Week Ending 11/10 - An Update on the Yen, Crude, ES, Corn and $ECYT

Last week we looked at a few different markets where I saw interesting things happening. As tends to happen in the markets, levels were tested, breakouts were reversed, and new patterns formed. So let's take at the same markets as last week and break down their behavior.

If you recall from last week, the yen was on major lows and ready to breakdown. We looked at how we were testing support for a third time, but in a very different manner than the first two times. The first two times we briefly traded in the general vicinity of the .8750 level and immediately reversed and rallied. The most recent test was different in terms of duration and attempted breakdowns (more time spent at the level and more tests of it; see last post). We did indeed breakdown, but for now, it appears that this was a "fakedown." On the 6th, which was Monday of this week, we broke through .8750 decisively, but we were unable to facilitate trade at these lower levels. A strong rejection took place, and that daily candle ended up being quite bullish. I don't think we are going to see a strong rally to swing highs like we did the last two times. I think the dynamic of this market has changed now. There are new shorts and longs at these levels. The .8750 level being breached is going to change the perception of participants. Perhaps a smaller rally is needed to lure in some longs, and then a retest of .8750 will result in a shakeout of these positions. This new selling could be the fuel for the next leg lower.



There are two daily bars circled here. The first is the bar that actually broke the low. Notice how we rallied back and closed on highs that day. I think it is highly likely that new shorts entered the market upon breaking the .8750 level, and they were forced to cover upon rallying back above it.

The next circled daily bar is the day in which volume was unusually high. Obviously, a lot of trading was done in this area. Let's zoom in and take a look at the hourly and see what signs, if any, are there.



There are a few trendlines that may act as possible support should we fall back again. The breaking one of these trendlines would be significant. The circled region is where heavy trading took place. A new high was tested, and then we settled into a range. I would like to see some confirmation of further downside before taking any shorts. A close below this current range low, a breaking of one of the trendlines, or another failed attempt to move higher would all qualify. The immediate trend is up, as evidenced by the higher highs and higher lows. Until that trend is invalidated, being short isn't an option for me. Being long is also not an option given the clear downtrend on a slightly longer-term time frame. No position is a position.

Crude oil ripped higher on Monday. The previous Friday, we had closed strongly, so this was not a huge surprise. The strength of the move was impressive however. Since Monday's move, we have seen consolidation as longs take profits, new longs enter, and new shorts enter in anticipation of a reversal. I normally find that after such an explosive move is a terrible time to trade. You can expect a lot of desperate longs that missed the move to come in, only to be countered by new shorts. Generally the action is choppy and there is not any direction to be had. This can be seen on a daily chart or a 1 minute chart.

The most interesting thing about the above daily chart is the highest support line. A test of this level is marked with the blue arrow. On this time frame, you can't see where this level comes from. But, if we zoom out a bit...
It is actually the low of a range from 2015, and the level from where we broke down! That gap has now been filled and retested. The market indeed has a memory.

Finally, let's go the other direction and zoom in on this chart. Not a pretty week to be trading. Following Monday's move, we have seen a tight, sideways market with one spike higher (DOE data on Wednesday) followed by more sideways action. A trend trader's nightmare. The trend is up, but buying in the middle of this range would be ill-advised.

We will only look briefly at ES. No need to look at a daily, because everyone knows exactly what that looks like. The hourly is a little more interesting, with a potential double-top being confirmed this week. This followed a fresh all-time high of course. Today's trading shows us continuing to hold below where the double-top was confirmed. Yesterday, Thursday, we had broken down to test and hold last week's low. A rally back up to 2585 followed, and then today's decline takes us back to a range just below the double-top confirmation level, as aforementioned. That level is one to watch. As long as we are below that, being short is an option.



We are also not going to dive into corn too deeply. No need to look at the daily. If you remember last week there was a clear pennant forming. This pattern continued to develop this week as we fell and tested the lower end of it.








And finally, let's take a look at $ECYT again. If you recall from last week, we were looking at a possible "W" pattern forming. We did not follow through fast enough, so that pattern has been invalidated. I guess it could be sort of a "W" plus a "V" when all is said and done, but we'll see. This week we saw continued buying in the stock and we are aiming at a potentially important resistance zone at $5.62.

OK one last chart. Natural gas. This market has been stuck in a tight range since May. Obviously this is a very seasonal market, and this is its season. We broke out decisively this past week, gapping higher and then closing at highs. Does this mean higher prices to come? A fakeout followed by a fall back into the range? It is too early to tell, but this was a nice example of a breakaway gap, and so far there has been strong follow-through. Take a look at the weekly and 4h chart below.