Market Update 9/20 – GBPJPY – Best Setup of the Year?

SPX DAILY

SPX broke the channel so the next downside level to pay attention to is the full extension of the width of the channel.  That  line intersects about 4220 towards the end of the week.  The underside of the channel is proposed resistance now near 4395-4400.

9/15 – My near term SPX focus is on the channel from the May low.  The upper parallel of that channel was resistance for the top which accentuates the importance of the lower parallel as the big test for direction.  The lower parallel is about 4394.  A break below would be the first indication in a long time that ‘something else’ is going on (behavior change).  There are 2 levels to watch for resistance…now and the high at 4551.  I reference median line symmetry often.  A test of the high would also test the 75 line…which would satisfy median line symmetry since the 25 line was just support.  Tactically, I wouldn’t try the short side until either a break under the lower parallel or a test of the high.

NASDAQ FUTURES (NQ) DAILY

Remember that 9/1 reversal (see text below)!  Near term focus for NQ is the center line of the channel that originates at the September 2020 low (9/21 actually…exactly 1 year ago).  This line intersects the trendline from the October 2020 low and support from July near 14540 over the next few days.

9/1 – NQ made a 4 hour volume reversal today.  I didn’t think much of the signal until I plotted it on the chart.  See for yourself!  The last year of such signals are plotted above.  The most recent bearish signal identified the April high.  Also, today’s high nailed the upper parallel from the year long channel (see below).  The combination of the volume signal and level (channel) warrants a contrarian (bearish) stance.

EURUSD DAILY

EURUSD low today was right at daily reversal support (8/20 close) and price put in a doji.  The broader pattern isn’t clear but this is a good spot for a small bounce at minimum.  Proposed resistance is 1.1790 or so.

USDSEK DAILY

Another reason to suspect a EURUSD bounce is the strong USDSEK reaction from noted resistance.  There is nothing to suggest that the broader trend isn’t still higher.  As long as price is within the 2021 bullish fork, the broader trend is seen as bullish.  However, a pullback here makes sense as well with support near 8.64.

9/16 – USDSEK ended up bottoming a bit above the expected level at 8.53 on 9/3.  Since then, price has traded in a relatively tight range and price is pressing the top side of that range now.  I’m bullish but would pay attention to 8.73 for possible resistance.  This is the 61.8% retrace of the drop from 8/20 and resistance from July and August.

GBPUSD DAILY

GBPUSD is fast approaching range lows.  A break of the lows would open up where the decline from June would consist of 2 equal legs at 1.3305.  This is close to VWAP from the March 2020 low (see below).  The larger double top target is 1.3100.  Former support at 1.3720s is now proposed resistance.

9/15 – The bearish GBPUSD setup continues to take shape.  The drop from yesterday’s high is clearly impulsive and the bounce is clearly unfolding in a corrective manner.  The 61.8% retrace at 1.3867 should provide resistance if strength persists.  Also, seasonal tendencies are now bearish across all lookback periods (see below).  This setup has everything (volume reversal, VWAP resistance, short term Elliott pattern, and seasonality).

BRITISH POUND FUTURES DAILY

USDCAD 4 HOUR

Today’s USDCAD rally may have been wave D of the triangle, as noted in last week’s analysis.  If a triangle is still underway, then price will pull back to 1.2600 or so before turning up and eventually breakout out above the 8/20 high.  I’ll also keep 1.2760 (former high) in line for possible support.

9/15 – Sometimes, the pattern starts to make sense.  That happened today as I was viewing USDCAD.  Notice how each leg since the 7/19 high consists of 3 legs.  That suggests triangle.  Also, proposed wave B is about 127.2% of proposed wave A…also suggests triangle.  Within an Elliott triangle, several alternating legs usually relate by 61.8%.  If that happens with wave D (now), then this rally will carry to 1.2820 which is in line with proposed resistance anyway.  The question is whether or not price undercuts the 9/10 low first.  I’m on the lookout for evidence of a turn higher.

GBPJPY DAILY

GBPJPY is playing out as suspected.  The break of trendline support triggers the wedge reversal although the head and shoulders top hasn’t yet confirmed.  If GBPJPY bounces to test the underside of the just broken trendline then look to short.  Proposed resistance is 150.50/80.  The big downside target is sub 140 (10+ big figures).

9/14 – GBPJPY has rolled over from 3+ month trendline resistance.  There is the specter of a 6 month head and shoulders with a 148.50 neckline.  If confirmed, the target for the h&s would be just under 140 (see zoomed out view below).  Action since the March 2020 low is also a textbook wedge.  Wedges often result in sharp reversals and this wedge would break below 150.50.  Proposed near term resistance is 151.90-152.10.  Bottom line, the potential is there for GBPJPY short to be a massive trade.