Press review - page 520

[Sergey Golubev]

Why The 200-Day Moving Average Is A Good Worry Signal (based on the article)

• "U.S. markets have bounced back a bit after Wednesday’s decline, but many investors are still rattled by recent developments. Although this decline does not appear to be the big one, for a number of reasons, it’s possible that markets could fall further. Should we worry about that? I don’t think so. And the following indicator is the reason why."
• "The 200-day moving average (MA)—which is the index’s average closing price over the past 200 days—is the best indicator there is, in my opinion. There’s nothing magical about 200 days—you could use 50, 100, 400, or 63.25 for that matter—but 200 days seems to be a sweet spot between false alarms and timeliness."
• "Right now, the 200-day MA is around 19,550 for the Dow and 2,255 for the S&P 500. These levels would represent declines of just under 8% from the Dow’s high and just over 6% from the S&P’s high. Based on where the indices are today, they’d represent about a 5% decline for both. I’d really start paying attention then, but we are nowhere close to those levels right now."

[Sergey Golubev]

Weekly Outlook: 2017, May 21 - May 28 (based on the article)

The US dollar was on the back foot, suffering some political issues among other factors. The meeting minutes from the Fed stand out, alongside updates on US and UK GDP but perhaps the biggest event is the testimony of James Comey. Here are the highlights for the upcoming week.

1. US New Home Sales: Tuesday, 14:00. A level of 611K is on the cards now.
2. Canadian rate decision: Wednesday, 14:00. 
3. US Existing Home Sales: Wednesday, 14:00. 
4. James Comey testifies Wednesday, 13:30 (tentative). The former FBI Director returns to Capitol Hill for the first time after he was fired by President Trump. Comey’s memo included a passage suggesting that Trump tried to intervene in the investigation of Michael Flynn, the disgraced National Security Advisor about the connections between Russia and the Trump campaign. We have witnessed how the scandals have affected the US dollar. If Comey clearly says that Trump tried to obstruct justice, the dollar could fall. If he denies it or plays Trump’s comments down, the dollar could rise.
5. FOMC Meeting Minutes: Wednesday, 18:00. In the May meeting, the Federal Reserve left interest rates unchanged and shrugged off the recent slowdown. Since then, we learned that wages have decelerated to 2.5% y/y and we have also learned about unimpressive retail sales and lower inflation. Since the meeting minutes document can be revised to send signals to markets, we might get a more dovish message than the statement suggested.
6. UK GDP (second release): Thursday, 8:30. The number will likely be confirmed now.
7. US jobless claims: Thursday, 12:30.
8. US GDP (second release): Friday, 12:30. 
9. US Durable Goods Orders: Friday, 12:30. Core orders, which the Fed eyes, were flat after the revision.

[Sergey Golubev]

Weekly EUR/USD Outlook: 2017, May 21 - May 28 (based on the article)

EUR/USD reached the highest in six months, mostly enjoying the weakness of the dollar. PMIs, a key German survey and the ECB meeting minutes stand out in the last full week of May.

1. German GDP (final): Tuesday, 6:00.
2. German Ifo Business Climate: Tuesday, 8:00.
3. ECB Financial Stability Review: Tuesday, 8:00.
4. German GfK Consumer Climate: Wednesday, 6:00.
5. Flash PMIs: Wednesday morning. Data for France is published at 7:00, for Germany at 7:30 and 8:00 for the euro-zone.
6. ECB Meeting Minutes: Thursday, 11:30. In the last ECB meeting, Draghi showed optimism on growth but was doubtful about inflation, postponing any announcement about tapering of the QE program.
7. Belgian NBB Business Climate: Thursday, 13:00.

[Sergey Golubev]

Big Week for Global Markets (based on the article)

EUR/USD Rockets-through 1.1200
"Of recent, we’ve seen a concerted effort from the European Central Bank to allay concerns of QE-taper. We heard Mario Draghi speak to this at the most recent ECB meeting, remarking that the bank hadn’t yet begun discussions around exit strategies; but judging by price action, markets aren’t necessarily buying that idea, as Mr. Draghi’s dovish assurances merely brought on a quick support test, and this was followed by three weeks of strength as EUR/USD has run from a post-ECB low of 1.0839 up to a fresh six-month high of 1.1246."

USD/JPY is Back in the Bearish Channel
"The latter portion of April and the early portion of May saw the return of the USD/JPY bullish theme, as the pair broke out of the downward sloping channel that had governed price action since the open of the New Year. But the reversal on Tuesday and Wednesday broke below a key zone of support comprising the area from 111.61-112.40; and now we can see this ‘zone’ acting as near-term support by capping the highs over the past three trading days."

[Sergey Golubev]

AUD/USD - rally within the bearish; 0.7488 and 0.7610 are the key resistance levels (based on the article)

Daily price is located below Ichimoku cloud in the bearish area of the chart for the secondary rally to be started by 0.7488 resistance level to be broken to above with 0.7610 bullish reversal level as the next daily bullish target.

• "The Australian Dollar may be poised to continue higher after breaking the top of a falling channel that had contained gains against its US counterpart for two months. It remains to be seen whether the move will amount to a correction or if prices are laying the foundation for a longer-term advance."
• "Near-term resistance is now at 0.7554, the 38.2% Fibonacci expansion, with a daily close above opening the door for a test of the 0.7609-24 area (chart inflection point, 50% level). Alternatively, a reversal back below 0.7461 (channel top resistance-turned-support) targets the 14.6% Fib at 0.7415."

