Unless we see a remarkable turnaround this week then we are likely to see the first negative month for European equities this year, as well as the biggest monthly decline in stocks since May 2012. The sharp reaction from financial markets to even the suggestion that the current Fed stimulus program may be coming to the end of its road has prompted a sharp sell-off in not only stock markets globally, but bonds and commodity prices. This mere suggestion of stimulus withdrawal has shown how fragile the current stock market rally has been and it could be some time before markets settle down to where they should be as investors become more discerning about company fundamentals.
Looking at the Currency Market, The USD Index bounced from oversold levels near 80 on Wednesday when Bernanke delivered his Hawkish comments. The Index now trades near the 82 handle and this has seen Bearish developments for EURUSD pair and the GBPUSD pairs, Both down over 300 pips for the past 3 trading sessions. Looking at the EURUSD pair we have a cluster of daily moving averages close to the current price action and these will likely be retested soon. The 200 Day Moving Average is at 1.3065 and a break below this may point for additional losses as the fundamentals support a weaker Euro with another rate cut or more easing expected before the year end and the other issue in this pair is the likelihood of Dollar strength for the rest of the year with Quantitative easing purchases being tapered and the Dollar gaining from this development. Just as I have been typing a major U.S. Bank has issued a sell recommendation in EURUSD at an entry point of 1.3180, a stop at 1.3280 and a target of 1.28.
This has a nice risk-reward set up and looks a very solid trade.
Looking at Cable, over the past few weeks it worked similarly to the EURUSD as the USD long positions were wound down and the pair made rapid gains on the back of this. Along with this a lot of the U.K. Data has been positive of late and has supported Sterling pairs. The pair even managed to reach its 200 Day Moving Average at 1.5710 last week but could not close above it and now we trade at 1.5351. If the new governor of the Bank of England Mark Carney adopts a dovish policy which he is expected to do we may see the yearly low of 1.48 tested sometime before the year end.
Good luck in the Markets
Monday, 24 June 2013
Friday, 21 June 2013
TGIF
Thank God It's Friday....The global equity markets will be counting down the minutes to the closing bell in the US this evening after a long hard week of massive declines. The big decision that we had all been waiting for come and scared the markets. The idea that the FED may act on the idea of 'Tapering' the existing level of QE was the catalyst that top callers have been looking for.
We saw the drastic effects on the global markets especially in the US, again highlighting the markets dependence on central bank intervention. It is amazing to see how dependent stocks have become on the FED and in its purest form it is scary. We have seen billions wiped off the global equity market over the idea that the FED may act to reduce its current easing due to the fact that the US economy is showing signs of improvement, one may ask the question, 'If the economy is improving is this not a good thing for stocks?' and although it should be I will list a few reasons why this is not the case;
We saw the drastic effects on the global markets especially in the US, again highlighting the markets dependence on central bank intervention. It is amazing to see how dependent stocks have become on the FED and in its purest form it is scary. We have seen billions wiped off the global equity market over the idea that the FED may act to reduce its current easing due to the fact that the US economy is showing signs of improvement, one may ask the question, 'If the economy is improving is this not a good thing for stocks?' and although it should be I will list a few reasons why this is not the case;
- The recent rally that we have seen from January 2013 has been based on the level of central bank intervention rather than economic fundamentals. This is not only the case in the US, Japan has experienced drastic stock market growth based on the BOJ 75 Trillion monthly injection.
- The economic fundamentals have not shown a correlation to the extreme easing measures in place and I don't think that anything has changed since pre easing measures have been introduced.
- Markets are focused on sentiment, and sometimes irrational and illogical. In an ideal world good news should be good news and bad news should be bad news, however with the level of global bank intervention we have created a world where the opposite is in fact the case.
- It should be a good sign for the US economy that the FED are considering reducing there level of easing to support the economy. From their research they feel that the US economy is moving in a direction that it may be able to stand on its own to feet.
- We need to experience a shift from CB intervention, we need to experience a rotation from intervention to stability a situation where economies and stocks can be judged on their own performance and innovation capabilities rather than how much the FED is willing to print.
We have come a long way in a short period of time and we are beginning to see some money come off the table as institutional investors lock in some profit as they fear what the next few weeks might bring. It is important to note that markets can fall a lot quicker than they can climb. The next dilemma on the table is where to invest your money next? Where is the safe-haven? Usually investors and hedge firms would run to defensive asset classes such and Gold/Silver/Bonds but that play is no longer available.
There exists no safe-haven, we have seen the drastic fall in Gold over the last couple of months and more importantly over the last couple of days with all major technical levels breached. The bond market is in the brink of collapse and neither of these plays will be supported by the FED's plan of tapering QE. The stronger USD will make Gold relatively more expensive to global investors, and there is a solid argument to support the commodity/ emerging economy bull cycle coming to an end.
As a trader/ investor this is a time that you need to sit down and analyse your portfolio. If you have been involved in the recent equity bull cycle over the last 5 months then I do believe it may be a good opportunity to cash in on gains and wait for another buying opportunity. It is my personal belief that equity markets will recover in the short term as investors try and get there head around the fact that 'Tapering' is a positive sign for the US economy in the long run.
Happy Trading
@lowkeycapital
Thursday, 20 June 2013
Taper Thursday
Last Night Ben Bernanke and the FOMC delivered their most Hawkish guidance in a long time hinting that Tapering is coming sooner rather then later and changed the threshold for Tapering of future Asset purchases. The Market expected him to maintain some what of a dovish tone in his remarks but when he talked about changing the threshold of tapering to nearer 7% from 6.5% unemployment the Dollar took off with Bonds, Equities, Metals and Commodities all going south from a stronger Dollar and the prospect of reduced liquidity in the system.
Bernanke gave guidance into reducing purchases but left the caveat that its down to data so the market will continue on in the good news is bad and vice versa approach. All eyes will be back on the Data and the Tapering Trade will be the major fundamental driver over the summer months. We feel that the moves may be overdone considering the Dollar was very oversold and their may have been a lot of short covering on short Dollar positions that traders were exiting quickly once they heard the Uber Dove Bernanke's hawkish rhetoric.
A lot of the Moves from last night are still playing out and in the Metals market and these may indicate that they are lasting and not ones to try and fade like the Currency moves. Gold hit the lowest level since 2010 this morning as the Spot USD contract traded at 1304. Major psychological levels in all base metals are approaching and moves below these could be very bearish. Copper sits at 306 approaching 300, Silver at $20.4 and Gold off the lows at $1314, all very close to breaking long term support levels and all looking very weak fundamentally as physical demand has started to dry up from a Slowing Chinese and Emerging Market growth. Some analysts last week started to call for Gold to go to $1200 per ounce in the coming weeks and they could be spot on considering leveraged funds will start to be Margin called on Long Gold positions once $1300 is broken. Expect heavy stop loss selling if this level goes.
Looking at Currencies, We mentioned last week that the CFTC positioning of EURUSD traders was more neutral then net short a few weeks ago leaving the pair open to faster declines as the currency was overbought and the Dollar oversold, however the move has been drastic from 1.34 to under the 1.32 handle in less then 12 hours. Poor European Manufacturing data has added to the sell off in this pair along with Strong U.K. data.
Yesterday's Daily candle was what we call in Technical Analysis an Outside Day reversal. This is when the High and the Low point of the day's range is greater then that of the previous day and is highly bearish. Combined with a pick up in Volume and a fundamental development it looks like we could have a medium term cap on the EURUSD price action at 1.34. The price action will undoubtedly come back to retest a cluster of Moving averages between the 1.30 and 1.31 handles. Another bearish development is the crossing of the 200 Day Moving Average underneath the 55 Day Moving Average, this generally signals additional downside in a pair and will have a lot of Euro bulls re-thinking their positions for the next few months with more easing potentially on the cards from the ECB in the form of Negative deposit rates or a narrowing of the corridor.
Bernanke gave guidance into reducing purchases but left the caveat that its down to data so the market will continue on in the good news is bad and vice versa approach. All eyes will be back on the Data and the Tapering Trade will be the major fundamental driver over the summer months. We feel that the moves may be overdone considering the Dollar was very oversold and their may have been a lot of short covering on short Dollar positions that traders were exiting quickly once they heard the Uber Dove Bernanke's hawkish rhetoric.
A lot of the Moves from last night are still playing out and in the Metals market and these may indicate that they are lasting and not ones to try and fade like the Currency moves. Gold hit the lowest level since 2010 this morning as the Spot USD contract traded at 1304. Major psychological levels in all base metals are approaching and moves below these could be very bearish. Copper sits at 306 approaching 300, Silver at $20.4 and Gold off the lows at $1314, all very close to breaking long term support levels and all looking very weak fundamentally as physical demand has started to dry up from a Slowing Chinese and Emerging Market growth. Some analysts last week started to call for Gold to go to $1200 per ounce in the coming weeks and they could be spot on considering leveraged funds will start to be Margin called on Long Gold positions once $1300 is broken. Expect heavy stop loss selling if this level goes.
Looking at Currencies, We mentioned last week that the CFTC positioning of EURUSD traders was more neutral then net short a few weeks ago leaving the pair open to faster declines as the currency was overbought and the Dollar oversold, however the move has been drastic from 1.34 to under the 1.32 handle in less then 12 hours. Poor European Manufacturing data has added to the sell off in this pair along with Strong U.K. data.
Yesterday's Daily candle was what we call in Technical Analysis an Outside Day reversal. This is when the High and the Low point of the day's range is greater then that of the previous day and is highly bearish. Combined with a pick up in Volume and a fundamental development it looks like we could have a medium term cap on the EURUSD price action at 1.34. The price action will undoubtedly come back to retest a cluster of Moving averages between the 1.30 and 1.31 handles. Another bearish development is the crossing of the 200 Day Moving Average underneath the 55 Day Moving Average, this generally signals additional downside in a pair and will have a lot of Euro bulls re-thinking their positions for the next few months with more easing potentially on the cards from the ECB in the form of Negative deposit rates or a narrowing of the corridor.
