Geopolitical tensions between Ukraine and Russia has accelerated the rally in Nymex oil prices that started in the week of January 18.» Read More
The euro's decline against the U.S. dollar late last week may have given some investors a scare, but charts indicate that pair is exhibiting characteristics of a sustainable uptrend.
The euro posted its biggest one-day decline against the U.S. dollar in 16 months last Thursday on the back of three factors: weaker-than-expected economic data from the euro zone; slightly less-dovish-than-expected post-policy-meeting comments from the Federal Reserve; and comments from European Central Bank governor Nowotny that the central bank would provide more liquidity to avoid a "cliff" effect once the bank's cheap loans to euro zone banks come to an end.
However, despite the pair's sharp single-day decline technical analysis shows signs of a sustainable uptrend.
India's benchmark Sensex stock index may have broken out to new highs, but for a sense of what's next for the share market, investors might want to take cue from the broader Nifty index.
While the Nifty Index is lagging, it tends to be more reliable for tracking the behavior of the Indian market. The weekly Nifty chart gives an overview of market behavior and provides a method for setting the breakout target.
The first feature of the weekly Nifty chart is the long-term trading band consolidation. The upper level of the band is near 6250, while the lower level is near 4610. The index has oscillated around the central trading band between 5200 and 5680 for almost three years. This is an important behavior because it provides a method for calculating breakout targets.
(Read more: Will it be two rate hikes in a row for India?)
The second feature of the Nifty chart is the width of the trading bands, which are around 507 index points wide. The width is projected above the upper edge of the trading band to give an upside target near 6780. If the breakout above 6250 continues then 6780 is the next potential resistance level, but that's a big if.
What a rise the NASDAQ has had and what great potential it has to fall. Best seen on the monthly chart, there are three chart analysis features.
The first feature is the index's spectacular rise. The monthly NASDAQ seems immune to the troubles that afflict the Dow Jones Industrial Average and the S&P 500. This is a solid uptrend that has accelerated since March 2013, with the index moving confidently towards the 4100 target level.
The weekly chart of the NASDAQ with a Guppy Multiple Moving Average indicator shows the long-term group of moving averages is widely separated. The separation between the long-term group of averages and the short-term group of averages remains steady and consistent; these are the features of a strong sustainable trend.
The Shanghai Composite index has developed a strong rebound from the upper edge of the long-term Guppy Multiple Moving Average, or GMMA, (in red on the chart).
The rebound rally shows that investors are confident about the strength of the index's trend. The market has broken resistance near 2210 – a significant historical resistance level. A sustained breakout above 2210 is very bullish and sets the next upside target near 2330.
This is a classic GMMA trend test-and-continuation pattern. This develops when the index falls towards the upper edge of long-term GMMA, the long-term GMMA acts as a support level and the index then rebounds, continuing the uptrend.
(Read more: UK's Osborne woos China with shared investment)
The position of uptrend line B is adjusted to include this retreat-and-rally rebound pattern. The new uptrend line has three anchor points, and is now near the upper edge of the long-term GMMA.
The United States is bickering about the debt ceiling once again but the market is bored with the debate and that boredom is reflected in the charts.
The solution to the debt ceiling debate is always the same – give us more free money from the Federal Reserve and increase the limit on the national credit card. This is not a crisis; it's a long-running mini-series with a predictable ending. The market has seen this show before; market boredom with the debate is evident in the U.S. dollar Index chart.
The U.S. dollar index measures the value of the U.S. dollar relative to a basket of currencies. The basket is composed of the euro, Japanese yen, British pound, Canadian dollar, Swiss franc and Swedish krona. It is used as a measure of strength or weakness in the U.S. dollar.
To taper or not to taper? That is the fork in the path but maybe the divergence in outcomes is smaller than expected – a pothole rather than a cliff. The S&P 500 is a more accurate measure of the U.S. market after three components of the Dow index changed this week. The weekly chart of the S&P 500 index shows a particularly strong and established trend with a number of important features.
First we look at trend strength. This is shown with the Guppy Multiple Moving Average (GMMA) indicator on the weekly chart. The long-term GMMA group of averages (shown in red) is well separated, which shows that investors are confident. When the index retreats investors enter the market as active buyers.
The short-term GMMA group of averages (shown in blue) is also well separated. When the S&P index moves to touch the wooer edge of the short-term GMMA it has been a buying opportunity to enter the market at a point of temporary weakness.
Parabolic trends define fast moving momentum trades, and are of particular interest when they collapse as this signal short trading opportunities.
The Indonesian rupiah, which has fallen drastically over the past few months, prompting the Indonesian central bank to take aggressive action to halt the currency's fall, has developed a parabolic trend.
The parabolic trend - best described using an arc or a parabolic curve – is found most frequently in bull markets, or markets showing volatile rebounds. It starts off slowly then accelerates very rapidly until the activity on the price chart is almost vertical.
(Read more: Summers out, canemerging currencies now catch a break? )
Parabolic trends end very quickly, often with substantial price pullbacks that gap well below the previous close. The pullback, which is typically 50 percent of the parabolic rise but could be as much 100 percent of the parabolic rise, becomes an ideal short trading opportunity.
While parabolic trends are most frequently seen in fast moving stocks, they are also present in fast moving index areas, or markets. With a parabolic trend the trend cannot be adequately described by straight edge trend lines, rather the price action uses a parabolic curve as a support level.
It's important to treat this pattern with a little more caution in currency charts because currency trading is driven by factors others than psychology. Patterns which are not based on psychology are not as effective, but they still provide guidance. In this spirit we apply the parabolic analysis to the rupiah chart.
Forget the Hindenburg Omen as a precursor of disaster; it's an unreliable pattern. The head and shoulder pattern is much more reliable and this has developed in the dollar-yen chart.
Where is the gold price going? It's a simple matter of following the S. That's S for silver, not Syria. COMEX silver has led the gold price since 2011, with silver reaching a price peak in April 2011 before Gold peaked in September 2011. The collapse following these price peaks showed the same behavior for both silver and gold. Traders who followed silver had clear warning of how gold would behave once the peak was established.
In 2012 the silver price leadership advantage was reduced. The retreat in silver after it reached a 2012 price peak in September was mirrored by gold in October 2012. While silver still provided a leading indication of gold price behavior, the lead time was reduced.
(Read more: Is silver back in the bull market?)
In 2013 the sliver price lead has narrowed to days from weeks or months. There is now a closer relationship between the price behavior in silver and gold. However, a lead of several days is still enough to give gold traders an advantage. They can monitor developments in the sliver price and watch for a confirmation of the behavior in gold.
The collapse of the Indian rupee is rapid and the danger lies in the potential to act as trigger for a new regional currency crisis in emerging markets.
From a chartist perspective, the collapse is so rapid that it may be difficult to apply accurate technical analysis. The reasons are that patterns applied to long-term currency charts are less robust because the foreign exchange markets, more than other asset classes, is subject to direct political interference, be it central bank policy, QE3 or tapering. This means that longer term application of technical analysis patterns must be applied with caution.
(Read more: Why the rupee may not be headed to 70)
Having said that, here are the some broad implications of how the recent rupee moves suggest about direction going forward.