DMA 8 March 2010 – little bull dance

Over the weekend, I had squeezed some time to look at the charts for a bit as the last two days of last week were tremendously bullish. On 3rd March 2010, I already posted that there was a rebirth of a small bull, and the week ended favourable to the bull call. This confirms a bullish case for the markets, and although there was a slight deviation of the USD-market relationship, this should correct itself to find the USD in a steeper decline sooner than later. Let’s see how the charts spoke to me…

/ES
The hourly charts indicate a rally overcooked, and we can expect some moderation (retracement) in the early hours of market open today. If we take GS as a market leader and look at their hourly charts, it closed Friday with a trend change bias pattern, indicating Monday morning to be negative. However, like the E-minis (and SPX), the daily charts look bullish for more upside, although there may be some resistance.
The daily ES charts indicate more upside to follow with perhaps a slower pace on increase over the week. I expect this week to be closing up, and am looking out for a breakout and maintantence of that breakout on a resistance level. That would seal the bullish case for the markets.
The weekly charts look very bullish in my opinion, and implies a likely resumption of the rally.

/CL
The daily charts speak of a continued rally, especially if the daily close should be >83 for more than 3 days. However, there is a risk of a possible head and shoulders pattern formation with the current prices at the peak of the right shoulder. This is small in probability as the indicators do not signal (yet) a likely turn in prices, plus other factors that would be discussed below. Setups indicate a resumption of the primary bull trend.
A possible black swan is USO, a highly traded ETF that is supposed to follow /CL. Although the USO daily charts are bullish, there is a divergent channel pattern, with the latter forming a falling channel, and CL forming a rising channel. Furthermore, USO is just near completion of a trend change bias pattern and I would be looking for a lower high pivotal point.
For crude, I shall call this a skeptical bullish case.

/GC
Gold had been very impressive over the past few weeks, with the USD fall, it was very resilient, and opposed to Silver (/YI or SLV), GC/GLD has shown strength. In the daily charts, a trend bias change pattern formed and prices broke out of a range with a gap up last week. A small test of the range resistance turned support should be holing Gold prices up. The RSI indicator is showing strength and indicates bullishness to come in the coming week or two. 1140 and above should be the trigger for gold to rally again, but needs a fundamental factor right now to do so. 1124 is support.
The weekly charts are very bullish witht eh RSI breakout and Stochastics median bounce up. On a weekly basis, Gold needs to close above 1150, which should happen this week or two.

/6E
The Euro futures are included so that the USD/EUR relationship can be factored in. This is an important equation as the Euro is affecting the USD and Gold prices in relation to its weakness/strength. The daily charts indicate a consolidation bottom with the RSI nearing a breakout of 50. It should also breakout of the current range and with the Euro recovering some confidence, the USD should take a hit.
Fundamentally, I see this happening as Germany and France have initiated a Euro Monetary Fund. Whether this takes off or not, or if this is suffice to stop check Euro countries from going default remains to be seen. I am skeptical as this looks and sounds to me like a grand Lehman Bros.

/DX
The hourly charts for the USD futures indicate a breakdown of the range and a rebound back into the range. There appears to be a trend bias change pattern forming over the consolidation range. Therefore, I am expecting some USD recovery and then would be looking for a breakdown of the range again.
The daily charts has the RSI indicating a decisive break of the RSI trendlines either up or down, and it looks more bearish than bullish at this point.
Weekly DX charts indicate that the RSI has hit and not broken the RSI bearish resistance. Closing weekly <80.2 should indicate a very likely bear case for the USD. Taken together, this coming week’s scenario sees the USD (DX) expected to be bearish, and as a result, the SPX, Gold and Crude to resume its bullish run. Note: Any material posted here is my sole opinion, and the opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational and discussion purposes only.