Although I don’t anticipate a whole lot of decisive moves the holiday week there are some interesting setups to keep a watch on. The indexes are looking like a deeper pullback is in the cards. Let’s look at the E Minis first. Currently ES is back within a 2703 to 2740 area it was in for about two week.

If we stay here throughout this holiday week we could be setting up for what looks like a head and shoulders pattern with a slope of 2703.

The NQ  doesn’t have as clear of a pattern but as of now the daily is below the 8 & 21 day MAs and the MACD has ticked negative so bias is still to the downside with a big support of 7000. 

Small Caps broke a Rising Wedge and as usual the pullback so far has been quick and deep. Currently below the 8 & 21 day MAs with a negative tick so again bias is to the downside with a big support of 1618. 

Looking across the Pacific the Nikkei futures appear to be setting up a double top with similar indicators as prior noted indexes with support of 21900 – 21980 area. 

Given all these indexes have a downside bias only adds another downside bias to them all. 

Moving on to energy, WTI oil had a huge week. After OPEC’s big meeting a week ago with promises to increase production the market realized it had been pricing in a bigger, faster production increase and the market reprised in a hurry. Yesterday Trump announced a side deal with Saudi Arabia to increase production by 2 Million barrels a day although the deal is likely to anger Iran and Venezuela. Looking at the weekly, CL is testing a long term channel resistance in place since its lows. 

The weekly RSI slope is downward so each swing high is being met with less strength of so I would not be surprised to see CL pullback from this resistance level. 

The Metals have all been pretty beaten down on trade war concerns and the USD at recent highs. So much so that many as looking like attractive longs for a bounce or more (except Silver).

As I said, the DXY has been flirting with highs of $95 but a big reversal Friday and USD is looking like $94 will not hold putting 92.50 area in play. 

 

If the USD keeps pulling back this is a bullish catalyst for metals so lets look at some interesting options. 

The big news this week about Gold is the Death Cross that occurred (the 50 MA crossing below the 200). The trend is to the downside and not yet oversold but Gold is coming up to a longer term trend support on the weekly so could be near bounce levels. 

The big level many Copper traders have been eying is 2.95. Given Copper has been especially hurt with trade war fears given China consumes about 40% of the metal for industrial use any hint of a resolution would be a very welcome news to Copper longs. Given almost at oversold levels and near a bug support area keep you eyes on a long signal. 

Platinum has been on a steady downtrend for some time but actually has some bullish RSI divergence. Having respected channel support Friday Platinum actually looks like it may have found a longer term trade bottom than other Metals. 

Finally Silver. Unlike the other Metals Silver looks in danger of a deeper correction if cannot regain some bullish momentum quick it has broken pennant support. It should be noted that Silver did break to the upside of the pennant and quickly reversed so it hasn’t exactly holding true to patterns lately and why I’m staying clear of at the moment given other Metals have clearer setups. 

Given the shortened trading week keep an eye on the setups and don’t be in a hurry as trading will likely be choppy on low volume. Happy trading and Independence day.

-Wags

We’ve seen selling pressure come in in recent days and after breaking trend support the question is where do we go from here especially with a holiday week coming up meaning traditionally low volume and choppiness. 

Here’s one scenario that “could” play out. Before the recent highs we were caught in a sideways range for about two weeks from roughly 2703-2733. ES then popped up so close to 2800. Now ES is back at the lower end of that previous range with some shorter time frame oversold levels to be worked out with some consolidation. With the coming holiday week, one scenario to be mindful of is the development with a head and shoulders pattern with a slope of 2703. 

We’ll see if we chop around this previous range for a week or so like before and see what happens but is that support level gives, I wouldn’t be buying dips until about 2600 area. 

After retracing all and more of a huge weekly gain Copper is looking interesting from a longer term trade standpoint. Looking at the daily Copper is testing trend support and in a support zone which has found buyers in the past. 

Zooming in on the 15min we can see the makings of a falling wedge that is just now breaking to the upside. A trade long at these levels with a stop below the support zone offers decent upside given the selloff is in part over exaggerated from the China tariff threats which, if anyone knows Trump’s negotiating style, is a bluff. China consumes roughly 40% of Copper for manufacturing so given the support zone and fears baked into the price, any rumors or news tariffs won’t materialize should aid in a quick short squeeze to the upside for the metal. 

