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Nic Lenoir's Outlook For The Week Ahead

Tyler Durden's picture





 

From Nic Lenoir of ICAP

Data this week is relatively light given and it's a holiday week. 3rd Quarter GDP at this point has no informative value regarding current and future economic activity. The slew of housing data is also inconsequential. Everyone knows housing is in a double dip so any slight improvement will be used by pundits to talk up the economy but fundamentals remain in the dumpster. Continuing claims is probably the most important piece of data this week given that durable goods is such a volatile series.

As a result I feel the markets this week will be mainly driven by sentiment and price action rather than news flow, especially given thin late December markets. Here are some of the key elements I am watching:

Precious metals give worrying signs to investors. On December 7 both Gold and Silver posted key bearish market reversals. After the initial drop markets tried to recover and failed at the 61.8% retracement for Gold on the 14th. Now we have triggered a H&S pattern we are trying to re-test the neckline as resistance and have managed to hold the 50-dma for now but when that support gives and knowing how bullish everyone is I expect a major correction. The February 1350/1300 put spread can be bought for $11 or $12 right now and for any asset manager out there who is long it offers great protection and a good risk reward for people who feel like taking a stab.

Obviously a move in Gold would come hand in hand with a stronger USD.

The Chart looks pretty constructive here for the USD index. There is an outside chance we could retest the 55 or 60 dma which has been a good envelop of the price action lately, but I feel that the dip on 12/14 marked the low on the pullback before further upside and a move through the 200-dma.

Fixed Income has given headaches to everybody recently, but the 5Y future weekly chart here is very interesting and if this week we close above 118-10 it will confirm a major turn. Interestingly I find that even if we are still in a bearish trend the market needs to pullback at least to 118-08. Therefore playing upside here makes sense knowing that it might only be a weekly play if the market fails to confirm the major reversal. For that reason if expressed via options the structure should have enough delta to at least capitalize on the bounce and cover 1 week worth of theta. The February 118.5/120 call spreads should work well in my opinion. If bought outright ideally 117-06/117-08 is the ideal entry.

As far as equities are concerned I am still very convinced we are nearing a top that will prove the high for at least a year. The resistance line and ideal sell level is considerably higher around 1,285/1,290 but it is very common to top out without testing trend resistance, especially with indicators showing the market is as over-stretched as it has been on the upside since the Nasdaq bubble top. The Nikkei has a very interesting profile technically here with massive daily divergence and failure so far to retrace beyond the 61.8% since April highs which is around 10,410. The market should pull-back towards 9,917 at the minimum. In the US the 5-day open Vs. 5-day close moving average has been a very reliable trend indicator so given the fact we are making new highs it might be more prudent to wait for a turn in the trend to sell outright.

Good luck trading this week,

Nic   

 


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Mon, 12/20/2010 - 16:59 | Link to Comment RobotTrader
RobotTrader's picture

As long as all this takeover speculation remains in force, it is difficult for the market to go down.

Way too much money to be made by the Investor's Business Daily mo-mo gamers, who will be noticing this stock on the scans, "breaking out of a sound base on 3x normal volume"

Mon, 12/20/2010 - 17:08 | Link to Comment Boilermaker
Boilermaker's picture

Hey, look, a random chart.  Thanks.

Mon, 12/20/2010 - 17:25 | Link to Comment buzzsaw99
buzzsaw99's picture

You'll notice it didn't post a chart of icahn's other success story, namely MOT. That candle is the kiss of death. lulz

Mon, 12/20/2010 - 17:15 | Link to Comment Hondo
Hondo's picture

This company is run by crooks.......willing to dilute and steal your money on a moment’s notice....they done it before and they are most likely manipulating stock now

.

Mon, 12/20/2010 - 17:17 | Link to Comment thepigman
thepigman's picture

Robo the bull says: "look at me, ma, i'm long the

fraud and lovin' it. "

Mon, 12/20/2010 - 17:00 | Link to Comment Slash
Slash's picture

http://www.bloomberg.com/news/2010-12-16/fed-mortgage-recission-plan-spa...

