Sunday Weekly EDGE Blog 5-27-12

This weekend it has been tough sledding thus far looking for good news on the economy home front. I was even spending some time looking for some “god news” from China with an RRR cut or a glimmer of hope. Unfortunately this weekend the news is all about the Euro zone and at this point I am not sure if it going to subside before the Greek elections. A good news article may be about the “pro bailout” party in Greece is leading in the poles.

Also, this week we do have the monthly Non Farm Payrolls which is always the marquee event for traders, but even the jobs news maybe overshadowed by the news surrounding Europe. One of the problems for analysts and economists this week is that both of the ISM numbers come out after the NFP, which in turn makes it a little more difficult for economists to predict the number for Friday without the guidance (in particular the jobs component) of the ISM.

Here is an article in the Guardian about how Germany would fare without Greece in the Euro zone. I have speculated (in simpler terms) on thefxcafe.com about this subject just a couple weeks back.

In Europe there are plans being drawn up for a Greek exit. Here is one in the Telegraph with German plans, and here is one in Reuters about the Swiss emergency Euro plan. The silver lining here is that contingency plans are being made. My opinion….traders and the market hate uncertainty, and until some final decision is made on Greece and the rest of the Euro zone periphery, the downside pressure will persist in the markets.

Here are some very “harsh words” to Greece from IMF’s chief, Christine Lagarde.

This week in the U.S. we are observing the Memorial Day holiday Monday, and around the globe there is no major news happening all day. The economic data kicks off on Tuesday with CB Consumer Confidence in the US, and later that evening in AUD is Retail Sales. Wednesday we have Pending Home Sales in the US, and in NZD we have Business Confidence, and AUD Building Approvals and Cap Ex (Private Capital Expenditures). Thursday things pick up with US ADP Non-Farm, US Preliminary GDP and Unemployment Claims. Later that evening in China is Manufacturing PMI. Friday early we have CHF Retails Sales, GBP Manufacturing PMI, CAD GDP and then the monthly US NFP followed by Manufacturing ISM.

There are a couple companies posting earnings this week. Wednesday is LGF and Thursday CIEN, SAI and JOY.

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. Our Wizetrade team will not be broadcasting over Memorial Day, so make sure you follow me on Twitter or Stocktwits @pipczar for my thoughts as the FX market opens this evening and tomorrow.

Here are some charts which I think will matter for the markets this week:

Weekly “Cup and Handle” formation suggests 90.00 in the coming months

EUR/USD weekly sitting on some major support

USD/JPY requires a daily close above 80.00 to turn bullish

Gold holding the 1525 level very well, but sitting below major multi year trend line

Disclaimer: I am long the USD against a basket of currencies

$EURAUD Could Take Shorts to the Cleaners

I have been stalking this pair for months, and have been trading the long side of this pair (successfully, I may add) also from the low 1.20’s. However, the recent breakout on the daily triangle and recent move above the 200 day EMA (seen below) is showing that this pair may be able to make another run higher.

Obviously, from a technical perspective you have to also consider the 200 day SMA (also seen below) that also needs to be taken out with a solid daily close above in order for the rally to continue.

If you are unfamiliar with the extremely strong inverted correlation to the equity markets, you can also view that chart below which would possibly illustrate the bearish implications if could have on equities on a substantial move higher in the EUR/AUD pair.

Lastly…if you have been following the latest CFTC data, EUR shorts are at record levels, which leaves the EUR susceptible to a squeeze at any time. And with most traders accustomed to buying the AUD on dips, I suspect that the EUR/AUD is also susceptible to a squeeze higher which could really upset the Intermarket market correlations.

EUR/AUD daily and you can see the 200 “EMA” being breached, and daily bullish wedge pattern

You can see the troubles with the 200 “SMA”

Weekly chart of EUR/AUD and SPX. This is a “MUST NOT IGNORE” chart

Disclaimer: I am long the EUR/AUD as of today, and establishing a longer term (maybe a few weeks) position

Sunday EDGE Blog 5-20-12

Aside from the G8 meetings (that sound like a repeat of most) and the marriage of Mark Zuckerberg (and this is such pertinent financial market news) there was not a lot to report this weekend. I found a few pieces of interesting news, and here they are:

On CNBC’s site, they ask if Greece would be able to print the Drachma in a rush. Speaking of Greece, here is an opinion piece in Bloomberg for your reading pleasure.

