Merry Christmas everyone!
I am writing from a very 40 degree hot & sunny Perth suburb this Christmas Day. I hope your Christmas is special as well...
Meanwhile, I just managed to squeeze some time out to prepare for the new year... in terms of chart technicals.
Let's see what we can expect in the coming week into the new year 2013.
S&P500 / ES
The weekly chart shows that the S&P futures are still in a mature uptrend. This uptrend is waning in strength as shown by MACD as well as momentum and price action. January 2013 may end sideways from here slightly above or below it seems. The daily chart has given a Sell signal on Christmas Eve and with the Fiscal Cliff talk to resume again from the 27th, with littlel to go on, I'd suspect that there is a short term downside over the next two weeks. Given the S&P500 futures technicals, I'd say that this is another correction just waiting to happen upon return from the Christmas holidays.
USD futures / DX
The USD futures coorrelates opposing from the S&P500 usually when funds exit or enter the US markets. The weekly chart has price rested on the 79 support (co-inciding with the 200MA - green line) and is looking to break 80.20 resistance. It looks likely that the USD should see a rally in the coming weeks. The daily chart nicely has generated a Buy signal and other indicators look good for a rally to follow through. From here, the USD looks set to rally, and does indicate a bearish scenario for the S&P500.
The weekly TLT (US Treasury bond fund) looks like a topping in the bond prices, currently consolidating near the moving average. However, with a Sell signal last week, it is possible for a MA line break. Breaking down below the support of 120 would signal a fall in prices. The daily chart shows price struggling to break above, which should be clearer into 2013.
It was observed preioously that a rise is the USD futures was slightly preceeded by a rise in TLT, which concurrently saw a fall in the S&P500. This time the indication doesn't seem so much of flight to aafety, but more of fear (see VIX charts below).
The volatility index looks interesting. The weekly VIX chart has a Buy signal last week, after weeks of bullish divergence, and it is the fourth of 2/3 signals that served well in the past nine months. The latest Buy signal comes also after a bounce off the long term support of 15.5. The daily chart shows that bounce off with MACD crossing into bullish territory and price crossing above the MAs. Recent Buy signals in the daily chart were also given and VIX spiked. There is more fear/volatility in the horizon... the volatility cycle is due.
Overall, this (short) last trading week will see some decent volatility, and anticipates a bearish entry into 2013 fuelled by fear rather than safe haven exodus.
Happy New Year!
25th December 2012
Note: ALL material posted here is from my personal opinion, and my opinion may differ or change without notice. These do NOT constitute as solicitation, investment nor financial advice. By reading the materials presented here, Readers acknowledge the awareness that the materials are intended for educational purposes only. For investment(s) advice, related decisions and/or actions pertaining to investments, always consult your own qualified financial advisors, brokers, etc.
Charts are from TD Ameritrade Thinkorswim platform