Sunday Weekly EDGE 4-29-12

Over the weekend, there is a lot of good reading out on the internet, but none that seems too “market moving” for this evening for futures or for the FX market. Early gaps are fairly manageable with DOW futures slightly higher, USD index a little firmer from Friday, crude oil and precious metals all basically flat at the moment.

Here is an article about the EUR which came in late Friday afternoon which “chart technicians” see a down move in the EUR/USD coming. Well, with that being said we are probably heading to 1.4000, and with a Newsweek cover that looks like this the contrarian in me becomes weary. Just keep in mind, major resistance is near the 1.3300 level (which in my opinion is a critical juncture) and a sustained breakout this week above the level will be key this week (see chat below).

Here is a Bloomberg article for NFP this week and most economists think that the jobs picture continues to improve.

Here is a good article to get you up to speed on France’s (possible) new leader and the possible German/France relationship in the Telegraph.

I want to thank Bruce M. in Arizona for forwarding this FT piece to me about Copper and China.

This week we have some earnings to pay attention to, and here are just a few that may catch your attention. Monday is MCK, NYX, WPI and HUM. Tuesday is CHK, AVP and EMR. Wednesday is TWX, JDSU, SYMC, CVS and ALL. Thursday is AIG, FSLR and KFT. Friday is EL, DUK and AON.

We have a busy week for economic data around the globe as well with the “Jobs Report” on Friday. Monday we have Canadian GDP and China Manufacturing PMI. Late Monday night, Tuesday morning is Australian rate decision, Manufacturing PMI for GBP and US (ISM). Wednesday is construction PMI for GBP, and ADP non-farm in the US and employment numbers in NZD a little later in the day. Thursday is Services PMI in GBP, then the ECB rate decision and weekly unemployment claims for US and the US Services ISM. Friday is Non Farm with CAD IVEY PMI following the jobs report.

Lastly, most of you know that my team and I broadcast daily from 6AM ET through the NY stock market close. To access our live webinars daily (which are free, and our live in the market analysis has been for nearly 9 years now) just click on this link.

Here are some charts for your viewing pleasure:

USD index sitting on the 200 EMA on the daily

EUR/USD daily chart

AUD/USD 4 hour chart

Copper Weekly

E-Mini futures 4 hour chart

USD/JPY bulls hate me posting this 4 hour chart….but if the 50% level goes, the 61.8 and channel low look like feasible targets

Forget the FOMC…I Am Watching Gold Today

As a trader, I am always looking for an edge when trading. Frankly, today’s FOMC decision/statement/projections/outcome is not too clear. Economists are all over the board as far as future expectations from the Federal Reserve in the coming months, so for me, it’s hard to get a handle on the direction of the US Dollar in the very near term.

Although I am a firm believer the USD is posting a longer term low (over the last year higher lows on a monthly basis) I am unclear on how to trade for today and in the near term. So, instead of me trying to decipher the Federal Reserve’s statements and remarks or analyze the “murky” major rates in the USD, my eyes will be on gold today. Gold should clearly show us the broader direction of the USD index (minus the JPY).

Why gold you ask? My simple explanation is this: Gold is a good representation of whether or not the market expects more QE (market dubbed as QE3) or not. In recent weeks, gold has not moved….at all. But more importantly it has not moved higher in recent weeks as the European debt crisis (miraculously) resurfaced. In the past, when fears gripped the market about Spain, Portugal or any other European nation, gold would spike higher. Since this dynamic has changed a bit, we are forced to look at what the other mover could be for the yellow metal.

In the last few FOMC meetings, gold had moved inversely to the USD in near lockstep. So, therefore, if the market “expects” (since there is a very good chance there will be no change from the FOMC other that rhetoric and projections) for QE3 to be coming in the following months, gold (as an inflation hedge, which more QE would spark inflation expectations higher) would break it’s daily triangle higher and bring in USD weakness.  Knowing that gold is sitting on weekly trend line support, a rally or sell off from here will be significant enough to spur a major USD move. A push gold below the 1600 level and major multi year trend line which would bring on a massive USD rally.