[Sergey Golubev]

EUR/USD: Bullish: Still bullish (based on efxnews article)

United Overseas Bank (UOB) is suggesting for traders to exit from buy position in case the price will go closer to 1.1300 resistance level:

• "EUR eked out a marginal new high of 1.1267 yesterday before easing off quickly. The price action is not surprising as we have held the view that that “while the outlook for this pair is still bullish, the odds for extension to 1.1300 are not high”. That said, only a break below 1.1130 would indicate that the bullish phase that started last Wednesday, 17 May has ended."
  
• "We have suggested taking partial profit at 1.1170 last Friday and those who are still long should look to exit their position if there is another push towards 1.1300."

[Sergey Golubev]

NZD/USD: Bullish: Immediate target of 0.7050/55 (based on efxnews article)

United Overseas Bank (UOB) is evaluating the market condition for this pair daily price as a bulish in case 0.7047/50/55 targets will be broken to above:

• "We turned bullish NZD yesterday and there is no change to the view. NZD rose quickly to hit a high of 0.7047 which is just below our immediate target of 0.7050/55."
  
• "Overbought short-term indicators could lead to a couple of days of consolidation but as long as 0.6930 is not taken out, the prospect for a break above 0.7050/55 appears to be quite high. A move above 0.7050/55 would shift the focus to 0.7090."

[Sergey Golubev]

S&P 500 Ahead Of FOMC Meeting Minutes (based on the article)

Daily price is on bullish ranging within 2400 psy resistance level and 2354 bearish reversal support level. If the price breaks 2400 to above so the next resistance at 2404 will be the key for the bullish trend to be continuing.

• "The 2380 level was an important one for a few weeks as the market consolidated just above it following the first round of the French elections. It held on several occasions, and when the market took a hit last week it was sliced through with ease. On Friday, the market attempted to break back above but settled out the week right at the key juncture. So far, this week that key level hasn’t been anything more than an afterthought."
• "Yesterday, the S&P filled last week’s gap, with the next level of resistance arriving not far ahead at the record high of 2306. Should we see a push to that point or just beyond, can the market continue its recent surge, or will it be a fake-out breakout? Often times indices will breach a key level only to take the rug out from beneath those who most recently entered the market. With that in mind, entries are favored on pullbacks if conditions are right, not chasing breakouts. A rejection off the highs may shift the market lower with range-trading coming into play as general conditions become increasingly unclear. Should we see a move lower our biggest interest will be in how the 2380 level is handled. A hold, and we may see a push back towards the highs; a fold below and the market may be looking to at least probe last week’s low."
• "Heads up: Later today, the FOMC minutes from the earlier-month meeting will be released. When the March minutes were released on April 5 the market underwent an unexpected bout of volatility. It seems unlikely we will have a redux, but traders need to be prepared regardless."

[Sergey Golubev]

Brent Crude Oil - daily bullish reversal (based on the article)

Daily price went to the bullish territory by breaking Ichimoku cloud to above: price is testing 54.60 resistance level for the bullish trend to be continuing with 55.95/56.62 nearest bullish targets. The other scenario is the following: the price will be bounced from one of the resistance level to below back to the bearish area of the chart for the ranging within the levels for direction.

X Wave Triangle
"Under this triangle scenario, prices would need to top soon and below $55.21. If a short term pivot forms, we would anticipate one last dip to hold above $43.79 to finish off the triangle pattern. This is an overall bullish pattern that would lead to a break higher. This triangle is valid in the near term so long as crude oil prices are contained between $43.79 and $55.21."

Diagonal Pattern
"Under this scenario, the dip to $43.79 was wave four of the five wave diagonal. This sequence implies crude oil prices have begun their ending wave higher. This final wave likely grabs a new high above $57 while holding the green support trend line."

[Sergey Golubev]

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2014.03.30 20:04

3 Ways to Combine Forex Indicators

Forex traders like to use different methods and tools to help them trade profitably. There are hundreds of technical indicators available to choose from; some of them work well and some of them only seem to work some of the time.

Often, traders like to combine indicators as doing so helps to provide more robust trading signals. By doing so, traders have more chance of making money. As well, filtering out trades helps to reduce commission costs overall. Here are three ways to combine forex indicators:

Volume and Breakout

Volume and breakout is a classic combination that traders use but unfortunately some brokers do not provide much in the way of volume data in forex markets.

Nevertheless, the combo works because breakouts often signal changes in trend and lead to long-term market moves.

Similarly, volume helps show direction as it indicates the move is “real” and not just a technical move. Combining the two greatly reduces the chance of whipsaws.

Moving Average and RSI

These two indicators work well as confirmation indicators in their own right and they can also be combined together for two different types of strategies.

Mean reversion strategies can benefit if the RSI is oversold or overbought. If the forex pair is a good way from its moving average, it also signals a return to the mean is likely so combining the two signals helps strengthen the trade.

In trending markets, RSI and the moving average can work in the opposite way. If a currency is overbought, and the moving average has just crossed over a slower MA, or if the price has crossed over the MA, then it’s a stronger signal to enter a trend following trade.

Either one can also be used as a filter against the other. For example, if RSI is overbought but there is no MA cross, then the trade signal can be annoyed.

Bollinger Band and Open Positions

Indicators can be combined with fundamental metrics too and this is sensible in forex markets.

Open position data or COT (Commitment of Traders) data, can be used to support or restrict technical signals.

As an example, let’s say that GBP/USD is riding high and has just climbed towards the top of its upper Bollinger Band. In some cases, this could be interpreted as a bullish sign but a look at the open position data suggests a one-sided situation that could limit any further move upwards.

In this example, open position data suggests that around 80% of open positions in GBP/USD are long positions. If this is the case, then there are very few bulls left in the market to buy. The situation is very one-sided and only a few short positions would be needed to make the currency drop back.

Thus when a currency hits a Bollinger Band and open position data suggests a one-sided market, there is a great potential for a reversal.