Choppy trading in SP500 continues. All declines were bought back quickly last week. It seems to be positive. However… Advance Decline Line doesn’t support this. It is negative in a short-term perspective. Based on cycle studies we can expect to get buy signal around 10 – 15 August. Till that time we will likely see more choppiness with a bias to the downside. I don’t think we are entering another wave of huge sell-off. We had a nice rally in this market and decline is just a normal pullback. GDP showed a big decline last week, but it turned to be positive for stocks as Powell said FED will do all to support the market. We have an interesting forecast based on FED Funds – a huge rally is coming at the end of September. Recent 2 years FED Funds has been one of the best indicators for swing traders. Let us see how it turns this time. For now, I keep focusing on very short-term trades.

SP500, GBP, AUD, WTI, and Wheat analysis for 03 - 07 August, 2020

GBP rallied as it was expected. We saw some profit booking in this market on Friday. Pound had a parabolic rise. It needs some breath to gain more momentum. Pullback and consolidation make perfect sense now. Till 1.28 holds upside targets 1.32 – 1.35 are still intact. We have a Bank of England monetary policy announcement coming this week. The economy is doing good despite COVID. So, I believe no new actions will be taken by the central bank. However, intraday traders have to avoid trading before the announcement.

The Australian dollar rallied above 0.72 and was immediately rejected. But it still holds the above the daily trendline. Potentially this rally can be extended to 0.73. Buyers have to protect their positions with tight stops. Commercials keep adding to their short positions, the cycle is turning to the downside. That makes me believe a selloff is coming. Failure to make a new high or breakdown below the daily trendline is a sign of trend change.

We discussed the potential decline in Crude Oil. Price made the first attempt to break down last week. I had some shorts on managed accounts, but now I am waiting for a new entry – formation of lower high + oscillator in sell zone or holding under $38. Till price stays above this level, there is still a chance to see $43 – $45.

And now one of my favorite markets – Wheat. You know I am a big fan of commodities and especially tight markets like wheat, live cattle, etc. These instruments are less manipulated and less speculative. Usually, they follow their setups very well. Getting above Friday’s high is potential swing entry. We have a triangular formation on the daily chart. Sometimes price makes false breakdown before the rally. So, it is another potential entry, if that happens. Wheat has a strong seasonal tendency to rally till September. Remember waiting for a trade is our business.

Wishing you a great week!

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