewed Euro Bund & 10 Year T-Note prices and concluded that it is still early to call for an inflationary environment and a major correction in govt. bonds. Both govt. bonds were testing their long-term moving averages (200-day) and were likely to rebound from these levels.

http://techcharts.wordpress.com/2012/03/17/euro-bund-us-10-year-t-note-2/

Since the last update bonds have rebounded sharply and deflation and RISK OFF environment is back again. Equities are weak and bonds are strong. Long-term uptrends are still intact BUT with one major warning; weekly RSI divergences! Though bonds are moving higher, momentum is not supportive of the last 8 months price action. Price is trying to move higher with weaker momentum. Watch govt. bonds with a positive bias and place an intermediate/long-term stop at the 200 day moving averages. For Euro Bund strong support is at 136 and for U.S. 10 Year T-Notes strong support is at 129 levels.

LIGHT CRUDE OIL

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In my previous post on Light Crude Oil, I wrote about a possible flag formation forming on the price chart. It looks like I was a bit optimistic with my bullish forecast.

http://techcharts.wordpress.com/2012/03/26/light-crude-oil-4/

Price continued lower, broke down the 103.75 support level and reached the lower boundary of the trend channel at 100.8 level. This is the 3rd test of the strong support level at 100.80. In the first trading session after the holiday light crude is testing the strong support and trying to rebound. It is important to note that $98-$100 area is strong support where 100 & 200 day moving averages meet. Light crude oil continues to make higher highs and higher lows. Uptrend should remain intact as long as price holds above the 200 day moving average. In the next few days, we would like to see the price rebounding from the lower boundary of the trend channel to call for more strength.

SPAIN IBEX 35 INDEX & EUROPE

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While most of the european markets are recovering or have been performing much better since the beginning of 2012, some had extremely poor performance. In this post I’m analyzing Spain’s IBEX 35 index and comparing it with other European country indices to see the ones that are recovering, performing better and worse. This should give us an intermediate-term overview of European equities performance. I believe if we need to rank the countries from poor performance to better performance (Spain, Portugal, Italy & Greece) should be in the poor performance category, (Switzerland, Sweden, Netherlands, Ireland, France, Finland, Belgium and Austria) should be in the recovering category and (Norway, Denmark, UK and Germany) should be in the better performance category.

If we analyze Spain’s IBEX 35 index, it has been pressured by the long-term moving average (200 day) and is now testing the lower side of its 8 months-long consolidation range. RSI failed to move above 50 levels in the past three attempts and price also failed to breach the long-term average. Now the question is will the index also break down the intermediate-term consolidation range? This will be answered by the market in the next few weeks. Unless we see a sharp reversal from the support at 7,800 level IBEX 35 can fall back to 2009 low levels at 6,700. Index should clear 8,800-9,200 area to be ranked in the recovering category.

WHEAT

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On the 18th of March I analyzed Wheat continuous price and drew attention to a possible symmetrical triangle.

http://techcharts.wordpress.com/2012/03/18/wheat/

In the past one week price resumed its consolidation in this tight trading range. Volatility is still at an extreme low reading and price is now closer for a major breakout from a 2 month-long consolidation range. Keep wheat on your watch list for a possible breakout in the next few days. Boundaries of the consolidation range are 670 and 635. A breach above 670 will be extremely bullish for Wheat and target 700-750 area in a short period of time. Failure to reverse from 635 will put pressure on the downside.