Wednesday, 19 June 2013
Wicked Wednesday
Good Morning Traders
Today could mark the most important day for global equity markets as we wait to see the outcome from the two day FOMC meeting followed by the Bernanke press conference. There has been a lot of speculation over the last couple of weeks that we may see the FED deciding to cut back on its agressive monetary easing programme but lie rest assured the market activity this week alone would suggest otherwise.
Yesterday we had another aggressive move to the upside across global equity markets and it was significant that we did not see any selling pressure into the closing bell. We have all seen the aggressive level of volatility over the last couple of trading sessions with the DOW recording triple digit moves in six of its last seven trading sessions this can be directly linked to the uncertainty of the FED's decision this afternoon.
As a trader we must be aware of the equity market movement in the build up to today's meeting in order to get a good understanding of which direction we might move to. The recent rally in the equity markets highlights the fact that investors are expecting no tapering so if this decision is announced don't expect to see too big of a move as it will have been largely priced in. The danger I see is the press conference that takes place after the announcement, Bernanke will definitely be questioned in a roundabout way as to whether 'Tapering' is likely over the coming months and any commentary to suggest this will inevitably see the market give up some of its gains.
In terms of the FX market we saw the EURUSD pair breach the 1.34 handle for the first time since February and the pair now trades just below the 1.34 handle from its morning high of 1.34100. The USDJPY has lost direction and is well off its highs but is hoovering around the 95 level. As we know the BOJ have tried to weaken the JPY but the screws are beginning to come un-done and it will be interesting to see if they step in again and increase their existing easing policy of 75trillion a month.
In conclusion, we are expecting a quiet morning session, there could be a few small swings prior to the announcement and expect to see severe volatility sometimes irrational during the press conference, but we are expecting to see no change in the QE level and maybe some talk of potential tapering towards the end of this year if economic data reaffirms their decision.
Happy Trading
@lowkeycapital
Today could mark the most important day for global equity markets as we wait to see the outcome from the two day FOMC meeting followed by the Bernanke press conference. There has been a lot of speculation over the last couple of weeks that we may see the FED deciding to cut back on its agressive monetary easing programme but lie rest assured the market activity this week alone would suggest otherwise.
Yesterday we had another aggressive move to the upside across global equity markets and it was significant that we did not see any selling pressure into the closing bell. We have all seen the aggressive level of volatility over the last couple of trading sessions with the DOW recording triple digit moves in six of its last seven trading sessions this can be directly linked to the uncertainty of the FED's decision this afternoon.
As a trader we must be aware of the equity market movement in the build up to today's meeting in order to get a good understanding of which direction we might move to. The recent rally in the equity markets highlights the fact that investors are expecting no tapering so if this decision is announced don't expect to see too big of a move as it will have been largely priced in. The danger I see is the press conference that takes place after the announcement, Bernanke will definitely be questioned in a roundabout way as to whether 'Tapering' is likely over the coming months and any commentary to suggest this will inevitably see the market give up some of its gains.
In terms of the FX market we saw the EURUSD pair breach the 1.34 handle for the first time since February and the pair now trades just below the 1.34 handle from its morning high of 1.34100. The USDJPY has lost direction and is well off its highs but is hoovering around the 95 level. As we know the BOJ have tried to weaken the JPY but the screws are beginning to come un-done and it will be interesting to see if they step in again and increase their existing easing policy of 75trillion a month.
In conclusion, we are expecting a quiet morning session, there could be a few small swings prior to the announcement and expect to see severe volatility sometimes irrational during the press conference, but we are expecting to see no change in the QE level and maybe some talk of potential tapering towards the end of this year if economic data reaffirms their decision.
Happy Trading
@lowkeycapital
Tuesday, 18 June 2013
Tuesday Morning Update
Good Morning,
Market nervousness about Fed tapering was perfectly illustrated late last night after a late article entitles "Fed likely to signal tapering move is close" from an FT Journalist and Fed watcher, sent US Markets into a sharp tailspin just before the close and Put some immediate strength into the USD. Once Markets had determined it was simply an opinion piece and there was nothing new in it they managed to recover enough to still close higher, but the entire sorry episode signifies how reliant on central bank stimulus markets have become. We hear an awful lot about how stocks are so cheap yet the mere prospect of slowing down the stimulus measures is enough to send markets into a tailspin. They can't be that cheap then, that investors are able to feel comfortable buying them, unless there is a Fed comfort blanket backstopping them?
With the Dry up in Volume in the Financial Markets in the past couple of trading weeks we have seen a break down in the Trend that we had observed all year and a break down in the correlation between different instruments. This could be for a number of reasons but the most likely is that the Market is at a turning point and the fundamental driver is the "Tapering talk" from the Federal Reserve. We personally do not buy into this. There is two things you can rely on in this world and that is night to turn to day and for Bernanke to be dovish. So the strategy for trading the FOMC minutes tomorrow has to be to buy Gold and sell the Dollar against a foreign currency.
We believe that the Dollar has reached an oversold level and it is setting up a number of attractive trades such as a short EURUSD position and a short Cable position. However with the Dollar likely to fall again tomorrow it is best not to enter this these positions until later in the week. EURO CFTC positions last week showed that the market is not as short as it was 3 weeks ago and this more balanced positioning will allow the Euro decline quicker on any Euro negative news or Dollar positive news. All the shorts have nearly been squeezed out as we approach 1.34 in this pair and with Analysts at Soc Gen and Bank of America calling for a decline to 1.20 before year end it could be time to adopt another speculative short position. Remember Soc Gen called a Euro short at the End of February before we saw it drop from 1.37 to 1.27 and they could be on the money again here.
Good luck in the Markets
Market nervousness about Fed tapering was perfectly illustrated late last night after a late article entitles "Fed likely to signal tapering move is close" from an FT Journalist and Fed watcher, sent US Markets into a sharp tailspin just before the close and Put some immediate strength into the USD. Once Markets had determined it was simply an opinion piece and there was nothing new in it they managed to recover enough to still close higher, but the entire sorry episode signifies how reliant on central bank stimulus markets have become. We hear an awful lot about how stocks are so cheap yet the mere prospect of slowing down the stimulus measures is enough to send markets into a tailspin. They can't be that cheap then, that investors are able to feel comfortable buying them, unless there is a Fed comfort blanket backstopping them?
With the Dry up in Volume in the Financial Markets in the past couple of trading weeks we have seen a break down in the Trend that we had observed all year and a break down in the correlation between different instruments. This could be for a number of reasons but the most likely is that the Market is at a turning point and the fundamental driver is the "Tapering talk" from the Federal Reserve. We personally do not buy into this. There is two things you can rely on in this world and that is night to turn to day and for Bernanke to be dovish. So the strategy for trading the FOMC minutes tomorrow has to be to buy Gold and sell the Dollar against a foreign currency.
We believe that the Dollar has reached an oversold level and it is setting up a number of attractive trades such as a short EURUSD position and a short Cable position. However with the Dollar likely to fall again tomorrow it is best not to enter this these positions until later in the week. EURO CFTC positions last week showed that the market is not as short as it was 3 weeks ago and this more balanced positioning will allow the Euro decline quicker on any Euro negative news or Dollar positive news. All the shorts have nearly been squeezed out as we approach 1.34 in this pair and with Analysts at Soc Gen and Bank of America calling for a decline to 1.20 before year end it could be time to adopt another speculative short position. Remember Soc Gen called a Euro short at the End of February before we saw it drop from 1.37 to 1.27 and they could be on the money again here.
Good luck in the Markets
Friday, 14 June 2013
Friday Feeling
Good Morning Traders
Well we find ourselves at the end of another crazy week highlighted by extreme volatility and a lack of direction. Yesterday we saw a nice bounce from the lows and the US markets looked like they did in the opening months of the year as they moved in one way. The move yesterday was significantly important as we saw the initial loss of the 1600 level on the S&P500 and we briefly traded below 14900 on the Dow. The market changed from Risk Off to Risk On in a matter of minutes and there was no fundamental logic behind this aggressive buying.
It will be important to see how we wrap off the week, another day in the green might bring some optimism into the market and encourage a few retail investors back into the equity markets. Another significant thing that we will be keeping our eye on its $AAPL due to its significant influence on the S&P500, the stock traded briefly below the $430 level and a close below this could have caused a drag on the US equity markets. However we have noticed an inverse correlation between the pair which is unusual as a trader you would imagine that if the S&P500 was moving higher so to would $AAPL but it is not the case, they move in opposite directions. We put this down to the fact that money was in in $AAPL when the S&P500 was declining and investors, when $AAPL hit the $700 level things turned around an the $AAPL stock began to decline and the US Equity market began to rally and we saw money come out of $AAPL and move into the US equity markets. However I believe that this relationship will persist, if we do see a significant market correction we could see money move back into $AAPL.
And finally we do not expect to much volatility today the news flow is light and volume has been relatively low in the morning session so we will find our levels and wait for the setup's before entering the market.
Happy Trading
@lowkeycapital
Well we find ourselves at the end of another crazy week highlighted by extreme volatility and a lack of direction. Yesterday we saw a nice bounce from the lows and the US markets looked like they did in the opening months of the year as they moved in one way. The move yesterday was significantly important as we saw the initial loss of the 1600 level on the S&P500 and we briefly traded below 14900 on the Dow. The market changed from Risk Off to Risk On in a matter of minutes and there was no fundamental logic behind this aggressive buying.
