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Macro Trading Update
Submitted by Nic Lenoir of ICAP
The breakdown in correlations has many traders confused, and the
light volumes are not really making trends easier to spot. However,
this is something we had warned about and we have been monitoring on
several occasions using the 90- or 120-day correlation between gold and
stocks. Our assessment was that the correlation would at best go to 0,
and in case of severe market movement possibly inverse and go down
around -0.80 after 9 months when commodities and equities traded in
perfect harmony. Traders have been pointing out that with EURUSD where
it is trading right now we "should" (assuming the same market dynamics
that have ruled markets since March 09 are still in place) have SPX
under 1,000. The question is what now? Let's look at markets
individually, which is always the approach we favor given that
correlations are as good as they last.
For
one thing as long as the S&P futures are stuck between 1,085 and
1,115/1,119 we have little to get overly excited about. The story of
the S&P future is one of exacerbated and shameless bearish
divergence, and lately we might add acute boredom. By any technical or
historic measure we are still expecting a sharp correction lower in
equities, but we won't try to front-run the market as we have wasted a
lot of exhaustion of short-term indicators in a narrow range, and the
Dax has broken out to the upside. The only certainty is that when the
market breaks out, whether it's up or down, the move will be sharp. If
we manage to stay in that range until next week we would consider
January or February 1,100 straddles as the realized vol of the move
coming up should far surpass what the Vix is pricing as it continues to
drop.
Different story for foreign
exchange markets and Gold where markets are trending impressively. Gold
is testing a key support here as can be seen on the daily chart, and we
have divergence of momentum indicators on a 3-hour and hourly scale.
However a clean break here along with new lows in RSI on the hourly
chart would indicate we have more to go and we will go challenge 1,026
or even 992. Again I would like to point out that at this point
breaking 992 would invalidate that we remain in a bull market. So if we
fail to close above 1,092 we are bound to go challenge the key trend
support. Conversely a hold here would open the way for a retracement to
1,142 or 1,171. Note however that even if we bounce here it is unclear
the market will resume right away its bullish trend as the recent
sell-off has the structure of an impulse, which is not a satisfactory
pattern for a correction.
EURUSD is
clearly not done selling off either. We are in wave 3 lower, and the
sub-count of the 3rd wave detailed on the hourly chart shows we are
most likely still within sub-wave 3/. Given that the 200-dma is at
1.4194 and daily RSI is at 32 it is possible that we bounce here for a
coupel days, but the resistance is now 1.4666 and if we bounce there we
still have potential to go down to 1.4080 as part of the current
impulse. In short, the downtrend is intact for now and there are no
reasons to assume we will not keep going. Fairlue is thought to be
around 1.20/1.25, and given the woes of the weaker economies in Europe
and the backlog of unreported credit losses of German banks, we could
well go trade below fair value for a change at some point in the second
half of 2010.
Finally US treasuries
remain under pressure today. The next support zone for the 10Y future
is 115/115-25, and in the medium term we target a re-test of the key
support and neckline of a massive H&S at 113-25. A break there
would probably spell a lot of trouble.
Good luck trading,
Nic
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Good luck indeed....I think the DXY will resume the down trend early next year as short covering will abate. Barring an exogenous event ? the dollar really has no business going up too much more despite all the 'good' economic news. Trsy has no interest in a strong $, and the Fed under siege as it is, will not buy dollars openly or covertly as it has in the past. Seasons greeetings. Stay tuned.
they don't ring a bell at the top and you would expect gold to break first because it is the least liquid of all the correlated assets.
the reason for the correlation is because all these assets are in "b" waves which are designed to trick the crowd. in fact i am counting his gold pattern as a b wave triangle (of larger B) instead of 1-2, 1-2 - it has the or a top in at 1226 - which is a very similar fractal to the DJIA from 2000-2007
bonds also look to be breaking out of a b wave, with 5YR c wave projected to hit 3.80/4.00 at a min..
Bernanke will be crapping his pants when that happens
oh fuck it all
the markets are pure bullshit
total fucking bullshit
someday it will all go to fucking zero as a result of the banksters' fucking schemes
fuck this. fuck them.
Anon,
I feel your pain.
Don't hold back. Let it go and tell us how you really feel.
Thanks for the Lulz, Anon and CD. :)
Proposed Financial Transaction Tax will force US financial markets to China: http://advancedtrading.com/regulations/showArticle.jhtml?articleID=22200...
Do you take politics into consideration,when planning certain trades?. Exaple:GLD had a volume ma(50)of roughly 15 mil,and suddenly on DEc 4 there is almost 80 mil shares traded. Isn't that a clear indication that it was shorted heavily to supress it for fear of becoming a medium of exchange(I know,sort of). Or:In reply to one of the questions to BB as presented here"with gold going up,isn't this an indication of loss of confidence?". So now he could say"you see,there is no loss of confidence,gold down,dollar up and market is up". Bottom line,all those tech analysis,although useful in showing range of trades,one cannot rely on them without incorporating the political thinking. May be,just may be,the whole dollar up and tbs down,is basically an effort to convince China and others that "there is no montization going on". In my opinion"you work hard to earn trust,and once you loose it,you cannot get it back".And if the note found by Bruce is a true story as he presented it,then I am sure soverigns know a lot more than those youngsters who were bar hopping....
SNIP>>
"I was very impressed the week before last at how Barrick Gold picked the top of the recent gold rally. With great fanfare on Dec 1 they announced they had completely eliminated their hedge book ahead of schedule and were now fully exposed to the upside potential of gold — and, took a $6B charge to do so. That's some stop-loss! Three days later gold tanked spectacularly and has been going down ever since. Awkward."
END SNIP>>
http://www.dailyspeculations.com/wordpress/?p=4238
One of the ironies here is that the wavers master himself got decieved by the Dollar strength issue in relation to the market. In one intervies he (Prechter)said to watch the dollar as a sign for the market cracking. Well,guess what, GS found another solution for the equation. But in the process,they kinda forgot the TBS. But that is for next year to worry about(lol)......
Will the S&P ever correct?
why would anyone sell?
to get money
for NOTHING
No. This market will go up forever. Wheeeeee!!!!!
Dollar Going Up Forever!
"why would anyone sell?"
Because they are holding near-worthless electronic book entries that pay no dividends and the only thing that can make that electronic book entry that pays no dividends worth more than they paid for it would be if more people want to buy a worthless electronic book entry that pays no dividends in the years to come?
+1000
Everyone here should short it in unison, and then we might get the long awaited correction LOL
Hello,
the traders will make the market go sideway until the oversold condition has been worked off. then whne overseas markets are going up the s&P will ride shotgun and go higher. on the low volumes the boys can keep this up forever esp since it costs nothing to borrow funds. they are just protecting their investment. (LOL)
We haven't had this degree of manipulation since the late spring!!!
gold chart is so symmetrical, it is going to be tough staying above $1k. Its almost as if someone is painting the tape after it hit the $1.2k peak.
Problem for gold is euro is reaching critical 1.42. With all the bad news from greece/PIIGS and german/austrian banks, if euro breaks after marking around the 1.43 level, it's going into a wave 5, the next target would be well below 1.4. In sympathy gold might be carried below $1k.
Do or die for the Gold shortists here.
This time, it's different.......