S&P 500: Bearish
The S&P 500 benchmark went off the all-time high, losing 1% of its value this past week. Although the long-term uptrend is still in play, the index is vulnerable to a deeper bearish correction. The daily chart below shows several technical factors, pointing to such a scenario. First of all, the S&P 500 crossed the Ichimoku's conversion line, which acts as the nearest support for the uptrend, from above. This traditionally means that the retracement could reach the next support curve which is the baseline coming at 3259.4 points.
If the bears will be able to breach that support, then the next target would be coming at the top of the cloud around 3,200 points. However, the leading span maintained positive surplus, which suggests that the bulls could step in at any time. Second, Williams %R oscillator dropped below the middle line, acting as the threshold to divide the bearish and bullish momentum. It is fair to expect the indicator to keep declining in the week ahead, which should reflect further selling pressure. On the other hand, the oversold level should be monitored carefully in the scope of possible bounces. Such a performance might lead to a bullish reversal, so traders should be ready to use the buy-dips trading strategy, counting on the long-term continuation of the recent uptrend.
The US dollar continued strengthening this past week versus almost all its major peers, charting a third consecutive weekly candlestick in the green. What's more, the index breached the recent top from December 23rd, drawing the sequence of Higher highs, which could lead to a complete reversal of the previous downtrend. The next target for the bulls is the double top formation noticed in November 2019. If the price action managed to overshadow previous bullish achievements, then the uptrend would head to retest the highest value spotted in October 2019.
The daily technical outlook is in favour of such a scenario as all the indicators are bullish. Williams alligator completed the bullish reversal, all of its lines are placed in the correct order to proceed with the eating mode. MACD trend indicator points to a strong momentum as the histogram growing in positive territory, while both lines crossed the zero level from below. Fast and sensitive RSI oscillator is well above the middle line but far from the other boat threshold, underlining the strong 13-days gain. The sequence of higher highs suggests the bullish continuation, however, short-term rebounds are still possible in a similar way that happened in the past week. Such bearish whipsaws should be used to open long positions or add volume to existing trading deals.
WTI Crude Oil: Bearish
The price of WTI crude oil had lost more than 14% in 3 recent weeks after testing the highest level since April 2019 at $65 per barrel. The past training week finished at $54.24 per barrel, while the weekly loss exceeded 7.5%. There are two important technical levels on the daily chart below, defensive barriers for the ascending formation. The first horizontal line comes at $52.23 per barrel and reflects the base of the recent uptrend started on October 10. The second blue line reflects the lowest price tested several times in the past summer. If the sell-off continued and the black gold price crossed both horizontal supports by daily close rate, then it would signal the beginning of long-term downtrend with a target of $40 per barrel approximately.
The daily technical sentiment became bearish when Parabolic SAR dots jumped above the price after the daily candlestick had a long upper shadow. The Average Directional Index has a growing negative surplus, but the only concern which leaves doubts about the sustainability of the downtrend is the weakening momentum reflected by the mainline headed South. Awesome Oscillator has a negative histogram which is getting close to the recent extreme level noticed on October 8th. That also signals that the current rate is getting oversold, and bullish rebounds are possible. Opening long deals against such a strong downtrend are dangerous as the selling pressure could continue in the week ahead. But in case if the daily chart would point to preliminary bullish reversal signals, charting long downside shadows, then an aggressive trading strategy would assume an attempt to catch the falling knife with an extremely large profit to loss ratio. Nevertheless, taking profits from short positions wouldn't be a mistake.
The price of gold managed to withstand the corrective selling pressure, completed the replacement and started edging higher. Although this past week's gains were quite modest, and the price of gold didn't rewrite the multi-year high by the daily close, the likelihood of the bullish continuation remained high. The daily chart below has a flag formation which points to the end of the correction and possibly new highs in the near future. Two trend lines reflect the ascending channel, while the technical analysis suggests a test the upper bound of the channel after leaving the bottom.
Technical indicators confirmed the previous suggestion about the end of the bearish retracement. The Ichimoku cloud trend indicator is in the continuation mode and there was no breakout of the baseline support curve. What's more, the price of gold is back above the conversion line, which confirms that the retest of the recent top is just a matter of time. The relative strength index didn't come off the overbought zone too far during the recent correction, which shows that the bulls are keen on buying gold with an attractive opportunity. Buy-and-hold trading strategies applicable while the medium-term target is at the round-figure mark of $1600 per ounce. It would be reasonable to take profits from long positions there because a lot of postponed sell-orders are placed below that threshold.
The Australian dollar was the weakest currency vs the Greenback among majors this past week. The AUD/USD currency pair dropped 0.7%, putting the recent upswing under a doubt. What's more, the Aussie weakened versus the Japanese yen as Forex traders were eliminating high-risk positions. The AUD/NZD cross rate extended previous losses as well. The daily chart setup reminds widening formation what's the current rate nearing close to the bottom, the breakout of which could lead to the crash of the bullish sentiment and a new wave of the sell-off.
The technical sentiment is mixed with the mainly bearish bias. The current price is placed between two long-term simple moving average. Although AUD/USD crossed the 89-days MA from above, remained above the 144-days curve (blue). The last support line was also tested on December 10, but the bulls were able to maintain the momentum. Breaking that curve from above would cause the long-term change of the technical sentiment, starting a new downtrend was the nearest target of 0.67 dollars per Aussie.
The USD/JPY currency pair went off the local top, declining by almost 100 pips on the back of the risk-off trading sentiment. The general tendency is headed north but there is a question in the possible depth of the current correction. On the one hand, the bearish action caused a breakout of the Bollinger bands middle line, which should point to a further slide of the exchange rate. On the other, the retracement was limited by the blue dashed line, which represents the middle level of the ascending formation. If the bears were able to push the rate below the double support, then the price action could get stalled in the middle channel of the Double-Bolli setup marked by the yellow background. However, the bullish reversal should not be taken off the table as the long-term sentiment remained positive.