It will be important to see how we wrap off the week, another day in the green might bring some optimism into the market and encourage a few retail investors back into the equity markets. Another significant thing that we will be keeping our eye on its $AAPL due to its significant influence on the S&P500, the stock traded briefly below the $430 level and a close below this could have caused a drag on the US equity markets. However we have noticed an inverse correlation between the pair which is unusual as a trader you would imagine that if the S&P500 was moving higher so to would $AAPL but it is not the case, they move in opposite directions. We put this down to the fact that money was in in $AAPL when the S&P500 was declining and investors, when $AAPL hit the $700 level things turned around an the $AAPL stock began to decline and the US Equity market began to rally and we saw money come out of $AAPL and move into the US equity markets. However I believe that this relationship will persist, if we do see a significant market correction we could see money move back into $AAPL.
And finally we do not expect to much volatility today the news flow is light and volume has been relatively low in the morning session so we will find our levels and wait for the setup's before entering the market.
Happy Trading
@lowkeycapital
Thursday, 13 June 2013
Thursday Morning Update
The Nikkei 225 had another rough night of trade as the main Japanese index went over by 6% as Investors and traders alike lose faith in the great experiment going on in Japan. The Yen has been strengthening for the past couple of weeks and could strengthen more as it has technically broken through a lot of strong support levels and trendlines that have provided a base for its weakening throughout 2013.
The Breach of 95 in USDJPY major leaves a test of 90 very likely as the Market has stopped believing in the Japanese bet to beat deflation and to stimulate economic growth. The "Long Japan" trade (Long Nikkei, Short Yen) is being unwound quickly by Hedgefunds and this has put Global Equity and Bond Markets into Turmoil as market participants have started to questioning the effectiveness of Quantitative Easing programs around the Globe. This is a serious Red Flag warning as is the Break Down in the American Dollar, which normally gains during times of Risk off and Uncertainty in the Financial Markets. The Dollar has been breaking down heavy in the Past 2 weeks as talk of Tapering echoes around the Markets on a daily basis. Stock Market correlations have broken down as the Bond Market and the Equity markets sell off together which is a very worrying sight. Bond Yields in the States have risen to 2.25% on the 10 Year. The end of the QE program in the states should effectively strengthen the Dollar as it is reducing The Federal Reserves Balance sheet as there is less Dollars being printed and pumped into the Economy. The reason why the Dollar is in fact weakening is because the Fed is supporting the Bond Yields by buying so many each month and with the inevitable tapering of Bond purchases on the Horizon traders are positioning themselves for bond yields to increase dramatically as the Fed takes off its Economic Stabilizers.
Looking at the Euro currency, 2 weeks ago we talked about the EURUSD technically and how the Market was net short but not going down and with the lack of bad news coming out of the Eurozone and Draghi's more hawkish tone at the last ECB press conference it has caused an epic short squeeze in the pair and could see some further upside to 1.35 near term as there is still shorts to be squeezed out. Saying this however, We still believe there is a lot of Political and Economic uncertainty in the single currency and with the Dollar approaching key support at an oversold level it may not be long before we start heading south again in the pair. If this is just a Dollar correction it has set up a lot of great levels for traders to enter positions at. A short of the EURUSD pair at 1.35 with a stop loss at 1.3750 could be a very attractive swing trade with a target of 1.25 or below, as would a short of Cable at 1.57 as it approaches its 200 Day MA at 1.5710. We also believe that the Japanese Government may come out all guns blazing at their next meeting and adopt an even more aggressive easing program. With the USDJPY pair sitting at the 94 handle as I type it could set up a huge trade with Analysts still calling for 110 to 120 by Year end. These are certainly some very interesting swing trades that are starting to set up nicely but it is not time to fade the moves quite yet. The Volatility in the Nikkei and the JGB market must ease before entering a position as the Liquidity in the Market has dried up in the last few weeks and the Moves are overdone and your position could be stopped out very quickly.
Good Luck in the Markets
The Breach of 95 in USDJPY major leaves a test of 90 very likely as the Market has stopped believing in the Japanese bet to beat deflation and to stimulate economic growth. The "Long Japan" trade (Long Nikkei, Short Yen) is being unwound quickly by Hedgefunds and this has put Global Equity and Bond Markets into Turmoil as market participants have started to questioning the effectiveness of Quantitative Easing programs around the Globe. This is a serious Red Flag warning as is the Break Down in the American Dollar, which normally gains during times of Risk off and Uncertainty in the Financial Markets. The Dollar has been breaking down heavy in the Past 2 weeks as talk of Tapering echoes around the Markets on a daily basis. Stock Market correlations have broken down as the Bond Market and the Equity markets sell off together which is a very worrying sight. Bond Yields in the States have risen to 2.25% on the 10 Year. The end of the QE program in the states should effectively strengthen the Dollar as it is reducing The Federal Reserves Balance sheet as there is less Dollars being printed and pumped into the Economy. The reason why the Dollar is in fact weakening is because the Fed is supporting the Bond Yields by buying so many each month and with the inevitable tapering of Bond purchases on the Horizon traders are positioning themselves for bond yields to increase dramatically as the Fed takes off its Economic Stabilizers.
Looking at the Euro currency, 2 weeks ago we talked about the EURUSD technically and how the Market was net short but not going down and with the lack of bad news coming out of the Eurozone and Draghi's more hawkish tone at the last ECB press conference it has caused an epic short squeeze in the pair and could see some further upside to 1.35 near term as there is still shorts to be squeezed out. Saying this however, We still believe there is a lot of Political and Economic uncertainty in the single currency and with the Dollar approaching key support at an oversold level it may not be long before we start heading south again in the pair. If this is just a Dollar correction it has set up a lot of great levels for traders to enter positions at. A short of the EURUSD pair at 1.35 with a stop loss at 1.3750 could be a very attractive swing trade with a target of 1.25 or below, as would a short of Cable at 1.57 as it approaches its 200 Day MA at 1.5710. We also believe that the Japanese Government may come out all guns blazing at their next meeting and adopt an even more aggressive easing program. With the USDJPY pair sitting at the 94 handle as I type it could set up a huge trade with Analysts still calling for 110 to 120 by Year end. These are certainly some very interesting swing trades that are starting to set up nicely but it is not time to fade the moves quite yet. The Volatility in the Nikkei and the JGB market must ease before entering a position as the Liquidity in the Market has dried up in the last few weeks and the Moves are overdone and your position could be stopped out very quickly.
Good Luck in the Markets
Wednesday, 12 June 2013
Dangerous Trading Conditions
Good Morning Traders
Volatility coupled with uncertainty has the markets direction less and dangerous. There are a few catalysts that have appeared over the last couple of days that has resulted in the violent swings we have seen;
Volatility coupled with uncertainty has the markets direction less and dangerous. There are a few catalysts that have appeared over the last couple of days that has resulted in the violent swings we have seen;
- The global bond yields have started to move in a more aggressive fashion to the upside. The level of easing from all of the major central banks have helped to maintain yields at historic low levels, but with tapering being mentioned volatility is back.
- There has been increased speculation that the FED will reduce the existing level of QE ($85bn) over the coming months, and there was market talk that initial tapering could range from between $5-10bn. Although this should be seen as a good sign that the economic conditions are improving the markets will more than likely run scared.
- The situation in Japan has changed dramatically, and no investors and traders a like are beginning to question the success of their aggressive easing policy. Their effort to devalue the JPY to stimulate domestic growth has taken a turn for the worst as we have witnessed exterminate JPY strength with the recent moves from; (USDJPY 103 - USDJPY 96.7). The BOJ left the level of easing on hold yesterday, and the market used this as a sell signal.
It will be interesting to see the next move and I feel that all the pressure on this market is to the downside. As noted in earlier blogs the market has come a long way in a relatively short period of time and the longer it stays at these levels without making higher highs I get worried.
We have seen a relatively positive open across the equity markets this morning and it will be interesting to see if we can stay in the green up until the opening bell in the US. However in such a volatile market it is important to keep stops tight and cash in on big moves when they happen. The global economies have become dependant of external stimulus and that is why we are at the levels we are today, its looks as though policy makers may be contemplating taking the foot off the gas and seeing if this market can hold itself on its own too feet.
Just one other point to note from yesterdays trading session and it is more related to Irish traders and Investors and one of our national banks BOI who suffered a massive 7% decline in the share price yesterday, after a report published that the banks are still under a significant amount of pressure and profitability is still a long way down the road. As I've mentioned previously I do believe BOI to be a buy around the €0.15-0.12 level and I would see this pull-back as a buying opportunity for long term investors.
Happy Trading
@lowkeycapital
Tuesday, 11 June 2013
Tuesday Morning Update
Yesterday was a dismissal day for Volume and volatility as the Market took a day off in wake of the carnage observed last week. With no tier 1 Data seen until later in the week we may see a few days of range trading until we get some additional news to give the Market some direction. S&P changed its outlook on the U.S. Government to Stable from Negative Yesterday which gave the greenback some initial strength before pairing these gains as the Dollar Index dropped lower later in the session. EURUSD hit session highs at 1.3258 from being as low at 1.3180 in early NY trading. USD/JPY was bid early and touched 99.20 before drifting lower to 98.70 as the Greenback slumped. Just as I type we have broken the 98 Handle to the downside in wake of some comments from BOJ Governor Kuroda. The volatility in the Nikkei 225 and the Yen currency looks set to continue as Investors and Market participants are mixed in their opinions on the experiment going on in Japan and if it will prove to be effective or potentially one of this biggest financial disasters of all time.
During today's Asian session we saw the BOJ keep monetary policy unchanged and retained the plan of 60-70trl annual rise in Monetary Base. The BOJ left funding terms unchanged after JGB yield volatility and refrained from extending the duration of fixed rate-supplying operation. It kept up its promise to continue easing until its 2% inflation target is reached and will make policy adjustments as needed. The Nikkei 225 Future did not take to these assessments well and the Yen currency strengthened on the back of this move.
