Technical Analysis: Weekly Market Strategy
This is the next installment of a weekly, exclusive, series of technical analyses that DeFinity is proud to share with its community.
The analysis is completed by renowned, experienced financial analyst and successful global podcaster, Paul Rodriguez.
Paul Rodriguez lectured at the City University in London on the subject of Technical Analysis whilst working as an award winning analyst at NatWest Global Financial Markets (Now RBS) in the 1990’s, pioneering and promoting the education and use of technical analysis to City professionals and private investors. Paul set up Think Trading to continue that education and consultancy having appeared frequently on financial news channels seeking his views. He set up the State of The Markets Podcast with fund Manager Tim Price three years ago, which consistently tops the top 50 UK business podcasts and has a global audience. He provides bespoke research and consultancy to market-leading firms.
SUMMARY:
Phase one of US dollar weakness and ‘risk-on’ trades have been unfolding, with equities reacting with magnified effect to this first phase. If we consider that the US dollar trend is now ready for a substantial trend change, it would imply a major bull phase for US equities into next year. It is likely that even if this is the case, the basing process in the SP500 and the topping formation in the DXY could take some weeks. It is tempting to think that August will be another quiet one in FX land, but that cycle tendency doesn’t seem likely this year.
Phase one of the major reversal in base and precious metals has also occurred. A basing process is likely with a retracement (this could look very much like the continuation of the bear market) only to reverse dsharply and continue the trend. Markets are synchronising which can, of course, work both ways if this turns out to be a false base.
DXY
Phase one of the reversal in the DXY has occurred — this could well be an interim pullback before the trend continues, but Intermarket analysis favours further downside. A break of the trendline is needed to increase the scale of the reversal — ideally soon. Note the reaction ahead of this means there are buyers on the dips and a move back towards 108 is possible (this could increase the size of the top). Whilst the market stays below the spike peak, we maintain a bearish US dollar view.
US 10 Year Yield
Yields rebounded close to interim support we have been tracking at 2.49% however, we maintain targets at 2.25%. Despite extending back over the neckline of the head and shoulders reversal briefly, our bearish bias will remain whilst the downward trendline is intact. We will consider holding the bias even if the move extends towards 3.24% to allow for a larger reversal pattern to develop, but holding below the fledging trendline and break of 2.49% is preferred.
Gold
Objectives from the minor reversal pattern have been hit with resistance at 1787 pausing the upward move. Our initial targets remain at 1800, but a confluence of resistance (medium term m.a./downward trendline) and the RSI approaching overbought, could encourage a correction soon. We hold a bullish view whilst above 1710 and will discuss potential upside targets if/when the main downward trendline is breached.
SP500
Our 4114 target was hit, breaking the intermediate trendline in the process. We now target a move to the main downward trendline (4383 and declining). Note short term resistance between 4160/4199 is strong, hence a retracement should be factored into this week’s price action. Should the market manage to clear this zone this week, it would be a powerful signal of the bullish trend ahead. We stay bullish whilst above 3945 or until other evidence emerges to the contrary.
Ethereum
Resistance at 1720 has paused the rally and a retracement back towards 1450 may unfold prior to attempting to clear this key resistance zone. Any early break this week would further raise the prospects that a major low in ETH has occurred. We will stay bullish whilst above the developing upward trend.
Bitcoin Daily
Short-term objectives remain at 28,547 and we are encouraged by the break of the medium-term m.a. and a test of the intermediate downward trendline. A consolidation below this trendline was anticipated, but a break above this week would be a clear indication of increased momentum and further support a major low was achieved in June. Support on retracements is at 21,868, but we will maintain a bullish view whilst above the fledgling upward trend.
Bitcoin Weekly
BTC has closed over the 200-week m.a. but needs to extend from this metric to solidify the reversal. Resistance from the main downward trendline is the main barrier so it may take a few weeks to extend. We remain bullish whilst holding over the developing upward trendline shown.
This report is superficial in nature and may contain errors. No warranty is given to the accuracy of the data or text and any reader must understand that it should not in anyway form part of an investment process — that is reserved for that individual/business and an investment professional. No positions should be taken, exited or otherwise considered on the basis of this research. This is a condition of reading this document. The main function is of education into how different chart patterns might indicate a future trend (or lack thereof) and not for the purposes of speculation or investment.
Transcribed to Medium
Original Technical Analysis provided by
Paul Rodriguez — ThinkTrading.com
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