In the NYT, Paul Krugman looks at the parallels of current state and post WW1 Germany, US and Eurozone periphery.

The FT has an article on the resource stocks and remind us that $FB was a nice distraction, but let’s focus on what is really important.

Pragmatic Capitalism has an article about Japan’s deleveraging cycle via Credit Suisse.

This week for economic data is fairly light, starting off with Monday eve from NZD inflation expectations, Tuesday UK CPI and Inflation Letter, Existing home sales in the US, and Japan will have its Monetary Policy Statement later that evening. Wednesday early morning the UK will have retail sales and MPC meeting minutes, CAD will have retail sales, and we will have new home sales in the US. Later that night will be China’s flash manufacturing PMI. Thursday EUR will have German IFO, UK will have revised GDP and then US will have durable goods and weekly unemployment claims. No major economic data on Friday.

There are some companies posting earnings this week. Monday is URBN and LOW, Tuesday is DELL, MDT, NTAP and BBY. Wednesday we have HPQ, BIG and AEO. Thursday is COST, HNZ and TIF.

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 which I think will matter for the markets this week:

The 3 charts above are the USD index. Obviously the USD is up against some major weekly resistance. More than likely, with the trend line giving way on Friday (4 hour chart) we will need a little pullback before charging the weekly resistance, which on a breakout, could target 90 (not a typo) later this year.

Gold has broken a multi year trend line, but looks to back test it around the 1615 level.

Copper looks very bearish, and also closed on its lows.

Crude looks bearish as well, and as long as we trade sub 92.50, expect downside pressure.

E-mini SPX closing in on its 38.2% daily Fibonacci level, which should provide at least an area to bounce.

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$USDJPY Chart Needs to be Monitored Closely

It’s all about risk aversion/appetite. This chart will influence risk trends with equities and bonds as well (since the USD/JPY is very sensitive to bond yields)

Take a look below, this 4 hour chart shows a possible breakout today, but a failure by end of day will take a toll on risk appetite and bond yields would slump after the powerful run up this morning. Failure to hold above 80.20 would reverse today’s move and show a failed breakout today. We have to close near the 80.60 level by end of the day to keep the bullish momentum in tact.

The standout today when putting the whole (market) puzzle together today is lack of participation in Gold and Copper, which charts look extremely bearish.Although some buying off the lows has come in earlier today in the North American session.

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Disclaimer: I have no positions in the above mentioned securities at writing (but could change at any moment)

 

Who Gets the Last Laugh? My Money is on Greece.

I was just reading this article in the WSJ online today and it prompted this blog for me.

Daily, on the Wizetrade webinars, I talk extensively about the repercussions on the “what if” Greece leaves the Eurozone. Of course (as many of my normal listeners know) I married an American/Greek woman, in Greece on the island of Milos (at this church) in September of 2003. So, I am a little sensitive to the current issues and obviously talk to a lot of folks in Athens who are my “boots on the ground” eyes and ears.

Anyway, I enjoy making things as simple to understand as possible when I explain them, since obviously I am just a trader and I am in no way, shape or form a rocket scientist, brain surgeon, MIT graduate or even an economist. So, here it goes:

Why has Germany fought so hard to keep Greece in the Eurozone? Well, easy…you take out the weakest link (in this case Greece), the EUR moves higher and your export engine (#2 in the world, right?) economy goes south with a stronger EUR. Flip side, they can’t leave either (think EUR with Greece and NO GERMANY, and Germany back to the Deutschmark. Can you imagine how strong the single currency would be?).

So…who hold all the cards? I say Greece.They can (and more than likely at some point in the future, imo) will somehow bow out of the EZ at some point. Social unrest and political backlash will probably be the catalyst. And what the WSJ maps out in the article is exactly the way I explain it on my daily webinars and what could possibly happen. I just never used the example of Iceland.

Obviously, there is so much more to this situation, and the stakes are a mile high. I am  attempting to explain in layman’s terms and thinking about the broader brush stroke consequences here.

So…what happens to the EUR? Well, unfortunately that is anyone’s guess. I was on the phone last night talking with a fellow trader friend of mine of 15 years, and since he is not FX centric, he asked me the same question. My response was “I don’t know, but vols are getting really tight in the FX market. A breakout is looming and should news like that hit the wire, I would assume, the initial move would be lower in the EUR (from lack of confidence in the EZ project initially), but quickly rebound aggressively (on what I said above). So, how does Germany and France (oh…throw Spain into the mix too) respond to an aggressively higher EUR exchange rate in a short period of time? Not sure I really want to find out. But then again…we will be in uncharted territory.”