These assessments seemed re-assuring to the market but it did not react as expected and this could lead to further downside in the Japanese stock market as investors and traders obviously wanted to hear of a more aggressive easing plan or evidence that the easing program was having some positive effects on the Japanese Economy.
Good Luck in the Markets
During today's Asian session we saw the BOJ keep monetary policy unchanged and retained the plan of 60-70trl annual rise in Monetary Base. The BOJ left funding terms unchanged after JGB yield volatility and refrained from extending the duration of fixed rate-supplying operation. It kept up its promise to continue easing until its 2% inflation target is reached and will make policy adjustments as needed. The Nikkei 225 Future did not take to these assessments well and the Yen currency strengthened on the back of this move.
These assessments seemed re-assuring to the market but it did not react as expected and this could lead to further downside in the Japanese stock market as investors and traders obviously wanted to hear of a more aggressive easing plan or evidence that the easing program was having some positive effects on the Japanese Economy.
Good Luck in the Markets
Thursday, 6 June 2013
Correct me if I'm wrong.......
It looks like the market is in correction mode and the market sentiment has changed dramatically over the course of the last couple of weeks, and we are heading lower. The recent sell off has not experienced any significant level of buying and traders look to be taking money off the table as we move lower. It is important to note that we came a long way during the first 5 months of this year, and the longer the market the continues to move lower the more money we will expect to see been taken out of the equity market.
The market seems to be following on from what happens overnight in Asia/Japan, and this follow through is beginning to hurt both the US and European equity markets. There are a combination of factors that have triggered this recent move to the down side;
The market seems to be following on from what happens overnight in Asia/Japan, and this follow through is beginning to hurt both the US and European equity markets. There are a combination of factors that have triggered this recent move to the down side;
- The economic climate in Japan has changed, and with the significant swings experienced in the Nikkei over the last couple of weeks there seems to be a consensus that the monetary easing policy adopted by the BOJ may be showing signs of failure.
- There has been recent remarks from the FED that we could see their level of QE reducing coming into the Q3/Q4 of this year. The market has been living off this aggressive policy and investors fear that the market will not be able to cope without this assistance.
- As mentioned previously the market has come a long way in a relatively short period of time and it looks as though the 'Bears' and beginning to enter the market and the 'Bulls' are not supporting this move any longer.
- The market dynamic has changed and traders/ investors need to be able to adapt to this change and alter trading strategies accordingly. The 'Buy the dips' mentality no longer exists and we have seen no support in recent weeks to the move lower, which we have experienced over the last months.
- We have again been shown that the market is too highly dependent on monetary easing and government support. We have been noting the correlation between stock market prices and QE over the last few months, and it looks like we have been spot on. The levels of QE have driven the market higher but the underlying fundamentals remain weak. We now have a global economy with more liquidity and higher stock prices but economic data continues to show weakness.
We expect to see this move continue over the coming weeks and we will wait to see if the equity markets can find some support. We are looking at specific levels (SPX 1500, DOW 14500). Just to note that if we seen this correction continue we could see a significant move into the defensive asset classes such as Gold, Silver, and Bonds.
Happy Trading
@lowkeycapital
Wednesday, 5 June 2013
Trend End?
The first 5 months of 2013 has seen a strong trend in the American Equity Markets that has correlated with the weakening Yen. Uncertainty In Japan about the "all in" gamble on the QE program and talk of Tapering of Asset Purchases in the States has left investors uncertain and quick to take profits on a very good run year to date. Technically we have a solid topping pattern on the S&P 500 and the Down Jones 30, with a high at 1687 on the S&P and 2 shoulders at the 1660 level. We trade at 1630 on the cash as I type and some more weak American data would undoubtedly lead to a test on the 1600 level to the downside.
We have a major Risk event on Friday in the Form of the Non-Farm Payrolls release. Last month saw a huge rally on high volume when they beat Estimates at 165,000. A consensus figure of 170,000 is expected on Friday with an unemployment rate of 7.5%. It is very unclear how the Market may react to a better or worse figure as a strong reading with a reduction in the Unemployment rate may be seen as a negative in terms of future Asset Purchases by the Fed. A worse reading may show that the QE program is diminishing in effectiveness and this may cause a sell off aswell. The best play is to wait for the initial reaction before trading this release or to trade Gold or the Dollar against a foreign currency. The Dollar index will immediately price in the chances of The tapering of Asset Purchases and sometimes the Equity markets take slightly longer to react then the Dollar as the initial knee jerk reaction of Algo's buying or selling of Equities can reverse quickly and the first move may not be the right one.
Looking at the Euro currency, We saw a short squeeze higher in the Major Pair last week with some month end Dollar sales which has popped the Single currency to 1.31 against the greenback over the last few trading sessions. Tomorrow we see the ECB's rate decision and press conference and we await Mario Draghi's speech to see what clues about future policy he gives. Another rate cut is not expected at this meeting but talk of narrowing the Corridor which is the Lending spread minus the Deposit spread seems to be a better overall option as negative rates seem a no go now.
Expect a quiet session today with lower volume as traders square positions ahead of the 2 Big risk events of the month Tomorrow and Friday.
Good luck in the Markets. Lowkey
We have a major Risk event on Friday in the Form of the Non-Farm Payrolls release. Last month saw a huge rally on high volume when they beat Estimates at 165,000. A consensus figure of 170,000 is expected on Friday with an unemployment rate of 7.5%. It is very unclear how the Market may react to a better or worse figure as a strong reading with a reduction in the Unemployment rate may be seen as a negative in terms of future Asset Purchases by the Fed. A worse reading may show that the QE program is diminishing in effectiveness and this may cause a sell off aswell. The best play is to wait for the initial reaction before trading this release or to trade Gold or the Dollar against a foreign currency. The Dollar index will immediately price in the chances of The tapering of Asset Purchases and sometimes the Equity markets take slightly longer to react then the Dollar as the initial knee jerk reaction of Algo's buying or selling of Equities can reverse quickly and the first move may not be the right one.
Looking at the Euro currency, We saw a short squeeze higher in the Major Pair last week with some month end Dollar sales which has popped the Single currency to 1.31 against the greenback over the last few trading sessions. Tomorrow we see the ECB's rate decision and press conference and we await Mario Draghi's speech to see what clues about future policy he gives. Another rate cut is not expected at this meeting but talk of narrowing the Corridor which is the Lending spread minus the Deposit spread seems to be a better overall option as negative rates seem a no go now.
Expect a quiet session today with lower volume as traders square positions ahead of the 2 Big risk events of the month Tomorrow and Friday.
Good luck in the Markets. Lowkey
Thursday, 30 May 2013
Things are heating up...
Good Morning Traders
Its a lovely sunny day here in Dublin this morning, and the weather is beginning to heat up coming into June just like the markets. Yesterday we saw another down day for most of the global equity markets lead by the overnight decline in the Nikkei 225, this selling pressure continued throughout the European session and into the US session. We did see a slight rally after the European close however we are back trading in the red again this morning.
It looks like the market has run out of steam, it has come a long way in a very short period of time off the back of poor fundamentals. Let's not forget this market has been driven by central bank intervention and promises, not strong core fundamentals. The market is unsure what direction it wants to go, and it will inevitably come down to Bernanke and when he might taper his current easing policy. Its a funny predicament because surely a reduction in the level of QE would signal that the economy is improving and making a step in the right direction, however as soon as those words come out of his mouth expect to see traders, investors, mutual funds, pension funds and other large institutions close equity positions.
However that is all down the line and in more relevant terms, the market looks tired to me, I think we will find it hard to make new highs unless we have some really good data today or the US jobless claims are really poor tomorrow. If the jobs number comes in worse than expected it will be seen that QE will be around for longer than a better than expected number so bear that in mind.
In terms of today I expect to see markets quiet as everyone will be keeping an eye out for tomorrows number, I will be adopting the 'Sell any rally' approach as I don't believe that this market can go higher without a new catalyst, and the longer that the market remains up here without making new highs it signals to me that this could be a market top.
Happy Trading
@lowkeycapital
Its a lovely sunny day here in Dublin this morning, and the weather is beginning to heat up coming into June just like the markets. Yesterday we saw another down day for most of the global equity markets lead by the overnight decline in the Nikkei 225, this selling pressure continued throughout the European session and into the US session. We did see a slight rally after the European close however we are back trading in the red again this morning.
It looks like the market has run out of steam, it has come a long way in a very short period of time off the back of poor fundamentals. Let's not forget this market has been driven by central bank intervention and promises, not strong core fundamentals. The market is unsure what direction it wants to go, and it will inevitably come down to Bernanke and when he might taper his current easing policy. Its a funny predicament because surely a reduction in the level of QE would signal that the economy is improving and making a step in the right direction, however as soon as those words come out of his mouth expect to see traders, investors, mutual funds, pension funds and other large institutions close equity positions.
However that is all down the line and in more relevant terms, the market looks tired to me, I think we will find it hard to make new highs unless we have some really good data today or the US jobless claims are really poor tomorrow. If the jobs number comes in worse than expected it will be seen that QE will be around for longer than a better than expected number so bear that in mind.
In terms of today I expect to see markets quiet as everyone will be keeping an eye out for tomorrows number, I will be adopting the 'Sell any rally' approach as I don't believe that this market can go higher without a new catalyst, and the longer that the market remains up here without making new highs it signals to me that this could be a market top.
