Sticking To Our Guns

Tyler Durden's picture

From Nic Lenoir of ICAP

Good morning,

I will not waste too much of your time to start the day. I remain bearish equities from 1,126, and would use 1,117.50 as a trailing stop here. The key support below is 1,083, and we can expect a bounce there possibly, but if we don't break 1,100 rapidly I will become more concerned about my view. The fact is if the bearish scenario plays out here we should be in a wave 3 or C lower, which either way is quite impulsive. So indecisive price action would make me question the downside a bit. The one thing that can comfort bears here is the Nasdaq daily chart which has a quite bearish set-up here.

Under a bearish scenario Gold should underperform as well, so I will keep a close eye on the precious metal. This morning it is not validating the further downside indicated by S&P futures, but it has not broken to the upside yet. While I clearly think that yesterday's Fed announcement is a USD negative and should benefit Gold as a store of value against future inflation, I remain convinced that in a debt contraction environment all assets go down and we are to face another wave of contraction Gold should underperform along with stocks. This is why I think the correlation between the two will quite telling as to whether this move is for real or not.

Last but not least, AUDSUD (and the AUD in general) is a good proxy for risk and should also exhibit weakness along with stocks and Gold. We had recommended shorting 0.9185 and would observe a 0.9165 trailing stop. It will not leave much of a profit but on the downside I am playing at the very least a retest of the 0.8875 support and on a break I thnik the potential for this trade could become rather large, so it's worth handling a few speed bumps if we are to last on this ride.

Good luck trading,

Nic