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Disclaimer: I have been short the $EURUSD most of this week, and plan on staying for awhile.

You “Know” They Are Trying to Pick the Bottom in $USDJPY

And for that reason I am focused on the key support at 79.70. A bearish wedge in the making, and a break below targets 79.00 which is the 61.8% Fibonacci retracement on the daily chart.

A break lower may create massive risk aversion and selling in pairs like the AUD/JPY, NZD/JPY, CAD/JPY, etc.

We have to rally above 80.10 to take off the downside pressure and then key resistance is the down sloping trend line at 80.70.

Disclaimer: I have no positions in the JPY pairs…yet (keyword)

 

Sunday Weekly EDGE 5-6-12

As anticipated on Friday (daily webinars), Greek and French elections are driving the opening gaps in the FX and Futures markets. Currently, DOW futures are down over 120 points, SPX down 14, and the EUR/USD is down over 100 pips.

There is a lot of news to get caught up on, but before I do let’s just make sure you all understand that when the market “gaps” like this, it is very poor trading habit to chase the market when you do not come in long or short already in a position. Obviously, if you are sitting severely upside down in some positions, you will have to monitor very carefully because there is no guarantee the market will try to fill these gaps (especially with the macro events driving the market tonight).

First and foremost, here is a great link in the WSJ.com that has up to date information about the elections in Greece and France.

Francios Hollande is the 1st socialist in power in France in 17 years. And here is Germany’s perspective

Obviously “Athens is burning,” and finally traders/investors are taking notice.

In other news, although unlikely to change anything from a market standpoint, Putin will be sworn in on Monday.

Since Facebook will more than likely steal the spotlight in the coming months, this has always (and will continue to be) the biggest worry for me as a potential investor.

There are still companies reporting this week (I know it seems that the world news may dominate the markets in general) and here are some on them: on Monday is WYNN, EA, TSN and SYY. Tuesday is DIS and TAP. Wednesday we have CSCO, M, PCLN and BMC. Thursday is ESRX, KSS and JWN. Friday finished up the week with NVDA.

Economic data this week will have a lot of inflation data around the globe, with obviously a lot of other data sprinkled in. Monday is CPI in CHF. Also CAD building permits and AUD trade balance. Tuesday AUD will release the Annual Budget, and NZD will release the Financial Stability Report. Wednesday we have employment data from AUD. Thursday is busy with GBP rate decision, USD and CAD trade balance, weekly unemployment claims, Fed Chairman speaks in Chicago, and later that night is China CPI. Friday we have PPI in GBP, employment data in CAD and PPI in the USD after that.

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.

I have so many charts I want to show you (so I will reserve that for tomorrow morning’s “Morning EDGE” webinar at 7AM ET) but I will limit to those I think matter the most:

Here is a “daily” USD index. This is a big trend line we are taking out. Also, if you turn the chart upside down you may get a different perspective (inside sarcastic joke)

EUR/USD daily chart which by the time I wake up (in European trade), key will be above/below 1.2970 major support.

Not a lot will rally Gold these days, which puts this weekly trend line to the test. We will know if the USD breakout is real if gold takes out 1600.

Copper chart from last week spells trouble for bulls

This “pullback” has been shallow thus far, so a 38.2 or 50% retracement is not out of the question

CSCO reports later this week. Chart looks fairly obvious to me. You know, there is a children’s song that goes to this chart.

 

Don’t Ignore This Correlation

As you know, the AUD and SPX have a (typically) very tight correlation. Over the last several sessions (in part to the Reserve Bank of Australia) the AUD/USD has diverged away from equities.

So, this is how I read it: How many traders are just “getting long” the AUD since stocks have held up well? I am guessing…a lot. In the event the E-Mini’s start breaking down (black line chart below) the traders getting long the AUD are going to be in a world of hurt.

This is why 1390 has been the level my traders and I have been watching all morning long.

4HR AUD/USD – ES_F

$ES_F “Black Line”

$AUSDUSD “Green/Red candle”

Disclaimer: I am short the AUD via short AUDUSD and long GBPAUD for last couple days