Price & Time: Equity Markets at a Key Juncture

DailyFX

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.

Foreign Exchange Price & Time at a Glance:

USD/JPY:

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PT_equities_body_Picture_4.png, Price & Time: Equity Markets at a Key Juncture

Charts Created using Marketscope – Prepared by Kristian Kerr

-USD/JPY failed again at the start of the week at the 50% retracement of the 2007 to 2011 decline in the 99.80 area

-Subsequent weakness below a convergence of different Gann levels in the 98.30/50 area has shifted our bias lower in the exchange rate

-Focus now on the 50% retracement of the late April advance in the 97.80 area with weakness below there needed to confirm the integrity of the current decline

-A Gann related time cycle turn window is in effect over the next few days

-Strength over a Gann level at 99.30 required to turn us positive on the rate, but a move over 100.00 is really needed to signal the start of a more important push higher

Strategy: Want to see this cycle turn window play out for a few more days before positioning.

AUD/USD:

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PT_equities_body_Picture_3.png, Price & Time: Equity Markets at a Key Juncture

Charts Created using Marketscope – Prepared by Kristian Kerr

-AUD/USD found support on Tuesday near the 1x1 Gann angle line drawn from the year-to-date closing high

-Strength from this level has been unimpressive so far with a Gann confluence near 1.0325 capping over the past couple of days

-Our bias remains lower in the exchange rate, but weakness under a Gann confluence in the 1.0215 area needed to trigger a more important decline

-Near-term cycles are a bit muddled, but a minor turn window is seen around the middle of the week

-The 38% retracement of the late April decline is now key resistance and only strenth over this level turns us positive on the Aussie.

Strategy: Still like selling on strength.

EUR/CHF:

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PT_equities_body_Picture_2.png, Price & Time: Equity Markets at a Key Juncture

Charts Created using Marketscope – Prepared by Kristian Kerr

-EUR/CHF traded to its highest levels since mid-March on Thursday before finding strong resistance at the 50% retracement of the January to February decline in the 1.2350 area

-Our bias is still higher in the cross, but a break over 1.2350 is needed soon to maintain confidence in the prospects of a further upside push

-Short-term cyclical studies still look positive for another couple of days

-A convergence of the 3rd square root progression from the year-to-date high and the 61.8% retracement of the late February to early March advance in the 1.2220/30 area is key support

-Weakness below this support zone will turn us negative on the cross

Strategy: Like buying on weakness against 1.2230/20 over the next couple of days.

Focus Chart of the Day: S&P 500

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PT_equities_body_Picture_1.png, Price & Time: Equity Markets at a Key Juncture

We have been very vocal about the importance of the next few days for the FX markets, but it looks like it will be a very significant time period for the equity markets as well. A slew of various geometric, Fibonacci and Gann relationships related to some key swing points in the indices going as far back as 1987 are all set to converge in the week ahead. A push to (or even near) new all-time highs in the indices during this time would actually be a major negative from a cyclical perspective and set the stage for a top of some importance. We must admit that there is a chance that this window could somehow morph into a low, but given the ebullient sentiment being exhibited toward equities at the moment and the sheer multitude of cycles converging in the days ahead such a scenario looks highly unlikely in our view. On the upside key resistance levels in the S&P 500 look to be 1595, 1610 and 1618. Weakness below 1530 would be strong evidence that an important move lower has begun.

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

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

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