Technical Analysis

The price action since Monday is ‘shapeshifting’; the once rising channel has evolved into a symmetrical triangle above the low 2080s support. Given the S&P’s ability to hold support and converging price action towards the apex of a triangle, the path of least resistance will remain higher on a breakout above the top-side trend-line of the triangle. Should it break to the down-side and clear below 2080, then our focus shifts to the down-side.

Given the proximity of price to the apex, it should break soon, like today soon. So we may see one more ‘reliable’ move before tomorrow’s UK vote and Friday’s outcome. On this end, looking forward to the return to a more "normal" trading environment.


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The pair blasted through the 6.6 handle and the 6.6500 resistance following the vote, and have since traded between the 6.7 handle as resistance and the 6.5000 level on what appears to be “resistance turned support” basis.

The fact that the pair has managed to find support at 6.6500 in the context of an uptrend might imply focus will be out on the 6.7 figure, while the next resistance level may be found around the January high at the 6.7584 level.
A move below 6.6500 may put the focus again on the 6.6 handle for possible support, followed by the 6.5500 level.

USD/CNH Daily Chart: July 4, 2016

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Silver prices printed $21 intraday for the first time since July 2014 as the Brexit vote has traders anticipating more central bank easing. Lower interest rates make metals like silver and gold generally more attractive. With silver prices poised to finish higher 5 sessions in a row, you would think they just won the Miss Universe contest.

However, later this week we have the US non-farm payrolls printing. Though the market is pricing in a very low probability of a rate hike in 2016, a strong NFP number may cause some repricing of future rate hikes and perhaps taper some of silver’s growth.

Additionally, today’s intraday high is $21.17 where prices subsequently spiked lower. It is possible that prices may dip back to the $19.00-19.50 price zone. This price zone could be an area to buy the dip as it was a former break out level.

After having 2 weeks of strong moves higher, silver prices are at risk of a meaningful pull back. On a more bearish note, a previous 4th wave (which is a common retracement level) is the July 2014 high of $21.60. Though future gains are possible, one has to consider the possibility of the shorter term trend consolidating from near current levels.

Bottom line, the train has left the station so new bulls may want to consider waiting for a dip towards $19.00-19.50. The risk for bulls is $18.04.

If the medium term to longer term top is in place, then we’ll reconsider our wave labels on a break below $18.04.

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After pushing through an area of resistance in the mid-9600s the DAX lost momentum on Friday/Monday at the next area of resistance in the 9730/820 zone. The decline from resistance resulted in the index falling back towards the lows created in the immediate aftermath of the ‘Brexit’ vote. Indeed, a weak market.

While the trend structure in recent months isn’t very clean, there is a series of lower highs and lower lows continuing to develop. With a little more weakness that price sequence could further mature itself in the not-too-distance future. As long as the DAX remains below the recent swing high at 9812 (another lower high), the next lower low would arrive on a drop below the 6/24 low at 9161.

For now, we will continue to view the DAX through a bearish lens given its poor technical posturing and relative weakness. If a lower low from here can develop, there isn’t much preventing it from picking up momentum towards the February low at 8695. This would certainly be consistent with the downward trend in place since the record highs set in April 2015. On the flip side, if the DAX turns higher from here, indicating a successful retest of the recent lows, and can hurdle the recent swing high then we would need to consider bullish alternatives.

DAX (Ger30) Daily

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Let’s take a look at the hourly chart: At this time, with the market trading in record territory there is no actual horizontal price levels which act as resistance, obviously. There is a top-side trend-line at this immediate moment extending back to the 7/4 peak which could help contain further momentum today. Just below, is the parallel of the top-side trend-line which crosses under lows made yesterday and today. This small channel will be used as a short-term guide. Stay within or above, then market will remain firm to higher. Drop below and a larger short-term decline comes into play.

A break below the channel will put the ‘Brexit’ high at 2127 into focus and not too far below there, the rising trend-line off the 6/27 low. The two angles of influence could very well collide with another, strengthening the 2127 level. A decline below both technical markers would open the door up for a move to the 7/4 high at 2112 (highly unlikely we see this level today without a major catalyst).


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The US Dollar is trading higher versus the Chinese Yuan in offshore trade as the pair broke above the 6.7 handle after finding support around the 6.6860 level.

The pair seemed to have found a short term support around the June 28 close at about 6.6860, which signaled possibility for either another attempt for a break above 6.7 or a deeper corrective move lower on a break below.
The pair blasted through the 6.6 handle and the 6.6500 resistance following the “Brexit” vote, but has since failed to see continued upside momentum above the 6.7 handle resistance.

Conviction above the 6.7000 level might put the focus on potential resistance at the January high around 6.7584, as the pair appears to be carving out a “higher low”.

If price fails to hold above 6.7 and 6.6860, eyes may be set for the 6.6500 level which could potentially act as support again.

USD/CNH Daily Chart

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Silver still has a fully-loaded boat of large silver traders long in the futures market (record long), of which their net position may have been reduced this week, but we won’t likely find that out in today’s COT report given it is for the week ending on Tuesday. The real meaty move lower came on Wednesday. At any rate, crowded trades are not where we want to be, but if price action suggests the crowd is right, though, then they are, at least until they aren’t. So far, broadly speaking they have been right, minus the newly minted long positions in the past three weeks.

The short-term chart still points lower since peaking on 7/11. During the Asian session, silver turned lower off a trend-line which runs off that peak created nearly two weeks back at 20.66. Lower lows and lower highs have been marking the trend lower.
At this time a move above the trend-line will be required to break the series of lower highs and lower lows, and until then silver leans bearish, neutral at best. A breakout above may not lead to a new leg higher, but the 20.66 area could be achieved as a broader daily range continues to build.

The support right around 19.20 will be pivotal; if the metal breaks below there, then a move into the mid-18s becomes the risk. Which is a spot that holds significant as long-term support. Perhaps by then some of the speculative longs will have puked out their positons and a possible reload for another shot higher could take shape. It is still too soon to discuss that, so we will stick with the short-term structure suggesting some work needs to be done by the bulls to turn the technical structure positive.

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Trading in August can be difficult, because just as volatility is set to begin rising, volume tends to slump during the month as summer unwinds and people enjoy the last of the summer vacation months. This is generally the case barring a major catalyst, such as last summer’s swoon on fears stemming from China. So keep in mind, while volatility is on the verge of rising, we will want to reserve our excitement if the market doesn’t have a good reason to move. But, with that said, if you are in front of your screens then you need to stay alert and ready to act even if the market action at the immediate moment is ‘boring’.

Be mindful the market could whipsaw as it breaks the extended range, and shakes off the rust. Traders may want to wait until the market clearly extends away from the range with momentum before becoming involved at this time.

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The S&P 500 pulled back from a top-side trend-line running off the 7/14 peak, and is currently trying to make its way back higher off the 2174/78 support zone. Can the breakout following Friday’s big NFP print hold, or will it fold, leading to a false breakout? It certainly could and it would be consistent with how markets often act coming out of tight ranges like the one we saw to end July into August. A drop back below 2174 confirms a false breakout and a decline back towards the low-end of the range becomes the risk. Should support hold, then so does the market’s current upward bias.

Short-term levels to focus on: Resistance comes in at 2187, the upper trend-line, then the psychological level of 2200. Support between 2174 and 2178, then the air pocket inside the trading range, with nothing substantial until the 2060/55 band.


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The hold above 6.6500 seems likely to shift focus to intermediate resistance at 6.6860 followed by the 6.7 figure.
A break and hold above those recent highs may be required for bulls to really take control again.
A move to the downside may target the 6.6500 level again, followed by the July lows at 6.6224.

USD/CNH Daily Chart: August 24, 2016

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