 

banks trying to take away the right of recission.....

Mon, 12/20/2010 - 17:09 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Nic,

 

I have been talking about strong dollar, gold going down, euro down for weeks ( Ben is great, pomo is good, dollar bears are crazy )

Spritzer/sheepdog/tmosley do not want/understand how this can play out. It will be good to get back into gold at $1,200 after the miners get blowtorched.

Mon, 12/20/2010 - 17:21 | Link to Comment AccreditedEYE
AccreditedEYE's picture

Spalding, get your foot off the boat! You don't need to think Ben is great and POMO is good to be long dollar. I also believe in booking the long dollar profits and buying physical... there is only one piece of the puzzle that has yet to materialize: the equity market beat down. Now where could it be?

Mon, 12/20/2010 - 17:35 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Dads gone, its my boat. The dollar is going up all year in 2011 just like stocks. The double wammy of strong dollar/GDP 3.5/bill clinton type reflation is a monkeyhammer for gold/silver.

Euro heading under 1.20, China rate hike/slowdown will also hammer commodities a bit ...

Mon, 12/20/2010 - 18:17 | Link to Comment Shameful
Shameful's picture

So the economies going to pick up as is demand for the infinite emissions of our debt?  How?  I know your not a fan of China, if they crash won't their sale of assets take the wind out the US bond auction sails?

Or is the idea that as the world burns that people will put their money in the most flamboyant of the big spenders?

Mon, 12/20/2010 - 18:38 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

I'm a big fan of China long term after she hits bottom in the near future, after that I'm all in. China will buy bonds,  that peg must hold steady maybe 5% a year move against the dollar. Everyone has dollar denminated debt with a 3.5 GDP print and the euro issues the dollar will make a nice home for many. The hot money will move into stocks. Jobs will be picking up Q3 everyone will wish they had C/BAC/MET/PRU

Mon, 12/20/2010 - 17:51 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Jim Rogers would not buy gold at this price - REUTERS 2011 INVESTMENT SUMMIT

 

http://www.youtube.com/watch?v=yZDVJ4L0Lbg&feature=related

Mon, 12/20/2010 - 17:05 | Link to Comment RobotTrader
RobotTrader's picture

Heads up gamers....

Seabridge Gold took off today from a base on way above average volume.

It already showed its hand with big volume days in April and May.  Usually this is a tipoff for a big move.

Mon, 12/20/2010 - 17:08 | Link to Comment FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Not many buyers above DOW 11,500... much to the FED's surprise... and nobody else's.

Mon, 12/20/2010 - 17:09 | Link to Comment Boilermaker
Boilermaker's picture

Buyers??  What's that?

Mon, 12/20/2010 - 17:20 | Link to Comment thepigman
thepigman's picture

All the buyers are like Robo: Look, ma

I can trade the fraud....wheee!!!!!

Mon, 12/20/2010 - 17:09 | Link to Comment TexDenim
TexDenim's picture

"As far as equities are concerned I am still very convinced we are nearing a top that will prove the high for at least a year."

Amen, Nic. I believe, man, I BELIEVE!

Mon, 12/20/2010 - 18:40 | Link to Comment BeerGoggles
BeerGoggles's picture

Yeah but he called 1160 the short of  a lifetime too! :)

Mon, 12/20/2010 - 19:23 | Link to Comment Strider52
Strider52's picture

"As far as avatars are concerned I am still very convinced we are nearing a top that will prove the high for at least a year."

Mon, 12/20/2010 - 21:20 | Link to Comment Don Birnam
Don Birnam's picture

+1

Madre de Dios !

Mon, 12/20/2010 - 17:27 | Link to Comment buzzsaw99
buzzsaw99's picture

CNBC sez bondz will crash and stocks will go up up up. They are on teevee so they are super-smart.