Happy Trading
@lowkeycapital
Wednesday, 29 May 2013
Morning Update
Good Morning,
A strong rally Yesterday in Japanese Stocks gave European Stocks a strong day closing near Year to date highs but once Europe closed the American bourses started to go south and have continued lower overnight, now nearly 200 points off the highs of yesterday. It's dangerous to call a top but we now have a technical double top in place on the American Equity Markets and with some fundamental uncertainty around the markets at the moment it looks a perfect time to take some profit for the first 5 months of the year and re-assess.
Price action still trades above a rising 4 hour trendline dating back to the middle of April and firmly above its 200 Period Moving Average. Buyers will still be found at these levels but a loss of the 200 Day MA and a Close of the candle below here could signal further declines and might see a lot of Bulls re-thinking their long positions.
EURUSD price action looks sluggish after re-testing and failing at its 50% retracement of its decline from 1.37 to 1.275. Looking at the Euro from a fundamental perspective we may see more easing in the coming months as the ECB are the only Central Bank with more available ammunition to weaken their currency in the hope of providing additional stimulus and growth potential. With the U.S. economy improving and hints of an exit from their Quantitative Easing program it may cause a broad Dollar rally against all Pairs which would cause a significant decline in this pair towards the 1.20 mark or lower.
However the Euro has proved to one of the most resilient currencies throughout the past few years and any adversity has always seen it rally back and with the Market being heavily short any form of good news or U.S. negative Data may cause an epic short squeeze in this pair where traders exciting short positions and speculators going long causes the price action to be squeezed higher. For an uptrend to be confirmed a break of the downward sloping trendline from February must be breached. On the other hand a break of 1.2750 would almost definitely open up a test of 1.20 in the coming months.
A strong rally Yesterday in Japanese Stocks gave European Stocks a strong day closing near Year to date highs but once Europe closed the American bourses started to go south and have continued lower overnight, now nearly 200 points off the highs of yesterday. It's dangerous to call a top but we now have a technical double top in place on the American Equity Markets and with some fundamental uncertainty around the markets at the moment it looks a perfect time to take some profit for the first 5 months of the year and re-assess.
Price action still trades above a rising 4 hour trendline dating back to the middle of April and firmly above its 200 Period Moving Average. Buyers will still be found at these levels but a loss of the 200 Day MA and a Close of the candle below here could signal further declines and might see a lot of Bulls re-thinking their long positions.
EURUSD price action looks sluggish after re-testing and failing at its 50% retracement of its decline from 1.37 to 1.275. Looking at the Euro from a fundamental perspective we may see more easing in the coming months as the ECB are the only Central Bank with more available ammunition to weaken their currency in the hope of providing additional stimulus and growth potential. With the U.S. economy improving and hints of an exit from their Quantitative Easing program it may cause a broad Dollar rally against all Pairs which would cause a significant decline in this pair towards the 1.20 mark or lower.
However the Euro has proved to one of the most resilient currencies throughout the past few years and any adversity has always seen it rally back and with the Market being heavily short any form of good news or U.S. negative Data may cause an epic short squeeze in this pair where traders exciting short positions and speculators going long causes the price action to be squeezed higher. For an uptrend to be confirmed a break of the downward sloping trendline from February must be breached. On the other hand a break of 1.2750 would almost definitely open up a test of 1.20 in the coming months.
Tuesday, 28 May 2013
DOW JONES 30 4 hour chart
The U.S. Equity Markets reversed sharply last Wednesday from some Hawkish FOMC Minutes. The mention of tapering (cutting back on Quantitative Easing) caused a big sell off from all time Intra-Day highs.
However the Dip has been bought and we are now looking to challenge or take out these highs again.
Looking at this 4 Hour chart, you can clearly see a rising 4 touch trendline from the previous dip during late April. All and all the price action looks very bullish even though their is a lot of chatter about a potential correction coming during the summer. We firmly believe a buy and dips strategy still is the best play until their is some significant fundamental news to cause investors to sell into this market. Also a breach of this trendline at around 15300 Spot would unvalidate the uptrend and look like a potential topping pattern.
Near term support can be found at the different Fibonacci retracement levels on the way down.
However the Dip has been bought and we are now looking to challenge or take out these highs again.
Looking at this 4 Hour chart, you can clearly see a rising 4 touch trendline from the previous dip during late April. All and all the price action looks very bullish even though their is a lot of chatter about a potential correction coming during the summer. We firmly believe a buy and dips strategy still is the best play until their is some significant fundamental news to cause investors to sell into this market. Also a breach of this trendline at around 15300 Spot would unvalidate the uptrend and look like a potential topping pattern.
Near term support can be found at the different Fibonacci retracement levels on the way down.
CAUTION
Investors Beware
The global markets over the course of the last couple of weeks have performed exceptionally well for investors and traders alike with significant gains and new record highs in the majority of the main indices. We have see a rotation from the underperforming into the riskier equity markets as investors look to take advantage of the recent gains. There was a slight shock to the system last week when we saw the Japanese (Nikkei 225), fall over 7% in one single trading session, which caused a slight tremor throughout the global equity markets.
Let me recap on what has happened over the recent months; accommodative central bank policy from the worlds largest banks (BOE, ECB, FED, BOJ) has helped drive equity markets higher. The process is quite simple the governments print more money through a variety of measures, in an effort to stimulate the economy and in turn stock prices follow suit. I however do believe that this aggressive approach will cause significant consequences in the long run as economies become dependant on these capital injections to stay alive. The markets have become obsessed on this phenonium of QE and any sign that the level of QE may be reduced, taper or even halted will undoubtedly cause a significant market sell off and a return to safe haven asset classes.
Investors are by nature greedy individuals to a large extend and everyone wants to be involved in the big swings and earning the big returns. However in a lot of cases this is how most retail investors get very badly burned. We all remember back in 2006/2007, when every dog on the street, every newspaper headline was telling people to invest in stocks, and then what happened?. As investors you have to be aware of what the big money is doing and the way they are thinking, by the time the ordinary individual is buying these markets looking to catch a part of the big move and own the same stock as their next door neighbour who has been making $$$$$$, these guys are selling the market. Unfortunately this is the truth and it is a cut-throat environment and if you leave yourself vulnerable you will be cleaned out and the market won't look back.
On a more positive note, we have seen some exceptional gains in global equity markets and anyone who was fortunate enough to take part in this rally will have a smile on their face, but just don’t become complacent. If you are happy with the gains that you have made to date it may be time to take some money off the table and wait for the next opportunity to arise. A common mistake made by average investors is that they enter trades with no plan, no exit strategy. They begin to make nice gains and they are happy to sit back and watch the money pile up, and low and behold a significant market turning event happens and all the good gains have been wipped out in the space of a few days.
I have made a list of a few of the things that I will be paying close attention to over the next few days/ weeks that will help me stay ahead of the crowd and not get stung if a market correction takes place;
- Can we come back and test the previous highs we made in the equity markets over the last few weeks. Most importantly the S&P 500.
- Keep an eye on the price of safe havens such as gold and government bonds, usually a good indication as to the market sentiment.
- Keep an eye on all central bank meetings and press conferences, levels of QE will be discussed and these will be significant market events.
- The longer we stay at these levels and don't continue on the road higher, the more likely we are to have a correction in the market.
- Have a plan and know what you want from your investment, if you haven’t made a plan make one now don’t let the market come in and eat up all your gains.
Thursday, 23 May 2013
Nikkei 225
Yesterday's 7% Drop on the Nikkei 225 was the biggest one day loss since the Tsunami and the Nuclear Meltdown of 2011, its only the 10th time in 50 Years that the Stock Market has suffered a 7% loss and was down nearly 2000 points from High to Low at one stage.
On a monthly chart dating back to 1999 you can see a perfect technical reversal off a downtrend line starting 13 years ago. Analysts may Call this a coincidence that poor fundamental data matched perfectly to a technical reversal at a key technical level at the same time but it sets a near term top in place.
Monthly charts are what long term investors look at and we can guarantee a lot will be looking at this very chart wondering is this the end of the Nikkei rally that at one stage yesterday was up 84% in the last 6 months.
Just something to keep in mind when taking the long Japan trade (Long Nikkei, Short JPY).
On a monthly chart dating back to 1999 you can see a perfect technical reversal off a downtrend line starting 13 years ago. Analysts may Call this a coincidence that poor fundamental data matched perfectly to a technical reversal at a key technical level at the same time but it sets a near term top in place.
Monthly charts are what long term investors look at and we can guarantee a lot will be looking at this very chart wondering is this the end of the Nikkei rally that at one stage yesterday was up 84% in the last 6 months.
Just something to keep in mind when taking the long Japan trade (Long Nikkei, Short JPY).
Correction...Correction...Correction
Good Morning Traders... we are faced with markets that we haven't seen act like this in months, its unusual to wake up and see markets open in the red and by this extent. It may be too early to call a definite market top but it has all the hallmarks. The market initially made a dash for the moon only to retrace off the back of Bernanke's outlook on QE, to me he didn't say anything unexpected but I think the thought of the day when Bernanke may implement a tapering of QE scared the markets.
We saw some significant moves into the US afternoon session and this selling pressure became aggressive when the Asian markets opened, at the time of writing the Nekkei Index is down 1099 points equilivant to 7% in one trading session. We have to take a step back and have a look at the fundamentals of the market and the psychology behind these big swings, yesterday may have been the start of a correction phase or it might be a small speed bump in the road higher we will have to wait and see.
The longer that this uncertainty continues in the market the more likely we are to see money taken off the table, don't forget we have come a long way over the last few months and nobody wants to see their gains wiped out over the course of a few trading sessions.
One thing that I would be looking at now, would be the safe heaven assets such as gold and bonds. We could see a rotation from the equity markets as investors look for a new safe home for the short term.
