Cable: A Long-Term Strategic View

When we step back for a moment to see what price action is telling us in the higher time frames, the fractal nature of markets is revealed and a much clearer picture can be garnered as to what may be driving movements at major levels in the shorter time frames. Cable futures are beginning to suggest that a major long-term reversal may be underway. With the next resistance level in quarterly time frame fourteen big figures away, it warrants further analysis. In the quarterly chart below of Pound/USD futures, we see a quarterly outside reversal with a close above two major long-term qualified support levels. The strength of this reversal is further heightened by the nature of the close of that outside quarterly bar. The reversal bar closed above first up Range Deviation Pivot, without touching first down, which adds additional power to the bar.

Quarterly Pound/USD Futures

Dropping back to the monthly time frame reveals further information about the internal dynamics of price action. First, a divergence buy signal is in place from the end of April. Furthermore, we have an end-of-month close above second up Volatility Time Bands (not shown) as marked by the fluorescent green bar. Shorter term resistance lies at 159, but a close above that level will then reveal a large gap to the upside that is showing up in the quarterly chart.

Monthly Pound/USD Futures

Zooming in again to a daily chart of Cable reveals further information. The lines represent supports and resistances across time (white is daily, blue is weekly, and red is monthly). The April low held monthly support - this was the quarterly outside reversal low. Since then, weekly and daily supports have been rising. Long-term fair value currently lies at the 156 level.

Daily Pound/USD Futures

Drawing on this pool of information across time, we can come to a conclusion: An end-of-month close above first up monthly Range Deviation Pivot will be a warning that higher prices are ahead. A further weekly close above long-term fair value at 156.74 should seal the deal. This should be reason enough for price to seek higher resistance levels, which would appear to be substantially higher than current levels. Should price close back under 150.50 on a weekly basis, then 145 will open up as support.

480-Minute Pound/USD Futures