Mon, 12/20/2010 - 17:39 | Link to Comment RobotTrader
RobotTrader's picture

Perhaps the cyclical stocks are

discounting Sarah Palin as the next President??

LOL...

Mon, 12/20/2010 - 17:48 | Link to Comment TexDenim
TexDenim's picture

Nice jugs!

Mon, 12/20/2010 - 17:40 | Link to Comment irishlink
irishlink's picture

Deep freeze here in Ireland. Huge impact on retail sales in these most important final days before Christmas. Nic's belief that we may be nearing a top  in stocks warms me up no end!

Tue, 12/21/2010 - 07:12 | Link to Comment reload
reload's picture

Yes, the cold spell is having the same sffect on retail in the UK. Shoppers staying at home. The BBC find it worrying what effect this will have on the `ecconomy`. As our ecconomy is largely banking, government, housing and retail they have a point. Perhaps VAT reciepts will be down a bit. If it was viable to manufacture here we would be in better shape, but we make practically nothing. I tried in vain to find a bycycle for my 6yr old daughter that was made in the UK, there is no such item on sale. The closest I could get was `designed in the UK`, pathetic really. On the other end of the technical scale we continue to loose high tec businesses and manufacturing to the more welcoming tax and labour environments in the east. Outside London the housing market is very slow, government is downsizing (too little & too late) while the Banks seem to be succesfuly massaging their ballance sheets for now. So when the BBC worry that the cold spell could `derail the recovery` I have to ask, What recovery?

Mon, 12/20/2010 - 17:42 | Link to Comment RobotTrader
RobotTrader's picture

From Trader Joe over at Cap Stool:

Back in September when Adobe was getting crushed, Joe
Eddie Terror Nova
on "Lost Money" said:

..."I would not own
Adobe here, it has further downside ahead..."

It was trading at just about $26 at the time

As per usual, I faded him and made some nice coin

Up $1.75 after hours.


F$$ktard

Mon, 12/20/2010 - 17:53 | Link to Comment Quinvarius
Quinvarius's picture

You are really stretching the limits of credibility with your new bearish gold formations every day.  Sometimes an uptrend is just an uptrend and three bumps in a row are just three bumps in a row.

Mon, 12/20/2010 - 18:13 | Link to Comment Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Nic:THe printing press will always beat the deflationistas.

Robotrader:Ease up on the pomo porn, just post the pure porn.

 

Mon, 12/20/2010 - 18:27 | Link to Comment Paul Thomason
Paul Thomason's picture

What a surprise.

Market is crashing again this week - worrying, concerning,bearish with conviction.

Crackpot.

Mon, 12/20/2010 - 22:23 | Link to Comment rayno
rayno's picture

Don't really understand the hysteria on the PMs, Nic. So Gold and Silver had a minor selloff. Not sure the "Bearish triple-witching engulfing" patterns are worth much during a thin holiday market at the end of the year where commodity traders at big funds might be ringing the register to buy Champagne. In fact gold barely got back down to 1360 while RSI dipped down to 50 or so. I'd call that a bullish divergence, if anything. Higher lows on the correction sets up for a strong start to 2011.

Mon, 12/20/2010 - 22:52 | Link to Comment Worker Bee
Worker Bee's picture

Yes but there was a confirmed omen omen and the moon is eclipsing tonight.Also Lindsay Lohan has not been arrested for a month this is traditionaly bullearish for stocks. Also dont forget the fed is pumping the market in the back end with HOMO. A double D dip is out of the question until it is and the hair on the back of my neck stood up while watching an interracial DP porno last night which always implies the things it usually doesn't...another words...go to fucking Vegas..much better odds.

Tue, 12/21/2010 - 05:15 | Link to Comment Justin Credible
Justin Credible's picture

Oh Nic-ee you're so blind, you blow my mind, hey Nic-ee...

Oh Nic-ee you're so blind, you blow my mind, hey Nic-ee...

Do NOT follow this link or you will be banned from the site!