Happy Trading
@lowkeycapital
Good Morning Traders... we are faced with markets that we haven't seen act like this in months, its unusual to wake up and see markets open in the red and by this extent. It may be too early to call a definite market top but it has all the hallmarks. The market initially made a dash for the moon only to retrace off the back of Bernanke's outlook on QE, to me he didn't say anything unexpected but I think the thought of the day when Bernanke may implement a tapering of QE scared the markets.
We saw some significant moves into the US afternoon session and this selling pressure became aggressive when the Asian markets opened, at the time of writing the Nekkei Index is down 1099 points equilivant to 7% in one trading session. We have to take a step back and have a look at the fundamentals of the market and the psychology behind these big swings, yesterday may have been the start of a correction phase or it might be a small speed bump in the road higher we will have to wait and see.
The longer that this uncertainty continues in the market the more likely we are to see money taken off the table, don't forget we have come a long way over the last few months and nobody wants to see their gains wiped out over the course of a few trading sessions.
One thing that I would be looking at now, would be the safe heaven assets such as gold and bonds. We could see a rotation from the equity markets as investors look for a new safe home for the short term.
Happy Trading
@lowkeycapital
Wednesday, 22 May 2013
Breakfast Blog
Good Morning,
Big Risk event from the across the pond today in the form of Ben Bernanke's testimony on the American Economy and the future Asset Purchases the Federal Reserve plans to make. Many analysts are calling for a tapering of purchases because of the Stronger American Economy however their is one thing you can always rely on and that is for Ben Bernanke to be uber dovish. He is not called "Helicopter Ben" for nothing. Refering to his printing press of money in the form of the Federal Reserve.
We can not see this being a stock negative event, whatever he says will likely be taken as bullish by the Stock Market. If he suggests a tapering in Q4 2013, it shows the Economy is stronger and more resilient. This will cause a flow out of Safe-haven assets (Gold, CHF, JPY) and into stocks. While reference to continuating accomodating monetary policy will further inflate Asset prices.
This morning should be quiet with all eyes on the 3 P.M. speech from Bernanke. Just as i type the EUR/JPY has reached a three and a half year high in the pair and has broken the 133 Handle. This was under 100 at the start of November. USD/JPY remains well bid at 102.8 Spot. The Nikkei 225 put on another 2% over night and sits at 15712, up over 6000 points YTD and accelerating . This index has gone parabolic and may continue its upward trajectory into Japanese earnings season as most companies are expected to report solid earnings in wake of the weaker JPY currency and the positive effects it has seen on its exporters.
Euro was the leading currency yesterday and has continued its gains this morning. Making gains against the Pound, Dollar and Yen. The catalyst behind the Euro move yesterday was the break of 0.85 to the upside in EUR/GBP pair which was a downward sloping trendline and proved to be a major break out level supporting the Euro in nearly all its crosses.
Sterling weakened heavily against most pairs yesterday as the monthly CPI came in weaker then expected, leaving Mark Carney the incoming Governor with some additional leverage to print when he arrives into the Bank of England next month. Selling Sterling looks a solid fundamental trade for the coming months as technically it has broken through some big levels against Euro and against the Dollar and the FTSE is certainly pricing in more easing as it broke 6800 yesterday with analysts as Cityindex expecting to see 7250 before the end of 2013.
Good luck in the Markets today
Lowkey
Big Risk event from the across the pond today in the form of Ben Bernanke's testimony on the American Economy and the future Asset Purchases the Federal Reserve plans to make. Many analysts are calling for a tapering of purchases because of the Stronger American Economy however their is one thing you can always rely on and that is for Ben Bernanke to be uber dovish. He is not called "Helicopter Ben" for nothing. Refering to his printing press of money in the form of the Federal Reserve.
We can not see this being a stock negative event, whatever he says will likely be taken as bullish by the Stock Market. If he suggests a tapering in Q4 2013, it shows the Economy is stronger and more resilient. This will cause a flow out of Safe-haven assets (Gold, CHF, JPY) and into stocks. While reference to continuating accomodating monetary policy will further inflate Asset prices.
This morning should be quiet with all eyes on the 3 P.M. speech from Bernanke. Just as i type the EUR/JPY has reached a three and a half year high in the pair and has broken the 133 Handle. This was under 100 at the start of November. USD/JPY remains well bid at 102.8 Spot. The Nikkei 225 put on another 2% over night and sits at 15712, up over 6000 points YTD and accelerating . This index has gone parabolic and may continue its upward trajectory into Japanese earnings season as most companies are expected to report solid earnings in wake of the weaker JPY currency and the positive effects it has seen on its exporters.
Euro was the leading currency yesterday and has continued its gains this morning. Making gains against the Pound, Dollar and Yen. The catalyst behind the Euro move yesterday was the break of 0.85 to the upside in EUR/GBP pair which was a downward sloping trendline and proved to be a major break out level supporting the Euro in nearly all its crosses.
Sterling weakened heavily against most pairs yesterday as the monthly CPI came in weaker then expected, leaving Mark Carney the incoming Governor with some additional leverage to print when he arrives into the Bank of England next month. Selling Sterling looks a solid fundamental trade for the coming months as technically it has broken through some big levels against Euro and against the Dollar and the FTSE is certainly pricing in more easing as it broke 6800 yesterday with analysts as Cityindex expecting to see 7250 before the end of 2013.
Good luck in the Markets today
Lowkey
Tuesday, 21 May 2013
Good Morning Traders
We arrive back to the markets this morning to see things shaping up as they have been for the last number of weeks. Yesterday we saw another strong performance in both European and US equity markets. We saw new highs marked for the SPX and the Dow however comments from Fed member Evans took the sting out of the rally as he indicated that we might see a slight tapering of QE towards the end of the year, and it it this QE news that has the ability to dictate market direction. All traders and investors will be looking towards Bernanke for a clear indication as to the future of the FED's level of intervention.
We will adopt the same trading principles that we have been implementing for the last few weeks, as this market wants to move higher. We expect to see the marker remain relatively quiet ahead of Bernanke tomorrow and we might see a few cautious traders take some money off the table in-case we see some indication that QE may be coming to an end expect to see a drastic move to the downside if this is the outcome. However I believe that the data is far from strong enough to tamper the current level and if the data continues to improve and the unemployment rate drop it may be a sign to ease the existing levels.
However that's tomorrow, as far as today is concerned, any dip is a genuine buying opportunity but I would be looking to close some positions ahead of the FED press conference tomorrow. Elsewhere in the markets the EURUSD pair continues to come under pressure as Dollar strength is dominating the core of the FX market. USDJPY trades at 132.250 handle off its high of 133.
Happy Trading
@lowkeycapital
We arrive back to the markets this morning to see things shaping up as they have been for the last number of weeks. Yesterday we saw another strong performance in both European and US equity markets. We saw new highs marked for the SPX and the Dow however comments from Fed member Evans took the sting out of the rally as he indicated that we might see a slight tapering of QE towards the end of the year, and it it this QE news that has the ability to dictate market direction. All traders and investors will be looking towards Bernanke for a clear indication as to the future of the FED's level of intervention.
We will adopt the same trading principles that we have been implementing for the last few weeks, as this market wants to move higher. We expect to see the marker remain relatively quiet ahead of Bernanke tomorrow and we might see a few cautious traders take some money off the table in-case we see some indication that QE may be coming to an end expect to see a drastic move to the downside if this is the outcome. However I believe that the data is far from strong enough to tamper the current level and if the data continues to improve and the unemployment rate drop it may be a sign to ease the existing levels.
However that's tomorrow, as far as today is concerned, any dip is a genuine buying opportunity but I would be looking to close some positions ahead of the FED press conference tomorrow. Elsewhere in the markets the EURUSD pair continues to come under pressure as Dollar strength is dominating the core of the FX market. USDJPY trades at 132.250 handle off its high of 133.
Happy Trading
@lowkeycapital
Monday, 20 May 2013
Apple Turnaround
There has been a lot of talk of the decline of Apple's share price from its $706 high back in September. We have seen increased speculation that large fund managers have been reducing their exposure to the stock as it continues to lag behind the rest of the equity markets. However I think that we might be seeing the formation of a bottom. Let me explain this;
We can see the fall of the stock from its peak at $706 to its low of $387, the down trend over this period is obvious to the naked eye and it was a great trading opportunity for shorting the stock adopting the 'Selling any rally' mentality. What has caught my eye over the last few months is the H&S reversal formation that is forming. This can be seen graphically by the points A-B-C. As we all know this is one of the most respected reversal formations, and it could signal the bottom of the stock if we see a move from point C to point D.
However there is a slight case for concern, we have seen the significant rally in global equity markets and Apple has failed to take part in this significant move. We have the Dow & SPX making new historic highs while Apple is a long way off this mark. It is interesting to note that Apple has become uncorrelated to the SPX and I think this trend might continue over the next months.
Apple has always been a strong performing stock and it has generated significant returns for investors, a large portion of these investors have opted to lock in some profit, and rotate money into alternative sectors in search of gains. I believe that when the market does begin to correct over the coming weeks, months we will see money move back into Apple. The second half of the year will be characterised by new Apple products and services that will inevitably stimulate consumer and investor confidence and should help to see a significant move to the upside in the stock price.
Apple in my opinion could be the new VIX....
Happy Trading
@lowkeycapital
We can see the fall of the stock from its peak at $706 to its low of $387, the down trend over this period is obvious to the naked eye and it was a great trading opportunity for shorting the stock adopting the 'Selling any rally' mentality. What has caught my eye over the last few months is the H&S reversal formation that is forming. This can be seen graphically by the points A-B-C. As we all know this is one of the most respected reversal formations, and it could signal the bottom of the stock if we see a move from point C to point D.
However there is a slight case for concern, we have seen the significant rally in global equity markets and Apple has failed to take part in this significant move. We have the Dow & SPX making new historic highs while Apple is a long way off this mark. It is interesting to note that Apple has become uncorrelated to the SPX and I think this trend might continue over the next months.
