Technical analysis is a tool in trading, it is not a science, it is rather an art and the skill to find, to read the price action and the key points where reversal or the continuation will occur. We will begin this article with, for some of the traders so keen to be long the USD, “cruel” DXY monthly chart shown above. It is revealing an extreme USD downtrend that lasts from 2001 and is in the corrective pullback from 2008 till now. Especially important is the key rejection from 61.8% Fibonacci Resistance of the swing down 2001-2008, 102 level. Another key point is this medium-term break below 96 level in 2018. This level, 96, is the confluence of the two Fibonacci 50% Resistances, the 2001-2008 swing down and 2017-2018 swing down. This is the zone of the Monthly DXY candles shadows 95.676-96.170unbroken for almost a Year now. The clear conclusion we are in the long-term and medium-term USD DXY downtrend.
Now let us take a look at the US 30 Yr T-Bonds. The common mistake is that the long-term uptrend is broken. What can we see from the Quarterly chart below? 135 level is firmly holding and this long blue uptrend line as well. So what is broken? What is making this frenetic media hype calling a bearish market in Bonds? A break of the medium-term uptrend line (red line).
As you can see we mostly use the top-down trading analysis, so on the weekly chart we can see a bullish flag formed. So we have a 3 basis points space for a bond sell-off if it happens from 138-135 for a possible new top in Equities. Even if we don’t have a 3 basis point sell-off we could have 138-144 consolidation which will again be useful for Equities buying and a new swing higher in Indices heading into Year End. So a clear conclusion we don’t have a start of the bear market in Bonds and it will be reflected in lower US yields.
And what about the US 30Yr Yields? Rejected from the monthly confluence of the upside resistance and the downside support 3.477 level. Again there is a space for the sideways rising wedge swings in the 3-3.400 zone before an eventual break lower, which would mean the long-term uptrend continuation in Bonds. Simply no uptrend reversal in Yields.
And Equities of course S&P500. Monthly chart. The medium and long-term uptrend is intact 2700 is holding. Medium-term uptrend line (blue), long-term uptrend line (red) holding firmly. What is more the Fibonacci extension 2.618 is really near for this cycle to be finished 3050-3100 zone. And to respect the technical analysis we have a clear bounce of the 2700 level on a daily chart
The main conclusion of this technical analysis, you should be very careful exposing to USD long trades, Bond short trades, and Indices short trades. Extremely key levels are not breached either daily, weekly and not to mention monthly. Always wait for and read the price action and don’t be so influenced with media hype and futuristic price levels predictions.
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