After today’s move up CL_F should find resistance in the 65.89 to 66 area (the bottom of the cloud and horizontal resistance). So long as this area holds, we still view the move today as consolidation off of oversold levels and a back test of the broken bear flag with a continuation to a target of $62 area. The measured move of the larger Rising Wedge from the $72 levels. 

Gold is at an interesting intersection. Near longer term daily support trend line at backtest of broken trend resistance, a long with a stop loss just below trend support at 1277 or 1276 could offer a decent risk reward trade especially given the general markets are at frothy levels at the moment. Target to look for are a test of the bottom of the underside of consolidation at 1295, top of at 1307 and then 1322. 

All time highs, the Russell has rocketed ahead of the other indexes, except perhaps the Q’s, but what is the risk vs reward trade here. Looking at the weekly the last 10yrs or so have been epic and in the last month and a have the $IWM has jumped from 151 to 167 roughly almost without pause.

So is this sustainable? Is now the time to go long? I say no. Could the Russel grind a little higher? Sure, but what’s the best risk to reward trade here. The daily is in oversold territory with a slight bearish RSI divergence (the weekly is looking like an even bigger RSI divergence will occur this week) and the MACD momentum is starting to slow. 

Looking at this past month push up we can see a pretty clear Rising Wedge pattern. Although it has yet to break and could still grind higher, I feel the time is now to start building a short position versus going long here at all time highs. A measured move of the pattern is 100% roughly so a target of 151 but would need to assess on the way down. 

UPDATE 6/18

The Russell reached a new high today but futures pulled back in early Asian trading after President Trump threatened an additional $200B in tariffs targeted at China. The Rising Wedge formation still remans and small caps are finding resistance at the top of the range while testing and intra day breaking support but then recovering. This is a warning sign as every time a trend line is compromised it becomes weaker. Our game plan is still in tact; sell rallies for the eventual sustained break of support for a measured move down to 1531 area for this trade pattern. Looking at the 4hr chart of small cap futures we can see a clear bearish RSI divergence meaning the strength/validity of each higher high is weakening. 

It has been awhile since we called the rising wedge formation for CL_F with a measured move target of $62. WTI has come a long way but on a weekly basis didn’t really move this week other than up and down intraday. Wags still believes CL_F has been backtesting the broken channel support, now resistance, and CL will continue down to the target price. So far CL has found resistance along the former support and reacted on its first test of the 8day. I view this week as a sideways consolidation for the MAs to catch up after an extreme unwind and now can continue down so long as the 8day acts as resistance. 

Per our trade alert, Heating oil continued down and took out trend support as we predicted. HO is about to get an 8day MA cross of the 21day further adding downward pressure.

Target one is the horizontal support at 2.15 with a second target of the larger channel support coming in around 2.05 currently but will change as time and price change. 

If support is not found there we can pull out to the weekly chart to target the macro channel. Fib levels can also act as support levels and we will have to check the indicators as we approach major levels to determine the extent of the move. 

Since we identified the Rising Wedge pattern the WTI futures have gone from the mid $72 area to a close of 65.71 Friday. Currently, CL is sitting on a trend support line in the area of major horizontal support with the 100day a stone’s throw away.

Our measured move of the pattern break is the 62-62.60 area but given the extent of the move and the converging supports a pause and retest of trend resistance is warranted and or as well as horizontal resistance levels indicated. 

 

The rising wedge we mentioned last weekend broke and like this pattern type the break is quick and big. Looking at the weekly we have a clear rising channel so a test of support at some point is not out of the question.

The measured move of the rising wedge pattern puts CL_F at $62 for that trade. Looking at the daily, CL_F ended right on the 50day and shorter time frames are more than oversold. The 60min time frame has a RSI of 7! So some relief consolidation is in order. CL is now in the box from 69.50-66.5 that it bounced around in so we could see the same type of choppy consolidation between before a push below 66.50 to the eventual trade target of $62. 

That would put CL somewhere midrange of the channel so an evaluation will need to be done there to determine if a further slide to channel support is likely or a bounce back up to the top of the range.