While I don’t think there is much trading to do before the new year, there are some movements that are worth keeping on the radar.
LQD. It is too early to tell, but the market may be at the beginning stages of pricing in interest rate hikes. LQD has been trading sideways since its trendline from March broke back in October. That break was the first clue that the ride might be over. The 50-day SMA has been broken and the 89-day is now being tested. I would be surprised if this recovers and I think there is a strong possibility that LQD tests the 200-day SMA somewhere around $100.
GLD. I posted on December 11th that gold was breaking down and that I was not a buyer off the 50 DMA. GLD will at least test $104 but based on experience I think this is going down to $100.
TLT tells a similar story to LQD. The chart is very pattern oriented with a large head and shoulders pattern with an apex at $120 followed by the more recent head and shoulders pattern with an apex around $100. TLT is telling the story that yields are rising. This one looks like it is on its way to $85.
3-month treasury yield. I think we may be seeing a short term top in the USD rally. I have said many times now that I am expecting sideways action in USD rather than a big reversal from the decline. A double bottom appears to be in place on 3-month treasuries meaning that short term treasuries are being sold and yields are rising. Just as the 0% treasury lifted USD I think those smart foreign investors that played the USD bottom are now taking some of that bet off the table.
FXE is quite oversold and should find a confluence of support at $142 (horizontal and 200 DMA). This ties into the USD rally finding at least a short term top. Might this short term bounce on EURUSD not be fuel to push the major indexes up to their highs before the end of the year?
UNG. From a pattern perspective, what a battle. On one hand, natural gas has been in decline forever and it appears a reversal might be in the works after the formation of a double bottom. On the other hand, there is a confluence of resistance in the $10.50-10.75 area and a descending triangle pattern in play. Whichever way it goes, it should be a big move.
So what does it all mean? In the immediate term, if EURUSD has a little recovery rally it might be the catalyst to give a Santa Claus rally during the last week of trading. Especially since low volume days have typically been bullish recently.