Can Indices Keep Up With the Optimism?

Last week was really awesome for stock traders. Indices skyrocketed, especially at the end, and Friday ended with total bullish domination.

The situation is very bullish, with four consecutive positive weeks. Maybe it’s a good time to cool down a bit, especially since many point out that we’re still in a bear market. This kind of a bull run is a very, very common trap because bull runs in bear markets end with a very spectacular drop. As always, we’re about to find out if the four recent weeks were just a correction or a start of a new uptrend.

Last week ended positively for gold too, but here the price is still below a crucial resistance on the 1800 USD/oz. So far, it’s holding, but the buying pressure is rising, and maybe bulls will test the 38,2% Fibonacci, which is around the 1830 USD/oz. The sentiment on gold in the mid-term remains positive.

Oil had a chance for a great week but Friday ended with a decline, which slightly worsened the mood. WTI stayed below the crucial resistance on 96 USD/bbl. and as long as we’re below that, the sentiment remains negative.

The previous week was definitely eventful for the American dollar which got hit by lower CPI data on Wednesday. The decline seems to be temporary because by the end of the week the USD had strengthened and come back to the main trend we’d been seeing for months. The American currency remains one of the hottest instruments on the market right now.

The upcoming week brings us a few interesting events. Monday as usual starts fairly quiet with the GDP data from Japan and retail sales from China, both disappointing with China’s being much lower than expectations (2.7% vs 5%).

Tuesday will be good for commodity currencies. We’ll have Minutes from Australia and inflation from Canada. Inflation, this time from the UK, will also be a topic for Wednesday, which actually should be the busiest day on the calendar. Apart from the UK CPI we’ll have a rate decision in New Zealand. A rise of 50bp is expected, so let’s see if RBNZ can deliver that.

The day will finish with retail sales data from the US, which are expected to be only slightly above zero and also Minutes from the FOMC. Thursday will bring us data from the job market in Australia and that will be it for the tier-1 data. Not bad for a holiday season.

Setups for This Week:

EURUSD

Primary View:

Last week ended with the price bouncing of an absolutely crucial resistance – 1.036

Apart from previous lows, we have a major down trendline here

As long as we stay below, the sentiment is definitely negative

Alternative View:

If the price climbs back above the 1.036 we will get a proper, long-term buy signal

GBPUSD

Primary View:

GBPUSD was very close to a major, long-term buy signal, but buyers failed to break the neckline of the iH&S formation

The price is still below the neckline and chances for a further rise seem limited

The morning starts off with a breakout of the mid-term up trendline, which is a proper sell signal

Alternative View:

If the price breaks the neckline of the iH&S pattern, a major buy signal will be created

WTI Oil

Primary View:

Oil remains in bearish mode

Last week, the price tested the 96 USD/bbl. resistance and failed to break it

Additionally, oil bounced off a mid-term down trendline, which is a strong bearish factor

Alternative View:

If the price climbs back above the 96 USD/oz, a strong buy signal will be created.