This is the last update of 2021. A new calendar year is significant and those details will be addressed next week. The charts in this post highlight why I’m heading into 2022 with a USD bearish mindset. The chart above is a starting point insofar as making a USD bearish argument although the big picture ‘textbook’ trigger doesn’t occur until a break of the channel near 95. Until then, respect potential for strength into the 61.8% retrace of the decline from March 2020 at 97.73.
Not much to write about today but crypto did get slammed. The most interesting short setup is SOLUSD. Again, the massive wedge broke in mid-December. A head and shoulders top may be forming since September as well. 186.30 or so is proposed resistance (see below). Immediate downside focus is the proposed neckline near 155.
AUDUSD continues to make progress within what I believe is a new bullish sequence. As such, focus is on identifying support to buy. .7170 sticks out as the ideal level. This has been an important horizontal level since the September low. The price intersects short term channel support at the end of this week (and year). Maybe we get a big buying opportunity right at the beginning of 2022! .7290 or so is still proposed resistance for a pullback.
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EURUSD is once again flirting with an important breakout above the trigger line. Price is more or less right at the line now. Again, a break above is needed in order to indicate an important behavior change. Ideally, price rises a bit more before pulling back to the line near 1.1300 and holding it as support. That’s the setup at least! Near term upside remains about 1.1520.
Cable remains above the high, although barely. I continue to ‘think’ higher in GBPUSD given the well-defined price level that price is hovering above. Again, this is VWAP from the March 2020 low and channel support. There is also the high from March 2020 and the 38.2% retrace of the rally from March 2020. Finally, there is RSI divergence on the 4 hour chart. Magenta dots in the chart below show divergent readings over the past year.
The equity ‘market’ has felt odd recently. A look beneath the surface confirms this suspicion. The 30 day Nasdaq advance-decline line is plotted below the composite index. The AD line closed at -637 today. The magenta dots indicate readings of -600 or lower. Previous readings this occurred at the Dec 2018 low and for several weeks in March-April 2020 (the first reading was 3/18/20). Prior to the last few years, readings this low occurred in October-November 2008 and during the 2000-2001 decline! Those periods are shown in the charts below. So, the A-D line is ‘oversold’ yet the QQQ closed a bit more than 5% off of the all time high today. All of the prior ‘extreme’ AD readings occurred after for more meaningful declines. The only takeaway I have is that if the index continues to decline but the A-D line improves then look out below because the next low won’t be until the next extreme A-D reading.
Is the nightmare correction over for EURUSD? The ‘look’ is definitely there. For Elliott nerds, everything from the 11/30 high constitutes a complex correction labeled W-X-Y. This means that the drop is in 3 waves but the corrective legs of the structure are also corrective in nature. Upside focus is the 161.8% retrace at 1.1540, which is also the 10/29 low. Proposed support is the high volume level from today at 1.1273 and 61.8% of today’s range at 1.1252. ECB is tomorrow.
The USD remains stubbornly up to flat. The psychological situation reminds me of early in the year when the USD was stubbornly lower for longer despite multiple reversal signals. Of course, price eventually resolved higher and now I want to go the other way! The underside of the former trendline support was reached 3 weeks ago and nothing has happened since. The situation should resolve in the next few days with Fed, ECB, BoE, and BoJ scheduled. We’re at resistance therefore I’m ‘thinking’ lower. The chart of daily closes below is a thing of beauty with respect to confluence resistance.
AUDUSD has pulled back following a slight push above .7170. My view is that the decline is corrective. The 61.8% retrace is in line with the 11/30 low at .7060s. That sticks out to me as the ideal spot for support.