Major Intermarket Levels Being Pushed

The trades that “I wait all year for” seem like they are just around the corner. I am watching some major levels being pushed today, so closing levels will be that much more important today and later this week:

E-Mini Futures have broken the daily trend line of the last 6 months, so a close below 1359/1352 will be” key” today and this week.

Gold is sitting on a major 2 year trend line, and you can see $GLD below is the same.

The USD index is very close to the 80.00 level which would be a major breakout higher. And equity trades know…then gold breaks lower, the USD breaks higher. And the equity markets do what when the USD goes higher?

Here is the daily AUD/USD which is back testing a major broken trend line, which could test trend support with break lower in equities.

Also…the 10 year treasuries, interesting chart indeed.

Disclaimer: I am long several USD pairs and am looking to add with confirmation of multiple market breaks.

How Do You Measure a Cup and Handle Target?

There are a couple ways to measure a cup and handle, but most books/sites will measure the bottom to the cup to the right side of the cup, or depth of the cup.

So, in the case of the GBP/AUD (after posting a rounded bottom last month) here is a chart that will show you a projection of what we could possibly target:

Disclaimer: I am long the GBP/AUD from last week on the breakout

Sunday Weekly EDGE 4/22/2012

This was a fairly slow weekend for exciting news. However, the major news sites are plagued with stories of the Sarkozy/Hollande French elections and possible run-off.

Here is a quick tidbit from Reuters on how SNB Jordan vows to hold the CHF peg.

Of course, unless you missed the IMF’s commitment that was released on Friday, here is the story. However, if you want the always interesting (AEP) spin on things, here it is.

Some of the big names reporting earnings this week are XRX, NFLX, STI and COP on Monday, AMGN, JNPR, BHI and WAT on Tuesday, XLNX, HOG, GD, BA, S and NOC on Wednesday, AMZN, TYC, BMY, XOM and PEP on Thursday, and MRK, PG, IP and F on Friday.

Monday we have Australian CPI, Tuesday Canada has Retail Sales and US New Home Sales and Consumer Confidence, Wednesday is the FOMC meeting with the Chairman giving his press conference, and then that evening is New Zealand’s rate decision as well, Thursday the US has pending home sales and weekly unemployment claims. Also late Thursday night is the BOJ rate decision with everyone looking for the possibility of more JPY weakness. Friday is advance GDP for the US.

Take a look of the AUD/JPY 4 hour which has a quadruple top and is about to break out higher. Keep in mind the AUD/JPY and the SPX have a very strong correlation.

Here is the 4 hour from the e-mini’s (ES_F) that show the same setup, which tells me the AUD/JPY could be the lead in this case this evening.

With HSBC China Manufacturing PMI in a couple hours, that could be catalyst that push the markets higher.

This is a daily chart of AMZN. I love stocks like this that have really been under-performing the market. Should the equity market turn lower in general, this stock should be on everyone’s short list. They report Thursday.

The daily chart of the EUR/USD will be facing all types of resistance from 1.3250-1.3300 this week on the two down sloping trend lines. So be careful getting too bullish prior to the breakout (if we get it).

 

 

Case for a Lower $EURGBP Exchange Rate

Case for a Lower $EURGBP Exchange Rate

For starters, scroll down and look at the chart. Pictures are worth a thousand words. Fundamentally (to keep it very basic) the EUR/GBP could fall further based on two specific reasons:

1.    The Eurozone situation continues to deteriorate further (just keep your eye on European bonds if you are a doubter)
2.    The BOE (Bank of England) may have some hesitation in the near term stimulating their economy due to inflationary pressures.

Technically, the weekly chart of the EUR/GBP is very convincing. And a sustained break below .8170 (and weekly close below) could easily send this pair down to the 61.8 Fibonacci support near .7800.

Disclaimer: I am starting to establish a longer term short near current levels

Sunday Weekly EDGE

Here are a couple of links to some stories that I have read over the weekend.

