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Pivot Galore

Tyler Durden's picture




 

Submitted by Nic Lenoir of ICAP

After pretty much two weeks waiting since what we thought was the last meaningful turn in risk appetite (towards risk appetite), I think the markets have reached a possibly key pivot area.

I will start with commodities where the pivot is the clearest on the day. Copper has retraced 61.8% of the recent sell off, and posted a quite nasty indecision candle on the day. If we gap lower tomorrow and close below 319 this would be a major evening star. Also note that today's pivot also corresponds to the level at which copper broke through the support of the bullish channel in place since March 2009. Gold similarly has hit an intermediate resistance at 1,120/1,125. As long as we do not post a daily close above that level there is risk to retest at least 1,074 before having a shot at further upside, and if we venture below 1,060 then we are headed for 980/1,008 which is the massive support zone (if broken this invalidates further upside for the medium term).

Fixed income is still holding on but we have two beautiful H&S in progression for the bund and the 10Y future. A break below 122.90 and 117-16 respectively should trigger quite a bit of downside, which remains our preference.

Equities are also on a relatively key pivot. Dax is a bit short of the 5,725/5,740 resistance be have a potential a-b-c correction completed with c=a here, and S&P futures resolutely refused to trade past 1,100 today. The key resistance is 1,100/1,107. A break of 1,092.50 would confirm we will drop to 1,080 and possibly 1,066 which is the key support.

Could we have a market in which commodities, equities, and bonds drop? Well, for one thing it would hurt the correlation high frequency platforms out there which could be fun for a change. The part that is hard to reconcile is the USD as EURUSD is already quite depressed so it is hard to iagine immediate downside here at least technically, and the dollar index has posted a perfect a-b-c with c=a since the lows, so something has to give. Our strongest conviction would be fixed income and copper here. Who knows, after all a weak USD with weak fixed income and weak equities would simply be a SELL US trade which happens every now and again. It only takes a leap of faith to believe commodities would sell-off in that environment. We will know shortly, and such an environment would have the stamp of deleveraging all over it!

Good luck trading,

Nic

 

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Wed, 02/17/2010 - 17:55 | 234606 lsbumblebee
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The one thing you need to remember about gold as it begins the next leg up is that it's not allowed to gain more than 2% on any day. That's a Cartel rule.

Wed, 02/17/2010 - 17:58 | 234612 Anonymous
Anonymous's picture

Nic - great comments - the Yen break today is a significant development for risk assets no?

Wed, 02/17/2010 - 18:18 | 234651 schatzingrid
schatzingrid's picture

buy (0,6 plat + 0,4 pall) sell (0,7 copper + 0,3 gold)

Wed, 02/17/2010 - 21:38 | 234720 RiskFreeT
RiskFreeT's picture

Every correlation breaks just in the nick of time to save the market. If the Euro correlation had held, the market would be much lower, not just today, but over the past few months.

Good read: Amerika the huge Ponzi scheme!

Wed, 02/17/2010 - 19:15 | 234722 Liberdadedescolha
Liberdadedescolha's picture

We have a nice Head and Shoulder formation on S&P500. Beware.

http://midasfinancialmarkets.blogspot.com/2010/02/o-perigo-espreita.html

Wed, 02/17/2010 - 20:02 | 234804 Miles Kendig
Miles Kendig's picture

Thanks for the continuing education for this non financial professional Nic.

Wed, 02/17/2010 - 20:20 | 234823 greg merrill
greg merrill's picture

Nice to see the traders are concerned about copper as well.  I recently blogged about the fundamentals and how rising copper inventories are going to cause problems with the current high price of copper.

http://merrillovermatter.blogspot.com/2009/12/how-many-more-days-until-copper.html 

To update the copper inventory data on that blog entry, copper inventories continue to rise and are standing at 759+k metric tons as of 02/12/10. 

I bought BOS (inverse copper, aluminum, zinc) yesterday. Hopefully the markets will agree with me for once.

 

 

Wed, 02/17/2010 - 20:37 | 234847 Hephasteus
Hephasteus's picture

It's good for fudging "restocking" data and showing how the economy is about to esplode to the upside any minute now.

Wed, 02/17/2010 - 20:46 | 234855 Anonymous
Anonymous's picture

Short copper and Oil and natural gas on reason of excessive storage inventory makes sense, but most sensible investors have lost money that side of the trade so far these last 3 months. Many oil traders have decided the forces that be (ie the largest investment banks) are protecting their books, probably with tacit government data "support", it is just not worth shorting anything until further "notice". Usually those notices are short-lived, the whole risky-assets complex "have to move up" in election years and to support the Fed's fight against deflation.

Wed, 02/17/2010 - 20:53 | 234865 gigeze787
gigeze787's picture

Will PPT target SPX >1100 thru Friday for options exp. (maybe after a bait and reversal switch on Thur)?

Wed, 02/17/2010 - 21:39 | 234925 Master Bates
Master Bates's picture

H&S patterns on S&P and GOLD.  The retracement has another day, at the most, then it's back to whence it came.

Wed, 02/17/2010 - 23:40 | 235057 Grand Supercycle
Grand Supercycle's picture

 

The impending dollar rally that I warned about from mid 2009 onwards has only just started.

USD Index daily and weekly charts remain bullish.

Vice versa for the EURO and DOW/SP00.

http://www.zerohedge.com/forum/market-outlook-0

Thu, 02/18/2010 - 01:45 | 235136 Anonymous
Anonymous's picture

don't the S&P, Dow, Nasdaq all have a potential evening star formation just like copper?

i don't see the H&S formation. what time frame are we talking about?

Thu, 02/18/2010 - 02:29 | 235163 Anonymous
Anonymous's picture

The more you talk, the more you give away that you have no fucking idea what you're talking about.

Thu, 02/18/2010 - 04:03 | 235204 order6102
order6102's picture

Could we have a market in which commodities, equities, and bonds drop? 

 

YES WE COULD. this call first year of global tightening... Cycle started, and in first year of cycle - cash is the king. This why 3m t-bils at 17bps... CASH IS THE KING!

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