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Macro Picture After The Close
Submitted by Nic Lenoir of ICAP
It was interesting to see the bears all come out of their caves today after the move yesterday. What's even more interesting is that non-bears joined the negative talk, with Bill Gross calling basically for a 30% sell-off in equities and arguing housing was overvalued by 50% from 2007 highs (by the way if the latter is true, the stock market should then correct by a lot more than 30%, more like 75%), and GS and BOAML came out with bearish outlooks on housing. Given upbeat equity predictions by the latter two firms (helps to have replaced Rosenberg with a bull!) it's all the more intriguing.
What we see on the charts, is that EURUSD looks like it has completed a very clean impulse from the highs, and while that means there is more weakness to come, we should probably retrace towards 1.4925/1.4950 (careful, the 76.4% at 1.4994 is always a worry, but if we are trully bearish the aforementionned range should do it) before we resume the sell off. 1.4620/1.4660 remains the target zone we should test and a break there would confirm a much more significant break of the uptrend.
As mentionned yesterday Gold was on a short-term basis around support levels, and we still think that we need to retrace towards 1,052 or consolidate further here before moving lower. Silver seems like it is bound to test 15.75/16, before 14.2 which is the support of the channel. Ultimately the big support is 12. But make no mistake, while correlations are not necessarily a great indicator between Silver and Gold, it is hard to imagine in the current environment to have Silver test 14.2 without taking any prisoners on the way down and have Gold not retest 986.
Just like we observed on EURUSD and Gold, short-term equities are a bit oversold. We brought it up yesterday, and despite making new lows today we look for now as we might close above the lows of yesterday. Divergence of short-term momentum indicators is there, and we would expect to at least try to test 1,070.50 over the next 48 hours for the S&P future. A break there would mean we should see 1,085/1,089 in theory. Anything above that would mean we are going for the resistance at 1,106 but that is not our favored case. We think short-term we test either 1,070.50 or 1,085/1,089. After that we would like to see the 1,038 support being challenged and possibly broken which would confirm a move to test at least 875. Dax is confirming our conviction that short term we will face a bounce. We have a little bit more downside possibly to 5,570 but after that we risk a retracement higher. 1,070.50 should correspond to 5,740 in theory. What bothers me is the great resemblance with the last 2 weeks of September for the Dax index as highlighted by the 30-minute chart. Also, the daily chart confirms we are close to support. On the daily chart for S&P we have an interesting turn of the second derivative for the MACD, but the RSI is pretty much on support. Both are not incompatible, as the MACD has a bit more latency and indicates if anything we will see more weakness after the bounce.
We were a touch early favoring an end of the sell-off in Treasuries on Monday morning as a few stops pushed the market lower, bt ultimately we have well recovered. 118-13 on the 10Y future is the level that will make all the difference. Auction today was well subscribed. As we discussed previously, the recent back-up in rates is likely to have made Treasuries more attractive for real money accounts, and the worries surrounding EURUSD and equity weakness probably also bring a bid in the market.
Good luck trading,
Nic
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Excellent work as always; crisp comments and analysis with spot on s/r levels. Keep 'em comin' Nic...
Keep an eye on them transports!
You need to keep your eyes on the transports?? You don't need to look at that to know this country is fucked. The only thing thats getting transported is bails of FRN's..
You will be hearing from my lawyer. At the end, prior to what appears to be graphs, I shot myself. I can't take these topics anymore.
This whole post is a recursive acronym,, you can't shoot yourself and write about it post mortem, unless you suck at gun control.
Loosing your big toe is not a major tragedy,, But I must say, I don't know if I can handle this anymore either..
Nic said: Given upbeat equity predictions by the latter two firms (helps to have replaced Rosenberg with a bull!)....
What I find very interesting is that Bianco recommends overweight on the financial sector yet their bank analysts still do not have a rating on wfc...it is STILL under review. Speaks volumes to me.....
S.U.R. is the new hold.
Ditto that, as well. It seems like, with selective super heavy weight pundits all of a sudden becoming bearish, it almost smells of a govt engineered correction that could go horribly wrong. I have heard correction so much lately im getting sick of it. Bring it..
