As you’re aware, this week’s major American holiday on July 4 will have a profound affect on the markets.
Trading volume will be reduced so trade accordingly. And Happy Independence Day festivities too!
With that in mind, let’s see what’s happening in the forex markets right now. I also want to update you on a recent U.S. stock market trade recommendation I made as well.
Let’s start with a quick look at the U.S. Dollar Index (USDI).
For the second week in a row, the upward momentum in USD stalled at a key resistance level.
This isn’t particularly surprising with the backdrop of escalating trade war rhetoric and policy these days. We’re also seeing the convergence of competing monetary policy paths from several central banks. Either or both scenarios could create a difficult environment for USD bulls.
Additionally, I remain skeptical that FX trends will follow through while the summer is still with us (July through September). That’s because traditionally, the FX markets tend to become quieter until autumn when all the major price action starts up once again.
And that’s why I expect USD-correlated pairs to remain somewhat range-bound for the next several weeks or even months. We’ll likely see nothing but sideways action for the foreseeable future there.
There’s one lone exception, though:
NZDUSD (the New Zealand dollar against the U.S. dollar) is a pair for which I’m expecting a very bearish future.
For about a year, I’ve felt that NZD is the weakest currency across the board against the other major currencies.
And last week, I predicted last Wednesday’s RBNZ Rate Statement would likely result in NZD cratering lower.
That proved to be correct. By the end of last week GBPNZD soared while NZDCHF, NZDCAD, NZDJPY got crushed. And NZDUSD closed at two-year weekly lows just below the 0.68 neckline I’ve shown you above.
I expect the NZD bear trends to continue. That’s because the double top in NZDUSD and the neckline breach suggest a significant drop lower in the weeks and months to come.
So if you’re a long term FX position trader, the single best recommendation I can make right now is to short NZD including NZDUSD.
Here are a couple more NZD charts to consider …
The British pound against the New Zealand dollar (GBPNZD) has long been a favorite of mine ever since I spotted the double bottom that formed in late 2016 and early 2017.
The price retraced after initially breaching that neckline, made a rounding bottom, and then headed north relentlessly. We made a lot of pips on this pair last year and I expect we’ll do the same again later this year too.
Right now the key pattern to watch is the long term ascending triangle. My Elite members are already up around 400 pips on a trade we took near the key reversals at the bottom of that triangle.
So consider buying this pair on any future weakness and waiting.
Meanwhile NZDCHF (the New Zealand dollar against the Swiss franc) looks similar to the NZDUSD pair.
There’s a long term double top and resistance area which marked the start of the downtrend we’re seeing now.
And last week NZDCHF closed below long term support. Even if there’s a retracement, it looks very likely to drop hard in the weeks and months to come. Consider shorting any rally.
Now there’s one other chart that’s likely to drop as hard and fast as the NZD pairs: spot gold (XAUUSD).
In last week’s trade action, XAUUSD crashed to three-month lows around the $1250 price level. Last week’s price closed under the support line of the long-term ascending broadening formation I’ve drawn for you here:
When you consider there’s already been a long term XAUUSD decline from the $2,000 level this breakdown is just a continuation of that earlier downtrend.
In fact, the rise of global interest rates, a strengthening USD, and a global tapering of QE (quantitative easing) have all contributed to spot gold’s decline.
And the breach of key technical levels on the weekly and monthly charts make the case for XAUUSD going nowhere but much lower.
You can see the monthly chart has finally broken down below its recent 1 year trendline.
The end result is that XAUUSD is now extremely vulnerable to further bearish action. Consider shorting on strength.
Let’s talk about stocks now, starting with the indices.
In the past few weeks, the NASDAQ 100 has soared to all-time new highs, while the S&P500 and Dow Jones 30 indices have closed well short of their respective highs. This sets up what could be a bearish divergence.
The NASDAQ 100 is showing a potentially ominous bear sign with a strong selloff last week. The index set a new high but couldn’t hold it.
To me, this suggests we’ve probably seen the near-term highs for now.
That’s why I would expect a trading range in NASDAQ 100 over the next few weeks and even months.
Meanwhile the S&P500 couldn’t even set a new high and gapped lower. As the chart is very similar to the Dow chart, I’m just showing you the DJIA today.
The DJIA (Dow 30) index also failed to come anywhere near a new high in recent weeks.
In fact, the price has traced out a descending triangle. One that it broke out from temporarily in what appears to be a false breakout.
The Dow now appears to be headed back to the neckline of that triangle. There will likely be strong support at the 23000 level.
However, I would be cautious about buying that support as things look a bit ominous on the monthly chart for the Dow.
That’s because last month, the DJIA made a new high and closed on the low. That’s typically bearish. There’s strong potential for a drop in the months going forward. At the very least, this key reversal suggests any further upside momentum will be inhibited.
Does that mean stocks aren’t worth trading for awhile, just like most of the FX market?
Not at all!
Here’s a bit more about my “Secret Stock Trading Strategy” I’ve been teasing these last few weeks …
On Thursday (Jun 21), I held a special webinar to share my inside strategies for selecting stocks poised to make huge moves (up or down) within 24 hours.
I predicted Redhat (RHT) was one such stock, and that — based on my analysis of the price action/price pattern preceding the RHT announcement that afternoon — RHT stock would move about $10 lower after the close.
RHT had already made a double top and was breaching its trendline. It definitely looked like it was on the way down. This is a screenshot I took from the webinar itself:
It turns out I was wrong.
But in a good way! That’s because after the close on Thursday, RHT fell out of the sky and closed down a huge $23.59 (or 14.23%) from the prior day’s close at $166.
That was very profitable for at least one trader who attended my webinar.
You see, I discussed several strategies to take advantage of the anticipated crash in RHT.
One of them included buying RHT 162.50 put options expiring June 22. At the time, they were at $2.10.
Following the drop in RHT to $142.14 on Friday’s close, those put options were worth $19.86.
That’s a potential 946% gain in less than 24 hours!
This trader who attended my webinar didn’t do quite that well, but still made 6.7 times his money. All in less than a day.
And that’s why I’m continuing to organize a stock trading subscription service around the idea of making winning trade recommendations based on Pattern Trader methodology.
I’m planning to teach you how to take advantage of sizeable moves in the stock market right before they happen.
I’m doing this myself, of course. With real money on the line.
Here’s what I’ve recently made in FB (Facebook) and TSLA (Tesla) too.
That doesn’t mean every recommendation is going to be a winner.
There will be losers, but over long periods of time — here I’m talking about 6 – 9 months — I’ve been hugely in the win column with my FX trades and now my stock trades also.
The key is to identify stocks about to announce their earnings after the market closes and bet on the resulting 5% to 10% move after the announcement. My pattern trading methodology really does work this way.
If you’re interested, there’s an easy way to “get the jump” on learning to trade the Pattern Trader way. You can book a spot at my LIVE 2-Day Bootcamp. That’s where I’ll demonstrate exactly how to make trades just like the ones I’ve outlined here, including my “Lazy Trader’s” 5-step execution plan. That’s the one I’ve used to pull in more than 9,000 pips in FX last year and thousands of dollars I’ve made from stock trades this year.
Remember, the exact same profitable patterns show up in FX as well as in the stock market.