Apple has always been a strong performing stock and it has generated significant returns for investors, a large portion of these investors have opted to lock in some profit, and rotate money into alternative sectors in search of gains. I believe that when the market does begin to correct over the coming weeks, months we will see money move back into Apple. The second half of the year will be characterised by new Apple products and services that will inevitably stimulate consumer and investor confidence and should help to see a significant move to the upside in the stock price.
Apple in my opinion could be the new VIX....
Happy Trading
@lowkeycapital
Breakfast Blog
Good Morning,
Early Monday has seen a huge Gap down in the precious Metals complex with Gold gapping lower by over $30 and silver by nearly $1. The rotation looks set to continue with Stocks opening higher in Europe with the Dax, Ibex and FTSE MIB all showing gains in early morning cash trading.
Over the weekend North Korea fired three short range missiles into the sea off the Eastern Coast of the Korean Peninsula, stirring tensions that had appeared to ease in the wake of a recent series of threats directed at South Korea and the U.S. We also saw the Japanese Economy Minister Amari stating that the correction of the Strong JPY was largely completed and if it kept weakening more it would have a negative impact on people's lives. He also stated that the Stock rise had been faster then expected.
This caused an immediate strengthening of the Yen currency in early Monday Morning trade where liquidity was thin but the Market has since bounced back and we sit at 102.6 in the USDJPY pair and at 132 in the EURJPY pair.
Today is very quiet on the Data calendar so expect a range bound trading session, while traders wait for Existing Homes sales Data later in the week along with Minutes from the FOMC along with Speeches from Bernanke and Mario Draghi. We will post Currency order levels later int he session.
Good luck in the Markets.
Lowkey
Friday, 17 May 2013
Breakfast Blog
The Mother of all Bull Markets,
The Rally in the Japanese Nikkei 225 since Abe won the election has been
remarkable and its accelerating!! Since mid-November, the index is up an astonishing 67% and it tacked on another 4.3% in the past two days. This index has gone parabolic! Do not try a pick a top on this!!
The index reached 20000 in 2000 and topped at 18000 before the Financial Crisis.
At 15,172 spot as i Type, a monthly downtrend line comes in at 16200 but when any instrument turns parabolic its best ignoring technicals and going with the fundamentals and as long as the Yen keeps weakening the Market will go higher and 18000 or higher could be in play by year end!
The Rally in the Japanese Nikkei 225 since Abe won the election has been
remarkable and its accelerating!! Since mid-November, the index is up an astonishing 67% and it tacked on another 4.3% in the past two days. This index has gone parabolic! Do not try a pick a top on this!!
The index reached 20000 in 2000 and topped at 18000 before the Financial Crisis.
At 15,172 spot as i Type, a monthly downtrend line comes in at 16200 but when any instrument turns parabolic its best ignoring technicals and going with the fundamentals and as long as the Yen keeps weakening the Market will go higher and 18000 or higher could be in play by year end!
Good Morning Traders
Things look relatively quiet in today's morning session, we have seen no major moves worth nothing. Yesterday of you followed our advice you would have made some profit as the 'Buy The Dips' mentality played out again after the initial sell off at the US market open. We saw new highs on the DowJ and the SPX but these levels didn't last to long and the equity market sold off into the US close.
For me personally I always pay close attention to what happens in and around the closing bell, as it shows to me the trading mentality of traders and market makers, are they happy to hold positions overnight or are they quick to cash in and take profit. In this instance it looked to be the the latter, and this is something that I use to gauge market sentiment amongst traders.
In the FX market we have seen the EURUSD pair come under pressure as it trades down at 1.28600. There is a 'Death cross' forming on the daily chart and if this cross follows its usual path we could see the Euro come under serious pressure making a move lower testing the previous lows around the 1.26-1.20 handle and don't forget any indication of a reduction in QE form the US or increased rate cuts from the ECB will support this move.
Happy Trading
@lowkeycapital
Things look relatively quiet in today's morning session, we have seen no major moves worth nothing. Yesterday of you followed our advice you would have made some profit as the 'Buy The Dips' mentality played out again after the initial sell off at the US market open. We saw new highs on the DowJ and the SPX but these levels didn't last to long and the equity market sold off into the US close.
For me personally I always pay close attention to what happens in and around the closing bell, as it shows to me the trading mentality of traders and market makers, are they happy to hold positions overnight or are they quick to cash in and take profit. In this instance it looked to be the the latter, and this is something that I use to gauge market sentiment amongst traders.
In the FX market we have seen the EURUSD pair come under pressure as it trades down at 1.28600. There is a 'Death cross' forming on the daily chart and if this cross follows its usual path we could see the Euro come under serious pressure making a move lower testing the previous lows around the 1.26-1.20 handle and don't forget any indication of a reduction in QE form the US or increased rate cuts from the ECB will support this move.
Happy Trading
@lowkeycapital
Thursday, 16 May 2013
Good Morning Traders
Rotation...Rotation...Rotation
We have continued to see the strength of this bull market after yesterdays impressive gains in the European and US equity markets. The market was taking a breather for the last couple of days, and yesterdays strong rally highlighted the fact that this market wants to continue making higher highs. There is only one way to play the market and that is 'Buy the dips', although people are reluctant to enter the market at these levels, they are providing excellent returns for day traders in the short term. It is simply one way traffic, and it is an unusual market at the moment, all bad news is being disregarded and markets continue to move higher, I put this down to two significant reasons, and unless one or more of these change expect to see higher highs;
Rotation...Rotation...Rotation
We have continued to see the strength of this bull market after yesterdays impressive gains in the European and US equity markets. The market was taking a breather for the last couple of days, and yesterdays strong rally highlighted the fact that this market wants to continue making higher highs. There is only one way to play the market and that is 'Buy the dips', although people are reluctant to enter the market at these levels, they are providing excellent returns for day traders in the short term. It is simply one way traffic, and it is an unusual market at the moment, all bad news is being disregarded and markets continue to move higher, I put this down to two significant reasons, and unless one or more of these change expect to see higher highs;
- The 'Great Rotation'; As touched on in previous blogs, we are seeing significant money move from the struggling commodity markets into the equity markets. Gold has fallen below $1400 and currently trades around the $1384 handle. Silver has fallen as low as $22 and I would be reluctant to take on a position in either good. The bond market is also struggling, and it is simple all money is being moved to the equity markets as central banks continue to fuel returns.
- Central Bank Policy; Central banks across the globe led by the FED, BOJ, BOE and BOJ continue to adopt a 'whatever it takes approach' and will continue to fuel this rally until their objectives have been met. It is quite clear to traders and investors that the returns they are seeing from their policies is not as high as expected and they are a long way from achieving their targets. So I would be firm is my belief that I do not expect to see a reduction or tapering of bond buying in the short term.
We are expecting to see some significant data from the EU this morning in the form of inflation data due out at 10am, we are looking for a headline figure of 1.2%, for FX traders this should bring significant volatility into the EUR currency markets. A figure below this expectation will bring some significant downside to the EURUSD pair and it would being the 1.2750 low into play. Elsewhere in the FX markets the BOJ continue to push the USDJPY pair higher as it tests the 102.50 handle, and we expect to see this strong trend continue as long as the BOJ keep their foot on the pedal.
In conclusion, keep the same strategy in place, it is not often that markets can be as predictable as they are at present so use this as as opportunity to take advantage of the moves and keep stops tight.
Happy Trading
@lowkeycapital
Wednesday, 15 May 2013
Breakfast Blog
Good Morning,
Yesterday was a continuation in the Trend we have seen for the last weeki.e. Another day, another Day of Dollar Strength. We saw Higher Growth expectations from some Tier 1 Bank's capitulated in Cycle highs for USD against JPY, AUD and CHF. We also obviously saw a fresh cycle high, YTD high and All time high of 1650 in the S&P 500. Tuesday's in the Stock Market this year have been incredible, This combined with a POMO day (Day when Fed injects Liquidity) and some upbeat comments from Fund Manager David Tepper on his long equity positions caused a rally all day with 1% being put onto all American Indices and seeing the Nasdaq Break 3000 for the First time since 2000 even though Apple slipped in late trade to close under 450 at 443.
Looking at the Market in General, the Break of 100 in USDJPY has caused Japanese investors to pile their money into Dollars and American Equities, This is causing a huge flow dynamic which is weakening the Yen aggressively and adding fuel to the Equity markets. This will likely continue as long as the Yen continues to weaken. As I mentioned the Dollar has been gaining traction in the last 5 Trading sessions from some upbeat growth comments and strong Data, This has seen the Dollar gain back 300 Pips on the Euro, 300 against Sterling and nearly 400 against the Yen. Yet the Equity Markets still believe that Quantitative Easing will continue and our being pushed higher daily on low volume.
Equity Markets going higher on low volume is technically called a negative divergence and is a warning sign of a reversal, but as they say "trend is your friend" and buying any dips is the only play until their is a significant Fundamental Development that may cause the Markets to sell off. The only development this could be is a story, rumour or announcement of the Fed's intentions to Stop/reduce/taper Asset Purchases.
The EURUSD made a strong reversal at 1.32 last week and now finds itself below the 1.29 handle. How things change quick? I even saw a few analysts chatting about parity again this morning. Poor ZEW data from Germany yesterday has probably made the Market think about Additional cuts or Stimulus for the Single Currency combined with the Dollar Strength story it has been a steep decline for the Euro throughout the past few trading sessions.
Today we saw Poor Geman GDP data which pushed the Euro out of its 1.29-1.32 range and a daily close below here would give case for further declines towards the Yearly Low of 1.2745 and potentially further on a breach of that level.