Excellent work Nic. As usual.
Great point on the "government engineered correction" I was thinking that myself (not that that means anything).
I wouldn't be surprised if the housing tax credit extension will be the brakes to try and slow a big sell off. It would be interesting to see what happens if/when that backfires.
Thanks ZH for sharing Nic's work. Let the selling continue.
"MARK IT ZERO, DUDE"
take a look at APOL. that stock is one giant scam. got my fund short it above $70. they own Uni of Phoenix online ed. SEC is inquiring into "revenue recognition practices". My bet is someone over there FINALLY got a clue about the boiler-room practices of signing anyone and everyone up for a "degree", claiming a Title IV student loan from the govt.... and then resulting in something like a 4% graduation rate.
looks to me that billions of dollars have been stolen from the govt. this thing should be shut down. can almost guarantee thats why Chanos is short this and all the laterals as well.
also, the giant stock sales by the founder at the top are rather Mozillo-esque
It's interesting that the index's are getting oversold and yet have not snapped back. Sometimes the biggest drives up and down come during overbought and oversold conditions.
After the close????
Here it is,,,
This whole fucking system is one creeping coup, an insurrection against constitution and law from beginning to end
Forgive the rant but I'm tired of the delusional gravity hitting my book.. lost a good sized client today because apparently it doesn't matter that the system is at HUGE risk. I should be able to trade it and make money because the market is up 55% since March and we should have been on that train - I'm tired of the client "knowing better" and yet having no fucking idea at all how much risk there is out there. Ironically 7 months ago EVERYONE was terrified of the markets.
I can't wait to start distributing my "I f*ing told you so" t-shirts with the Zero Hedge Logo.. Marla? TD? Can we please do those up when it happens?
and now back to your regular broadcast..
/rant
Risk,,,,
It's right here in the fucking U.S. DOLLAR DENOMINATED ASSETS. When will you people wake the fuck up. THE DOLLAR IS FUCKED. How many people are not taking risk because they think the dollar is safe??. THE DOLLAR IS SAFE? OK ,ASK BEN FUCKING HELICOPTER BERNANKE. He will give the straight answer,,,,, He can eat my joint...... Ruin peoples families..... This prick needs to fucking HUNG....
fuck you Ben, STRONG LETTER TO FOLLOW
gubb....i feel for you on that one....
btw, i'd like one of those t shirts too.
Then get away from the delusional gravity. The typical Joe bag of donuts in the USA.
Feel your pain. Clients don't get it. I want the t-shirt.
This mkt seems incredibly strong. I am short to the teeth (-3000 Delta). It never gets crushed, always drifts down w/ run-ups of 1% through out the day. There are plenty of opportunities to get short every day. I can't say that about getting long the past 6 months.
I have been playing the dollar, in relation to the market, for the last 7 or 8 sessions, on the short side of course. There is an inverse relationship between the market and the dollar right now. Weak dollar = strong market, and vice versa. Seems like a simple valuation adjustment related to the dollar only, ( there are no real buyers ).
So to me, weak dollar; adjust up.. Mkt up 130
Strong dollar; adjust down.. Mkt down 100
Lather, rinse, get paid, repeat..
The old saying was up like a escalator, down like a elevator. I think now it is reversed.
Its all about predicted GDP numbers tomorrow - analysts are looking at 3.5% improvement. They aren't going to get it and that will be the start of the correction.
Your right,,,, fucking analysts, everybody beats the street by a penny..
Nice as always Nic. Thanks.
Im going all in on silver at anything near 15
16.71 @ 9:42:00 EDT
So you are saying that the above is the high for the next 12 months?? Or is it a budget issue?
SPX - trend line support at 1057 and 50dma at 1049ish. Could bounce off 50dma if it breaks 'the trend line' that EVERYONE is focused on.
Also it would be wise to note that that every leg of this rally has been fueled by short interest. Beware and be nimble - could be yet another set up and short slaughter in the making...
compliments of
Federal Reserve/Goldman Sachs
'buying equities with your money and keeping the profit - our specialty'