First one is in Bloomberg, Spanish Minister Rajoy says the ECB should step up and buy more bonds. 

Also in Bloomberg, China is to expand it’s “peg” (or trading band) for the Yuan. I think this is important especially those who trade the JPY, since the CNY has been strengthening, the JPY has also followed in correlation. Many traders are short JPY, and if the CNY continues to push higher against the USD it could give those short JPY some headwinds.

For those of you that think the China GDP numbers were a little scary last week, here is an article from the Telegraph that China could still engineer a “soft landing.”  Also, this analyst thinks that China raising the peg is signalling to the world they are not going to have a hard landing.

Some of the big names reporting earnings this week are C and SCHW on Monday, INTC, KO and USB on Tuesday, QCOM, AXP on Wednesday, BAC, AMD, SNDK, ALTR and EMC on Thursday, and MCD, HON, SLB, GE on Friday.

Monday we have US Retail Sales, Tuesday Eurozone has German ZEW and US building permits and the CAD rate statement, Wednesday are the GBP meeting minutes, and the Bank of Canada has their Monetary Policy Report, Thursday the US has existing home, Philly Fed manufacturing index  and weekly unemployment claims. Friday is German IFO, GBP retail sales and CAD CPI.

This is a 4 hour chart of the e-mini futures. Make sure you read the notes. Double top lower target was achieved from last week.

 

 

Watch the Commodity Currencies

One of the big standouts today for me is the price action of the AUD/USD, NZD/USD and USD/CAD in the last couple of days. With China missing GDP by a large margin (especially from the rumored 9%) the AUD/USD (or the others) has not moved much. Then this morning China cut the RRR for some rural banks (still unconfirmed), tells me credit needs to be loosened in the rural communities, which in turn is telling us that commodities are under pressure from a farming standpoint. Lower consumption, slower global growth, etc.

Commodities like copper have been cluing us in recently (over the last several weeks) that this trend is taking hold, but the way the AUD, NZD and CAD have acted the last 24-48 hours is telling us that maybe the market was getting a little too aggressive to the short side of these currencies.

Until some of these positions square up, I would think that we are in for a patch of working off oversold positions off and moving sideways in a choppy (and frustrating) range for a while.

Respect the price action.

Disclaimer: I have no open positions in any of the above currencies as of 15 minutes ago :^)

Sunday Weekly “EDGE”

I hope you and your family are enjoying a great holiday weekend.

I wanted to share some news that I have read over the weekend and share some charts and upcoming events with you for the next trading week.

First, is an opinion piece from Charles Dumas about the EUR and how it was “flawed from the start.” Charles Dumas is chairman of Lombard Street Research, a London-based independent consulting firm committed to monetarist economics.

From the Guardian, the US “Hall of Mirrors” economy.

There are a couple China Stories that are a bit gloomy. First from Time Business and the other from MarketWatch. If you are a China bear, you may want to give those a read.

In the UK, some of the largest companies are boosting dividends from the FT.

Don’t forget earnings season kicks off with Alcoa on Tuesday, Google on Thursday and Wells Fargo and JPM on Friday. And a lot of traders I am watching are looking for a “turnaround Tuesday” this week. However, the chart my normal “Daily EDGE Webinar” listeners have been eying since Wednesday is the double top in the e-mini futures at 1417 that points to 1353-58 which I think needs to be hit before we can see a turnaround.

Additionally, watch copper this week as we are threatening a breakdown in the event the 3.75 level gives way. I am assuming this evening we will be probing those areas.

On the economic calendar, we have a lot of inflation data (towards the end of the week) in the US, some Fed speak and employment data down under in Australia.

Enjoy the rest of Easter (for those of you celebrating today) and I will be around this evening via @pipczar taking a look at the markets.

History of the EDGE: The “EDGE” term for the Wizetrade group originated with our China business partners back in 2004. At that time, our Hong Kong based analyst suggested that we used the term “EDGE” to give an “every day a good example” chart. Since then, we have used the EDGE as a name for our daily shows, webinars, blogs, etc.