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Prop Trading Futures

December 21- 2015 – Special Situations 5/5 (1)

Commodities, Financials and FOREX

Special Situations

for the week of December 21 2015

 

MARKETS IN PLAY

CURRENCIES – US DOLLAR

The long/medium term trend in the US Dollar Index is definitely up. But it will take a decisive close above 101 to kick off the next bull leg. DX futures offer a great example of the alternance of consolidations and trends in a market.

 CURRENCIES – EURO

In the past few weeks, EURUSD hit an important trendline (see the first chart below) and is not surprising that we got a bounce right on it. Those short should have covered right at that level. Those still short (like me) should be watching the level around 1.0943. The Euro should not trade and/or stay above that level for the downtrend to resume soon. The situation here in the EUR is the inverse that I described above for the USD.

CURRENCIES – SWISS FRANC

Still looking for a close 1.03/1.04 to validate the Symmetrical Triangle (still in play) and confirm a double bottom (still developing).

COMMODITIES – CRUDE OIL

Crude oil is testing traders’ intentions. I expect a more decisive push lower to attract responsive buyers and all seller: the action/reaction could give more clues about what is head.

For the moment, Crude has 1 unmet target below. If you think that Crude at $14.4 a barrel is “impossible”, look at Natural Gas.

CURRENCIES USDBRL

I’m long term bullish this rate. The long term chart has a completed Head and Shoulder Failure pattern in play with a target at 6.85.

In the short term USDBRL could be forming a continuation Head and Shoulder. This pattern can be completed in the next 1-2 days and launch a rally to 4.27, a early sign that the longer term trend is re-gaining steam.

 COMMODITIES – SUGAR#11

Sugar could be one of the best trending market of 2016. I have high expectation on this commodity (contrarian indicator?). Ideally this market is forming a Head and Shoulder bottom. For this pattern to materialize, a decisive close above $16 is needed. I’m long.

CURRENCIES – CHINESE YUAN

The USDCNY had another strong week. The measured move target of the predominant pattern in this market is near reach.

[a reader asked me if I “accept the Head and Shoulder bottom” interpretation for the price action since 2013. My answer is: no. Why? Because there is a lack of proportion between the two shoulder and the Head.

CURRENCIES – AUDUSD

There is an unmet long term target below 0.63 for the AUDUSD pair. Shorter term the pair is developing what could turn to be a Symmetrical Triangle.

 CURRENCIES – GBPAUD

A long term Cup and Handle in play plus a potential Flag in the making. This rate is head to 2.4, at least.

DEVELOPING PATTERNS

CURRENCIES USDSEK

As the Sugar (discussed above) also USDSEK has the potential to be one of the leading trending FX markets in 2016, but probably we do need to wait few more weeks to see it trading above 9.00 and completed the small Flag that is visible in the daily chart. The longer term target is at 2001 highs.

CURRENCIES AUD-CAD

Longer term, a sideway consolidation that is going on since 2000. Medium term, a Head and Shoulder failure that would be competed by a decisive close above 1.04. Short term, a downward channel that was completed in last November.

FINANCIALS – DOW JONES

FINANCIALS – EURODOLLAR GE7

After Sugar and USDSEK, this is the third most promising market for position traders in 2016. Of course the big deal is to trader the Eurodollar (and interest rates, in general) on the downside. Watch for a break below 98.18/GE7 for an early sign the a bull market in interest rates is started.

FINANCIALS – 5 YEAR NOTES

This market has gone nowhere for the past 1.5 year and could be near to resume the downtrend. Watch for the completion of the Rectangle by a close well below $118.

 COMMODITIES – GOLD

Difficult action to interpret, but the precious metal is trading near an important trendline that could act as a support and support a reversal from these levels. By the way the long term measured move target for gold is below $1000.

 

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