Price & Time: End of Year Melt Up?

DailyFX

Talking Points

  • Indices taking out important resistance
  • Euro sits just shy of new yearly high
  • Gold testing key resistance zone

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Focus Chart of the Day: S&P 500

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PT_Melt_up_body_Picture_4.png, Price & Time: End of Year Melt Up?

As the 4th quarter nears the end of its first month traders need to pay special attention to the S&P 500 and the potential implications for the end of the year. With the index up some 25% on the year so far there are two plausible scenarios we could see play out as the calendar year comes to a head. The first scenario is a ‘melt up’ as underweight investors are forced in as they try to catch up with the performance of the benchmark. The other scenario is ‘melt down’ of sorts as a few key investors lock in returns for the year early forcing a kind of domino effect as the benchmark gives back performance. With the index having broken just about every possible price and time resistance the market has thrown at it over the past few months the path of least resistance certainly look to be higher (favoring the first scenario)especially if the index can gain some traction over Gann resistance at 1743 this week. On the downside, 1708 is important support where weakness on a weekly closing basis would warn that a more important correction is developing.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

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PT_Melt_up_body_Picture_3.png, Price & Time: End of Year Melt Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD traded to its highest level in 8-months on Friday before encountering resistance just under the year-to-date high at 1.3710
  • Our trend bias remain positive on the Euro while over Gann support at 1.3595
  • The year’s high at 1.3710 is a natural upside attraction with traction above exposing Fibonacci and Gann points at 1.3755 and 1.3770
  • A turn window is seen around the end of the week
  • A move under 1.3595 would undermine the immediate positive tone in the pair and focus lower

EUR/USD Strategy: Like the long side while 1.3595 holds.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3595

1.3655

1.3675

*1.3710

1.3770

Price & Time Analysis: AUD/USD

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PT_Melt_up_body_Picture_2.png, Price & Time: End of Year Melt Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USD traded to its highest levels since early June today
  • Our near-term trend bias remains positive on the Aussie while above Gann support near .9500
  • The 9th square root progression of the year’s high at .9665 is an important pivot with strength above needed to propel towards a Fibonacci attraction at .9710
  • A potentially important turn window is in effect over the next couple of days
  • Weakness under .9500 on a daily close basis will turn the near-term trend bias to negative on the exchange rate

AUD/USD Strategy: Like reducing long postions into the upcoming turn window.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

*0.9500

0.9595

0.9660

*0.9665

0.9710

Price & Time Analysis: GOLD

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PT_Melt_up_body_Picture_1.png, Price & Time: End of Year Melt Up?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD has moved steadily higher from last week’s cycle turn window
  • However, while under the 2nd square root progression of the month-to-date low at 1321 our near-term trend bias has to remain lower in the metal
  • The 1x1 Gann angle line of the year’s low at 1265 is critical support and a daily close below is really needed to re-invigorate downside prospects
  • Some minor turn windows are seen over the course of the week
  • A daily close over 1321 will turn us positive on Gold

XAU/USD Strategy: Square here, but may look to get long on a daily close over 1321.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

*1265

1285

1317

*1321

1350

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved

Looking for a way to pinpoint sentiment extremes in real time? Try the Speculative Sentiment Index.

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX

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