Trading The Technicals: "Beware The Bear Trap"

Tyler Durden's picture

While fundamentals remain, for now, as useful as useful as having the only phone in the world; we demur to BofAML's technical analysis team for their short-term trading focus across various asset classes. In light of the only thing that matters, the Fed balance sheet (as Hugh Hendry so eloquently explained), BAML warns "beware the bear trap" in stocks...

 

In FX markets,

CHF at risk of a bearish reversal. $/¥ choppy, but bullish

 

Across many pairs the CHF has reached significant resistance and is now at risk of a bearish reversal. €/CHF is particularly worthy of note as it has completed a Bullish Reversal candle from retracement and pivot support. With momentum rolling bullish from its lowest levels since Apr'12, €/CHF could squeeze back towards 1.2346. $/CHF is in a similar situation and could squeeze back towards 0.9240, potentially 0.9472.

 

 

Turning to $/¥; since the 101.62 lows, price action has turned very choppy and overlapping, a condition likely to persist for the next week or so.

 

 

However, STAY BULLISH. THE UPTREND REMAINS FOR 104.60/105.00.

 

 

101.62 should mark the low end of price action AND $/¥ CAN'T TRADE BELOW 101.14/100.62.

Bonds remain a sell...

US 5yr yields stall at support, but stay bearish.

 

We remain bearish Treasuries. 10yr ylds are on track for 2.950%/2.992%/3.007% (swing targets and multi-month range high), while we remain short TYH4 (Dec-05 LTA : Sell TYH4. Treasuries are in Trouble). The completed TYH4 Head & Shoulders Top targets 122-06+. Meanwhile, 5yr yields have held the initial test of 1.556%/1.551% support (50% retrace of the Sep/Oct yield decline and mid-Sep pivot), but this should be only a temporary stopping point before the bear trend resumes for 1.670%/1.659%.

 

 

Back below 1.488% (equivalent to 2.839% in 10s and 124-17+ in TYH4) warns of stalling, while below 1.445%/1.443% (2.790% in 10yr yields and 124-30 in TYH4) negates the bearish potential. We recommend adjusting TYH4 stops to 125-02 from 125-08.

But "beware the bear trap" in stocks...

Conditions align for an ESZ3 Bear Trap  

Finally we reiterate our BEAR TRAP VIEW on ESZ3. While 1773.25 support remains pivotal, BEWARE A BEAR TRAP!!. Intra-day momentum is at levels that have coincided with important lows AND seasonals into year end and the week of triple Witching are VERY BULLISH.

Indeed, the S&P500 has finished higher in 22 of the past 28 years the week of December Triple Witching (Next week). Above 1784.50 confirms a base and turn higher.

And Buy WTI...

Time to buy WTI

 

The CLM4 impulsive advance from 92.21(Nov-267 low) says the near-term and, POTENTIALLY, medium-term trend has turned bullish for WTI. Targets are seen to the Aug highs at 100.65, but likely beyond towards 105. Indeed, there is potential for a resumption of the long term bull trend towards 122/123 (basis continuation charts). We are wrong on this view below the Nov-27 low at 92.21 (CLM4).

 

 

BUY CLM4 at 95.00, add at 94.00, risking 92.20, targeting 100.65 & beyond.