This week in the markets was one for the record books and for all the right reasons (for a change).
Markets frothed hard over after a cooler than expected CPI print, potentially signalling peak inflation is behind us. Whilst I'm of the belief inflation will have a lot of trouble getting back to the 2% target and FY23 earnings downgrades will weigh heavily on markets in the year ahead it doesn't mean markets can't keep pushing north for now (but it's not that straight forward).
Looking at SPX daily, we've been trading down in a channel for around a year now. In mid October 22 there was a dramatic pushdown that bounced direct of the lower edge of the channel (circled below) and things have been moving north since.
Was this the capitulation we've all hoped for? I'm not so sure on that front but only time will tell.
The current set up is quite interesting with a few technical areas to watch over the coming sessions.
Thursdays session saw a very forceful break on the 100dMA which resulted in one of the greenest days on record - with liquidity drained I'd say it's fair to expect a few more big moves in the not too distant future (in both directions)
SPX close right on the VAL (Value Area Low) from 2021 till now - who said volume doesn't matter?
Seeing as we are talking volume lets look above as there are some things that glaringly stand out. VAL is of significance and if price is accepted back into the VA (Value Area) for 3 consecutive sessions then the odds are very favourable for much higher...
That said, one cannot miss the resistance that SPX will be running into soon. The path of least resistance is up over the ST with some very thin profiles (outlined be by the LVNs) directly above.
Then coming into the 200dMA (currently at 4081) price should see some strong resistance with the 200 showing resilience on it's last test and this time around it is placed at the lower edge of a very heavily traded area (an area of strong insto positioning) marked with HVN on chart.
The HVN is from around 4100 to 4155 which also coincides with the top of the channel - this is a key area in the scheme of things, so be sure to watch trading here. (4111 is a price point I've had marked on ES for months so I'll certainly be watching that one)
SPX daily .
Now looking at the weekly chart below and it's clear there is a number of technically driven resistance points that coincide with the upper edge of the channel that may come into play if price keeps pushing north.
On the weekly chart both the 100MA and 50MA are almost smack bang on the upper edge of the channel, which so happens to be the upper edge of the HVN.
Price has already rejected the key 200MA lower and is now stuck between these key levels - these are levels algos will program so expect to see reactions off these prices. *All MAs are listed up top of chart
Last week was a biggy with nearly 6% gained on the SPX, however the main trend is still down so manage risk accordingly.
Now flipping over to the Aussie 200 and talking risk.
Last week was a disappointing one personally. In May this year I split my $$ into different trading accounts to test some different strategies and keep focus and discipline on my main trading account which is used for swing trades.
Up until 2 weeks ago I'd placed only 15 trades since May with a 100% success rate. I guess with such a good strike rate I got a little ahead of myself and instead of sticking to the plan I used my emotional bias to force a short trade on the Aussie.
6990 was always a price I was looking for a short entry on the Aussie 200 and that initial position couldn't have been more bang on with a strong reversal in the very next session and instant paper profits in the account. Was expecting a backtest on this level and this also played out but then instead of waiting till the CPI print I tried to gamble on a hot one and doubled down at the same level.
Although my initial position would have lost anyway it was the second effort that was disappointing as it was against the plan.
Bad move with the only saving grace being the Aussie didn't rip anywhere near as hard as US markets. So all I can do is review my own trading and try to be better going forward.
In other news I was lucky enough to cash out some profits on LKE on Friday from a swing trade and I did accumulate a long position on MNS last week which I held over the weekend and it's looking very promising going into this week so we'll see...
Ok, enough about me, lets talk about the Aussie 200
Thursday night was a big deal in terms of the Aussie chart with some key levels broken. 6990 was the price causing most resistance and the cooler CPI print wiped this out emphatically. This same level was where the 200dMA is placed so a break above is certainly a big tick for the bulls out there.
A few weeks ago I mentioned 7143 as my 'extreme high' on the Aussie and Friday this was looking like a very good call, with price bouncing almost directly off it pre market (only 3pts higher) and never trading above it during the Aussie session.
However, tailwinds were too strong in overnight trade and this level has now been breached which leaves us to look at what's next.
The Aussie did close into a zone of thin profiles so a quick move in either direction will be quite easy. Below we are looking at the level just mentioned 7143 - I'd expect a backtest on this in the next session or two.
Above we are looking at the most traded price from the consolidated (distribution) range from May 21 to June 22. The POC for this period is 7299 This price coincides with the top on May 30 When tested in May this triggered a 13% sell off for the index.
This is a zone with heavy insto positioning, so I'd expect a reaction up there if price were to keep heading north. Key levels I'm watching are marked on the right of chart.
Aussie 200 daily .
One thing I'd be sure to note on most index moves going into the week ahead (SPX and Aussie included) is the speed of the ascent last week. Due to the speed and consequential gapping up there are not many insto postions to be protected below, so any move to the downside may be quick and we could quite easily give up last weeks gains in a speedy move lower.
The drain on liquidity and speed of recent moves could equate to some hectic volatility. So keep risk management as a priority...
Finally I'll just post a quicky on DXY as it saw some HUGE moves since CPI. After the close to the week anyone would think its a smallcap with the way it traded. It's certainly not dead yet but there are some immediate headwinds.
However it closed right in amongst some heavy profiles so keep your eye on this market.
DXY daily
Anyway, that's enough from me for one day as theres a few other stocks and markets I want to run my eye over for the coming week.
As always DYOR Play safe And good luck whichever way you're trading...
FWIW obviously another market to watch this week is China. Some news driven moves which effected markets this last week but are those headlines enough to keep the dream alive I guess we'll see soon enough. China reopening has both bullish and bearish undertones so expect some games ahead...
(20min delay)