Markets are set to trend in early 2021 then become rangebound, as yearly pivots pull from below, reports Trevor Smith of Trevor's Trading, wishing you a great 2021!
Range and pivot math for early 2021 are setting up for range breaks, wide-trending swings, and some bear trades in 2021's first fiscal quarter (Q1). Subsequently, yearly/quarterly charts' sideways-pricing mathematics may prevail. 2021 will have some trending days/weeks/months, but their brief wide-range projections would be softened by the overriding math conditions of higher time frames.
Until markets settle down for Q2-Q4, traders can chart/trade anticipated mean reversions off current range extrema, and the currencies are the first to show directional signs. The euro and Japanese yen futures have some bearish candlestick patterns in contexts of high Bollinger Band positions on multiple time frames from daily to monthly charts. The euro's monthly pivot for January is 1.216 as one example of a lower throwback target. Disclosure: I am still short some euro call spreads, although price went to new highs.
Another bear trade starting to develop could be some of the indices' futures. Nasdaq and the Russell 2000 have inverted hammer candlesticks on daily-chart highs, although I do not yet see similar weaknesses/negative technical divergences or trade signals in the other major indices now poised for more high prints. So, traders should monitor this situation as lower price levels pull. S&P futures' monthly pivot for January is 3699, and 2021's yearly pivot is 3225, which is near 2020's opening print.
Option chains do not agree with my statistics, have stronger bearish skews on the indices and currencies, and show more narrow-range probabilities in gold and crude oil than my hand-calculated math. Gold and crude oil are currently at 78% and 46% of their expected two-day chart ranges, respectively, with a degree of price compression that often leads to wider ranges. Traders can adjust my ranges if believing more in the option chain's one-standard-deviation ranges than my math; my assumption is gold, crude leave their narrow ranges within two weeks.
My article on December 15 predicted the ensuing trending breakouts in world markets. Six of 10 projected ranges printed as of Saturday, January 2, 2021, with other ranges extremely close.
Next Two Week’s Predicted Ranges (Written Saturday Night, January 2, 2021)
E-mini S&P 500
High Range 3783-3763; Low Range 3715-3695
Bullish then trending bearish opinion due to understudy divergence/unfulfilled lower targets. January Pivot: 3699, Quarterly Pivot (Q1): 3575, Yearly Pivot: 3225
Japanese Yen
High Range 9740-9710; Low Range 9640-9590
Expanded ranges due to trending mathematic conditions. Prices may exceed my ranges in current context of trending math. 9656 is the January Monthly Pivot as a Fair-Value median point in my projected ranges. Yearly Pivot .009498
Euro FX
High Range 1.237-1.228; Low Range 1.209-1.203
Neutral-bearish ranges in trending trading; bear candles, negative divergences may pull price down to the Monthly Pivot at the 1.216 level. Yearly Pivot: 1.174
Gold
High Range $1928-$1915; Low Range $1885-1868
Moderate ranges in sideways character, although its narrow 2-day range may increase the two-week range, causing me to make each range wider than I would have done. Quarterly Pivot: $1876 & embedded in low projections above; Yearly Pivot: $1813
Crude Oil
High Range $4863-4724; Low Range $4510-4364
Neutral-bearish directional range with trending character; overhead technical resistances persist. Yearly Pivot: $40.19
Prior Predicted Ranges (Written Saturday, December 15 for December 15-December 31, 2020)
E-mini S&P 500
High Range 3719-3685; Low Range 3622-3595
Bearish opinion due to market internals' divergence, trending math. Weekly chart bear candles in effect until January 2021. Disclosure: I am in a weekly short call spread (bearish) option spread.
Actual: 3753-3596
Japanese Yen
High Range 9668-9640; Low Range 9571-9545
Expanded ranges due to trending-momentum mathematic conditions for the coming two weeks. Prices may exceed my ranges in current context of trending math.
Actual: 9736-9614
Euro FX
High Range 1.220-1.216; Low Range 1.203-1.195
Neutral-bearish ranges in strongly trending trading based on two-day chart. Disclosure: I am short a monthly expiration call spread at strikes below current levels based on two-day chart technical oscillators, Bollinger Band positions.
Actual: 1.233-1.214
Gold
High Range $1877-$1859; Low Range $1828-1812
Expanded ranges in trending character. Bearish monthly chart candlesticks, but two-day charts may be in a wave-two-to-three bounce. New moon cycle on Monday may have no effect on gold, reverse it or coincide with bearishness.
Actual: $1912-1820
Crude Oil
High Range $4863-4724; Low Range $4510-4364
Neutral-bearish directional range with trending character; overhead technical resistances persist.
Actual: $4616-4569
Trevor Smith is a technical market analyst/forecaster who is registered as a Commodity Trading Advisor. You can view Trevor’s Trading here.
