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Price & Time: Cycle Turn Windows Coming Up in Several Instruments

By , Sr. Currency Strategist
10 October 2013 12:35 GMT

Talking Points

  • Cycle turn window in the S&P 500 coming up
  • USD/CAD nearing important time resistance
  • Euro holding over key support level

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Focus Chart of the Day: S&P 500

PT_asset_body_Picture_4.png, Price & Time: Cycle Turn Windows Coming Up in Several Instruments

The S&P 500 fair value instrument tested and briefly broke below the 2nd square root progression of the all-time high on Wednesday before rebounding to finish the day over this important support level. Interestingly the S&P 500 cash index reversed of this 1646 level on an intraday basis (square root of 1729 = 41.5). We say this level is important because a break of the 2nd square root progression is usually a reliable indicator of a more important correction in trend. A successful test of this level usually points to a resumption. For instance, in August the S&P 500 rebounded almost precisely off this support (2 square root progression off 1710) to trade to new all-time highs in September. Will the same happen again? It certainly seems possible, but Friday and Monday are an important cycle turn window in the index. Weakness under 1646 in the SPX cash after Monday would be very negative.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

PT_asset_body_Picture_3.png, Price & Time: Cycle Turn Windows Coming Up in Several Instruments

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD has come under modest pressure over the past few days since encountering resistance just shy of the 8th square root progression of the year’s low in the 1.3655 area
  • However, our near-term trend bias remains higher in the Euro while above the 2nd square root progression of the year’s high at 1.3475
  • Interim resistance is seen at the 88.6% retracement of the year’s range in the 1.3600 area , but a daily close over 1.3655 is really needed to confirm the start of a more important leg higher
  • Today is a minor cycle turn window
  • Weakness below 1.3475 would undermine the immediate positive tone and focus attention lower

EUR/USD Strategy: Favor holding only a reduced long position in the Euro while above 1.3475.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

96.20

*96.55

1.3530

1.3600

*1.3655

Price & Time Analysis: USD/CAD

PT_asset_body_Picture_2.png, Price & Time: Cycle Turn Windows Coming Up in Several Instruments

Charts Created using Marketscope – Prepared by Kristian Kerr

  • USD/CAD touched its highest level in almost a month and a half on Thursday before finding resistance at the 4th square root progression of the 2Q low in the 1.0410 area
  • Our near-term trend bias remains higher while above the 3rd square root progression of the year’s high near 1.0300
  • The 1.0410 area is clearly and important resistance zone a daily close over this level would setup further strength towards attractions at 1.0455 and above
  • An important medium-term cycle turn window is seen Friday and Monday
  • A move under 1.0300 at anytime will turn us negative on Funds

USD/CAD Strategy: Like the long side whilst over 1.0300, but will be looking to reduce into the turn window tomorrow.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

USD/CAD

*1.0300

1.0345

1.0380

*1.0410

1.0455

Price & Time Analysis: GOLD

PT_asset_body_Picture_1.png, Price & Time: Cycle Turn Windows Coming Up in Several Instruments

Charts Created using Marketscope – Prepared by Kristian Kerr

  • XAU/USD coninues to meader around the the 50% retracement of the June to August range in the 1307 area
  • Our near-term trend bias is lower in the metal while below 1350
  • The 4th square root progression of the September high at 1279 is important support that must be breached if a more severe decline is to take hold
  • Late next week is a medium-term cycle turn window
  • Back over the 5th square root progression of the year’s low at 1350 would turn us postitive on the metal

XAU/USD Strategy: Like holding only a small short position here, but will look to add on a break of 1279.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

XAU/USD

1248

*1279

1306

1333

*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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10 October 2013 12:35 GMT