Brandon Wendell, CMT
Brandon Wendell
There has been much debate by the talking heads about whether the current bull-run in equities is coming to an end. Rather than debating the Fed’s potential “tapering” or other events, I choose to focus on what really matters, the charts.
The S&P 500 Weekly chart has been retreating from all time highs. Since we did not have supply overhead until out most recent drop, I am not willing to short until I see a defined downtrend and a retest of a supply zone. A break of the low 1600 demand zone could also trigger some panic.
The 2007-2008 market crash was preceded by a drop in the Russell 2000 index. I am also watching this index for signs of weakness. The daily chart has broken from a head and shoulders and may be headed toward the demand at 956.
If the daily demand doesn’t hold, the 938 weekly demand zone is old and tested and may only offer a small bounce to make a lower high before breaking to the 850 area.
In my article from a couple of weeks ago, I suggested that without the supply zones to tell us the top, we may have to rely on some related securities hitting demand to signal reversals. I am closely watching the weekly supply zone on the 10 year note. If prices of the note hold the demand zone and rates hold supply, then the equity markets may weaken.
So there is a lot to watch for the next few weeks in the markets. For investors and longer term traders, this indecision is a time to be cautious. Wait to enter in either direction until you have clarity. Deciding not to trade is a trading decision and may be the best way to protect your capital until you have more certainty in the markets.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD climbs to daily highs near 1.1820
EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.
GBP/USD trims losses, retests 1.3460
After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.
Japanese Yen gives back half of early gains against USD ahead of US PPI data
The Japanese Yen (JPY) surrenders half of its early gains against the US Dollar (USD) during the European trading session on Friday. The USD/JPY pair rebounds to near 155.90 as the JPY falls back, but is still 0.15% down.
Editors’ Picks
EUR/USD: Fed calm, ECB steady, but the Dollar still leads Premium
EUR/USD is still struggling to find real traction. The pair has tried to stabilise, but momentum keeps fading, leaving the door open to further weakness.
Gold: Falling US yields, geopolitics help XAU/USD hold ground Premium
Gold (XAU/USD) gained traction and climbed above $5,200, ending the fourth consecutive week in positive territory. The next round of US-Iran talks and crucial macroeconomic data releases from the US will be watched closely by market participants in the short term.
GBP/USD: Will Pound Sterling defend key 1.3450 support ahead of US jobs data? Premium
The Pound Sterling (GBP) entered a bearish consolidation phase against the US Dollar (USD), after having tested critical support near the 1.3450 level on several occasions.
Bitcoin: Another month of losses, and it’s been five
Bitcoin (BTC) price is stabilizing around $68,000 at the time of writing on Friday, but the Crypto King is poised to close February on a fragile footing, marking its fifth consecutive month of losses since October and a rare start to the year with back-to-back monthly corrections.
US Dollar: At a crossroads; Fed steady, tariffs in flux Premium
The US Dollar’s (USD) upward momentum from the previous week seems to have encountered a tough nut to crack in the 98.00 region, as measured by the US Dollar Index (DXY).
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