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The euro-dollar rally has continued in recent weeks, hitting a peak of 1.14 last week. While the breakout initially looked like a short-term move rather than a trend change, the situation now is different and that impacts on long term positions.
The fast and decisive breakout above the historical resistance level near 1.10 has encountered short term resistance near 1.14. This has the potential to develop a inverted head and shoulder trend reversal pattern. The pattern is completed with a small retreat from short term resistance near 1.14 followed by a rally that moves above 1.14 and tests resistance near 1.16. In this case it's the confirmation of the inverted head and shoulder pattern that is more significant than the historical resistance near 1.16.
Confirmation of an inverted head and shoulder pattern sets an upside breakout target near 1.22. This is well above the value of the downtrend line. This confirms a new uptrend rather than just a rally and retreat pattern.
With Nymex rebounding 40 percent since its lows of the year hit in March, many are asking if the uptrend is here to stay or whether this is a mere short-term bounce.
Technical analysis suggests that a new trend change emerged earlier this month when the price closed above $58 and the trend will be confirmed if the price manages to stay above that resistant level.
The current uptrend is fast moving so there is a high probability of a consolidation pause developing around the $58 level before the up trend continues. There are three significant resistance levels above $58 ($68, $78 and $88) and these will influence the nature of the developing uptrend.
The euro may have rebounded more than 6 percent from its lows of 1.05 against the U.S. dollar, but chart analysis shows that rally may be shortlived and the downtrend remains intact.
There are two dominant analysis features in the euro-dollar chart. The first is the obvious downtrend. Although the downtrend is easy to see, it is a little more difficult to define with a single downtrend line. The chart shows what we think is the best fit for the trend line as it captures the majority of the extremes in the rebounds. The position of this line captures the largest number of high points and excludes the least number of high points. But it still remains a judgement call.
The Nasdaq's move above 5132 for the first time since 2000 has sparked concerns the new high would signal the end of an uptrend. But chart analysis suggests otherwise.
There are distinct differences between the rapid rise from 1998 to 2000 and the current situation. In 2000, the very rapid rise of 247 percent from 1475 to 5132 over seven months was unsustainable from 1999 November until the crash in 2000 March the NASDAQ trend was almost vertical. This is not the situation today.
A period of consolidation has investors worried that the Dow Jones Industrial Average's long-term uptrend has finally run its course, but charts suggest the uptrend remains strong.
Following last year's 7.5 percent increase the Dow index is up just over one percent year to date. The index has consolidated near 18,225 since early March amid concerns that a stronger U.S. dollar could negatively impact earnings at U.S. multinational firms.
But the weekly chart shows the Dow remains within a well-defined trading channel and exhibits a consolidation pattern consistent with a continuation of the uptrend.
Nymex oil prices rose over 5 percent on Monday as the framework deal reached on Tehran's nuclear program last week offers little chance for a near-term increase in oil exports, but charts suggest it's too early to expect any meaningful price rise.
The framework reached on Tehran's nuclear program lays the path to the eventual removal of sanctions on Iran's crude oil exports, which have fallen by more than one million barrels per day since sanctions were levied in 2012. But analysts say that an increase in Iranian exports is unlikely to hit the market until 2016, putting a tailwind behind prices.
The Shanghai Composite has rallied sharply this year, outperforming its regional peers in the first quarter, and charts suggest further upside is likely.
China's benchmark stock index has risen 17 percent year-to-date, spurred by easing measures from the People's Bank of China and buying among local retail investors. The gains follow last year's stellar performance, but have led some investors to question whether the index has risen too fast.
The Shanghai Composite quickly reached the 3800 target level thatwe projected at the beginning of March. This is above the long-term historical resistance level near 3750, which suggests a high probability that the index will consolidate near the 3750 to 3800 level. This type of pause in the fast uptrend is bullish; it creates the foundation for a continuation of the uptrend.
Silver rallied to a one-month high at the end of last week after the Federal Reserve's latest policy statement led investors to push back bets on the timing of a rate hike, but charts suggest that a sustainable trend is unlikely to develop.
In its policy statement last week the U.S. central bank was more cautious with the language around the timing of a rate hike than markets expected, which sparked a bout of dollar selling. The greenback fell from recent highs against various currencies, while traders plowed into commodities with gold posting its best weekly rise since mid-January, according to Reuters. Silver, meanwhile, touched a one-month high of $16.89 an ounce on Friday.
Widely viewed as a proxy for gold, silver leads gold behavior on the charts by several days, providing a leading indicator.
Worries about slowing economic growth have undercut the momentum that saw China stocks rise over 50 percent last year, but charts suggest that a new long-term uptrend may be at hand.
China's Shanghai stock index posted stellar gains in 2014, outperforming its regional peers amid strong fundamentals and solid valuations. Many investors expected the positive momentum to carry over into the new year, but concerns about the economy undercut that momentum after China posted its lowest annual growth figure in 24 years.
The Shanghai composite is up just over 3 percent year to date after posting a 10 percent technical correction between late January and early February. But charts suggest upward momentum may return amid signs of a rebound.
The 10 percent trend correction created a broad consolidation band between 3060 and 3400, with key resistance levels near 3300 and 3400. The correction behavior has developed inside a seven-week sideways consolidation band that includes frequent strong rally and retreat behavior.
Weaker-than-expected U.S. housing data lifted gold prices from a seven-week low on Monday, but charts suggest that investors shouldn't get too excited.
Gold got some reprieve on Monday, rebounding from a seven-week low intraday after data showed U.S. home resales for January declined to a nine-month low. The data are unlikely to dent the overall trend, however; gold posted its fourth consecutive weekly decline last week amid a stronger U.S. dollar and expectations that the Federal Reserve will raise interest rates later this year.
Meanwhile, the outlook on charts is bearish.
The weekly gold chart has developed a complex technical pattern with three features: a downtrend line; strong historical support; certain pattern behavior in the Guppy Multiple Moving Average (GMMA) indicator.
Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia.