ThinkTechnical 31 July - Macro Ed.

In today's ThinkTechnical Macro Edition we'll take a look at the technical picture for a number of key risk on vs risk off indicators.

Typically, equities markets and energy commodities have been considered risk on. These markets are cyclical in nature, that is, they tend to thrive when the global economy is firing.

Alternatively, gold is a classic risk off play. It tends to thrive in times of economic uncertainty - and there's plenty of that around at the moment.

So, how do these key markets compare on a technical basis? Let's take a closer look, and note, there are a couple of downgrades in short term technical biases in store.

 

BIAS: ST/ DOWNGRADE FROM LONG TO NEUTRAL; LT/ NEUTRAL-SHORT

The ASX200 Share Price Index Futures contract is in a short term uptrend, as evidenced by the 21 EMA located above the 34 EMA. Caution needs to be applied in the short term however, as these moving averages are now pointing lower.

In contrast, the long term trend is down. It is well-defined, as evidenced by the 144 EMA located above the 233 EMA and with each EMA declining.

Static resistance will be encountered at the 22 Jul 2020 high of 6144, the 09 Jun 2020 high of 6199, and then at the 16 Aug 2019 low of 6303.

Static support at the 27 Jul 2020 low of 5959 has been broken. This is the first time a short term swing low has failed since the start of the recovery in March. This is a bearish signal, however, there are a number of key static support prices that may well stave off a more severe decline.

The next static support will be encountered at the 10 Jul 2020 low of 5857, and then at the 26 Jun 2020 low of 5724, which coincides roughly with the 15 Jun 2020 low of 5710.

The dynamic short term support zone is defined by the 21-34 EMAs, projected between 5940 and 5975. The price has been consistently rebounding higher out of the short term dynamic support zone since the short term uptrend began in May.  The key issue now, is that the price today is trading below this zone. If this situation is sustained, this zone may well switch to offering dynamic resistance.

The dynamic long term resistance zone is defined by the 21-34 EMAs, projected between 5965 and 6065. The price has been consistently rebounding lower out of the long term dynamic resistance zone since the long term uptrend began in March. This highlights the importance of this zone as a future area of potential dynamic resistance moving forwards. This area is clearly impeding higher prices. It should continue to act as a significant zone of resistance going forwards.

Given the uncertainty in relation to the short term trend, short term traders should remain neutral. Bearish long term traders may wish short at static resistance and/or the long term dynamic resistance zone with stops set above these levels.

 

BIAS: ST/ LONG; LT/ LONG

S&P 500 (US) is in a well-defined short term uptrend, as evidenced by the 21 EMA located above the 34 EMA and with each EMA rising. The long term uptrend is also well-defined, as evidenced by the 144 EMA located above the 233 EMA and with each EMA rising.

Static resistance will be encountered at the 23 Jul 2020 high of 3280, and then at the 19 Feb 2020 high of 3394.

Static support will be encountered in a band defined by the 24 Jul 2020 low of 3200 and the 08 Jun 2020 high of 3233, which also coincides with the 31 Jan 2020 low of 3214.

Note that static support at 3200 coincides with dynamic support expected to be encountered in the zone defined by the 21-34 EMAs, projected between 3170 and 3210. Whenever multiple support factors coincide, the market response at the zone defined by these factors tends to be stronger. The price has been consistently rebounding out of the short term dynamic support zone since the short term uptrend began in April. This highlights the importance of this zone as a future area of potential dynamic support moving forwards.

Targets are to the 20 Feb 2020 high of 3394. Beyond 3394, SPX is at all-time highs, and therefore targets are open ended.

Traders may wish to buy at the static and dynamic support zones with stops set below these levels. If this cannot be achieved, then traders may have to consider buying on a breach of 3280.

 

BIAS: ST/ LONG; LT/ LONG

Nasdaq Comp (US) is in a well-defined short term uptrend, as evidenced by the 21 EMA located above the 34 EMA and with each EMA rising. The long term uptrend is also well-defined, as evidenced by the 144 EMA located above the 233 EMA and with each EMA rising.

Static resistance will be encountered at the 21 Jul 2020 high of 10839, which coincides with the 13 Jul 2020 high of 10825.

Static support will be encountered at the 23 Jun 2020 low of 10222, which coincides with the 23 Jul 2020 low of 10217.

Note that static support at 10217 coincides with dynamic support expected to be encountered in the zone defined by the 21-34 EMAs, projected between 10240 and 10435. Whenever multiple support factors coincide, the market response at the zone defined by these factors tends to be stronger. The price has been consistently rebounding out of the short term dynamic support zone since the short term uptrend began in April. This highlights the importance of this zone as a future area of potential dynamic support moving forwards.

Beyond 10839, the Comp is at all-time highs, and therefore targets are open ended.

Traders may wish to buy at the static and dynamic support zones with stops set below these levels. If this cannot be achieved, then traders may have to consider buying on a breach of 10839.

 

The Australian Dollar vs US Dollar is in a well-defined short term uptrend, as evidenced by the 21 EMA located above the 34 EMA and with each EMA rising. The long term uptrend is undefined, as evidenced by the 144 EMA located below the 233 EMA but with each EMA rising. It is likely that these EMAs cross over in the near future, therefore commencing a new long term uptrend.

Static resistance will be encountered at the 31 Jan 2019 high of 0.7295, the 04 Dec 2018 high of 0.7393, and then at the 08 Dec 2017 low of 0.7498.

Static support will be encountered at the 18 Apr 2019 high of 0.7205, and also the 22 Jul 2020 high of 0.7182.

The dynamic short term support zone is defined by the 21-34 EMAs, projected between 0.6985 and 0.7060. The price has been consistently rebounding out of the short term dynamic support zone since the short term uptrend began in April. This highlights the importance of this zone as a future area of potential dynamic support moving forwards.

Targets are to 0.7295. The next key target is 0.7393. 

Traders may wish to buy at the static and dynamic support zones with stops set below these levels. If this cannot be achieved, then traders may have to consider buying on a breach of today's current high of 0.7224.

 

Spot Gold is in a well-defined short term uptrend, as evidenced by the 21 EMA located above the 34 EMA and with each EMA rising. The long term uptrend is also well-defined, as evidenced by the 144 EMA located above the 233 EMA and with each EMA rising.

Static resistance will be encountered at the 28 Jul 2020 high of 1980.56.

Static support will be encountered at the 06 Sep 2011 high of 1920.30, and then at the 08 Jul 2020 high of 1817.71.

The dynamic short term support zone is defined by the 21-34 EMAs, projected between 1850.00 and 1890.00.

Beyond 1980.56, USD/oz is at all-time highs, and therefore targets are open ended. Note however, static resistance will likely be ecountered at the 2000.00 round number.

Traders may wish to buy at the static and dynamic support zones with stops set below these levels. If this cannot be achieved, then traders may have to consider buying on a breach of 1980.56.

 

BIAS: ST/ DOWNGRADE FROM LONG TO NEUTRAL; LT/ NEUTRAL-SHORT

West Texas Intermediate Crude Oil is in a well-defined short term uptrend, as evidenced by the 21 EMA located above the 34 EMA and with each EMA rising. In contrast, the long term trend is down. It is well-defined, as evidenced by the 144 EMA located above the 233 EMA and with each EMA rising.

Static resistance will be encountered at the 21 Jul 2020 high of 42.40, which coincides with the 24 Dec 2019 low of 43.36.

Static support at the 20 Jul 2020 low of 39.83 has been broken by Thursday's price action. This is the first time a short term swing low has failed since the start of the recovery in March. This is a bearish signal, however, there are a number of key static support prices that may well stave off a more severe decline.

The next static support will be encountered at the 10 Jul 2020 low of 38.54, and then the 25 Jun 2020 low of 37.08.

The dynamic short term support zone is defined by the 21-34 EMAs, projected between 39.30 and 40.40. The price has been consistently rebounding out of the short term dynamic support zone since the short term uptrend began in May. This highlights the importance of this zone as a future area of potential dynamic support moving forwards. However, if the price cannot quickly move back above this zone, it may well start to act as a dynamic resistance zone going forwards.

The dynamic long term resistance zone is defined by the 144-233 EMAs, projected between 38.70 and 42.20. This zone should continue to impede price increases into the future.

Given the uncertainty in relation to the short term trend, short term traders should remain neutral. Bearish long term traders may wish short at static resistance and/or the long term dynamic resistance zone with stops set above these levels.