Base Metals and Commodities in general continue to have a dismissal year with slowing Chinese Growth, slowing demand and Dollar Strength combined with a rotational issue into Equities it has seen Metals especially suffer huge losses. Gold Broke down out of its 1440-1480 range on Friday and trades at 1410 spot in Current trade, still looking heavy. One of the Main reasons I believe base metals have been hammered so hard this year is because of the Drop in inflation, Let me explain what I mean by this.
Ever since Central Banks started their Easing programs and flooded World Markets with liquidity and easy credit their was an expectation that Inflation would take off and be above 2% in all major Economic zone's. This has not been the Case at all, Inflation has declined in the States and in the Eurozone. Investors bidded up the Prices of Commodities in times of inflation as a place to protect the value of their money. This is especially true with Gold. Gold is traded as a currency and a direct hedge against Inflation. Since Inflation has not happened even though their is Trillions of printed money in the system The relative value of Gold must drop because it has no Intrinsic Value like Stocks that provide value and revenue streams for the investors. As long as the Inflation rate remains subdued, Gold will suffer further declines.
Good look in the Markets
Lowkey
Yesterday was a continuation in the Trend we have seen for the last weeki.e. Another day, another Day of Dollar Strength. We saw Higher Growth expectations from some Tier 1 Bank's capitulated in Cycle highs for USD against JPY, AUD and CHF. We also obviously saw a fresh cycle high, YTD high and All time high of 1650 in the S&P 500. Tuesday's in the Stock Market this year have been incredible, This combined with a POMO day (Day when Fed injects Liquidity) and some upbeat comments from Fund Manager David Tepper on his long equity positions caused a rally all day with 1% being put onto all American Indices and seeing the Nasdaq Break 3000 for the First time since 2000 even though Apple slipped in late trade to close under 450 at 443.
Looking at the Market in General, the Break of 100 in USDJPY has caused Japanese investors to pile their money into Dollars and American Equities, This is causing a huge flow dynamic which is weakening the Yen aggressively and adding fuel to the Equity markets. This will likely continue as long as the Yen continues to weaken. As I mentioned the Dollar has been gaining traction in the last 5 Trading sessions from some upbeat growth comments and strong Data, This has seen the Dollar gain back 300 Pips on the Euro, 300 against Sterling and nearly 400 against the Yen. Yet the Equity Markets still believe that Quantitative Easing will continue and our being pushed higher daily on low volume.
Equity Markets going higher on low volume is technically called a negative divergence and is a warning sign of a reversal, but as they say "trend is your friend" and buying any dips is the only play until their is a significant Fundamental Development that may cause the Markets to sell off. The only development this could be is a story, rumour or announcement of the Fed's intentions to Stop/reduce/taper Asset Purchases.
The EURUSD made a strong reversal at 1.32 last week and now finds itself below the 1.29 handle. How things change quick? I even saw a few analysts chatting about parity again this morning. Poor ZEW data from Germany yesterday has probably made the Market think about Additional cuts or Stimulus for the Single Currency combined with the Dollar Strength story it has been a steep decline for the Euro throughout the past few trading sessions.
Today we saw Poor Geman GDP data which pushed the Euro out of its 1.29-1.32 range and a daily close below here would give case for further declines towards the Yearly Low of 1.2745 and potentially further on a breach of that level.
Base Metals and Commodities in general continue to have a dismissal year with slowing Chinese Growth, slowing demand and Dollar Strength combined with a rotational issue into Equities it has seen Metals especially suffer huge losses. Gold Broke down out of its 1440-1480 range on Friday and trades at 1410 spot in Current trade, still looking heavy. One of the Main reasons I believe base metals have been hammered so hard this year is because of the Drop in inflation, Let me explain what I mean by this.
Ever since Central Banks started their Easing programs and flooded World Markets with liquidity and easy credit their was an expectation that Inflation would take off and be above 2% in all major Economic zone's. This has not been the Case at all, Inflation has declined in the States and in the Eurozone. Investors bidded up the Prices of Commodities in times of inflation as a place to protect the value of their money. This is especially true with Gold. Gold is traded as a currency and a direct hedge against Inflation. Since Inflation has not happened even though their is Trillions of printed money in the system The relative value of Gold must drop because it has no Intrinsic Value like Stocks that provide value and revenue streams for the investors. As long as the Inflation rate remains subdued, Gold will suffer further declines.
Good look in the Markets
Lowkey
Tuesday, 14 May 2013
SP500 4 HR
You can see a clearly defined uptrend on this 4 hour S&P 500 chart. The price action has become wedged in a rising channel between 1620 and 1636. A rising wedge or channel is generally a bearish technical warning combined with a bearish engulfing candle that is forming over this timeframe the market looks to be turning lower. A reverse and a break to the downside of the 1620 area could expose the 1612 level which is the 23.6% Fibonacci retracement of the rally from 1537-1636. An additional break of this would then target the psychological 1600 level then 1597 which is a previous high and the 38.2% Fibo of the rally up.
1597 is definitely a level a lot of Bulls will be looking to take a speculative long trade at.
Good Morning Traders.
Global equity markets seem to be hanging on the edge of a cliff as we speak. In the last few trading days the aggressive nature of the prevailing up trend has lost its explosive power but it continues to remain range bound at these high levels. We are seeking new highs being made in the US equity markets but there has been a lack of persistent follow through which will give both bulls and bears something to speak about.
The markets as a whole seem to be confined to these tight ranges and the lack of important economic headlines should keep us in these ranges unless we hear something unexpected.
The interesting story over the last few days that caught the attention of the market was the Wall St journal article which highlighted the FED's map to taper their monetary easing policy (QE) toward the end of 2013. This headlined caused a minor pull back in the equity markets only to be quickly bought up again. As we mentioned in a blog last week, the European session continues to lack volume and they have been selling the market and we have seen the american market participants come into the market and give strong support.
Levels for me today are as follows: EURUSD 1.3040 / 1.2940, S&P 1620 / 1636, DowJ 15070 / 15,110
In conclusion we have a bit of economic data from the Eurozone this morning in the form of German ZEW and Eurozone Economic Sentiment Indicator which should give direction to the market. We expect to see a German reading below expectation due to the recent leg lower in the DAX but want for the headline don't speculate. I would be sticking to the philosophy of buying any dips unless we see something drastic in the market.
Happy Trading
Global equity markets seem to be hanging on the edge of a cliff as we speak. In the last few trading days the aggressive nature of the prevailing up trend has lost its explosive power but it continues to remain range bound at these high levels. We are seeking new highs being made in the US equity markets but there has been a lack of persistent follow through which will give both bulls and bears something to speak about.
The markets as a whole seem to be confined to these tight ranges and the lack of important economic headlines should keep us in these ranges unless we hear something unexpected.
The interesting story over the last few days that caught the attention of the market was the Wall St journal article which highlighted the FED's map to taper their monetary easing policy (QE) toward the end of 2013. This headlined caused a minor pull back in the equity markets only to be quickly bought up again. As we mentioned in a blog last week, the European session continues to lack volume and they have been selling the market and we have seen the american market participants come into the market and give strong support.
Levels for me today are as follows: EURUSD 1.3040 / 1.2940, S&P 1620 / 1636, DowJ 15070 / 15,110
In conclusion we have a bit of economic data from the Eurozone this morning in the form of German ZEW and Eurozone Economic Sentiment Indicator which should give direction to the market. We expect to see a German reading below expectation due to the recent leg lower in the DAX but want for the headline don't speculate. I would be sticking to the philosophy of buying any dips unless we see something drastic in the market.
Happy Trading
Monday, 13 May 2013
Breakfast Blog
Good Morning Traders,
A quiet start to the week with no Tier 1 Data from Europe this morning with Traders awaiting the Retail Sales Data from the States at 13 30 this afternoon.
Thursday and Friday were two days completely dominated by Dollar Strength. We saw the USD/JPY push from below 99 to nearly 102 in just two trading sessions. Strong U.S. Data combined with a rumour that FED watcher John Hilsenrath's weekend articles had a direct interview with a member of the FOMC and a detailed plan about the FED's exit strategy proved a catalyst for Dollar Strength with a number of significant levels being breached. These included 1.30 to the downside in the EUR/USD pair, parity in the AUD/USD pair, 100 to the upside in USD/JPY and the break of the narrow trading channel in spot Gold. This was a break of the 1440-1480 range, where we broke to the downside before recovering with a low print seen at 1419 on Friday, we trade at 1431 Spot as I type.
Over the Summer Months one of the Markets main risk events will be how the Fed plans to reduce/halt/continue/increase its Asset Purchase program as the Markets have become petrified that their training wheels could potentially be removed in Q4 of this year. Even on Thursday afternoon a rumour that John Hilsenrath's weekend press contained details of a Fed exit strategy from its current program caused a 60 point drop in the Dow Jones before it rallied back after the close of U.S. trading. This clearly shows the Market is overly long and looking for any reason to short the market. Trading Equity Indices in this current climate involves no knowledge of Company Performance, technical skills or Analysis. The Market simply revolves around Central Bank policy and nothing else and this evidently won't stop until Bernanke or Yellen or whoever chairs the Printing Press starts to draw out the Liquidity in the System causing a huge Stock Market Crash and hopefully resetting the Market in a more rational and transparent mind set.
The Move over 100 in the USD/JPY confirms that the Market believes in Kuroda and his easing Policies and bid to beat deflation once and for all. With Japanese nationals now Net buyers of Foreign Bonds compared to Domestic Bonds it saw the JGB Market being halted on Friday as the Yield grows so small as Japanese Investors are forced out of the Country with their Capital in a bid to Find a 3% or greater Yield for their Money. This is the point that the Yen may start to weaken significantly when Wealth from Japanese citizens is forced into Europe and The United States. If we see more Data supporting the outflow of Jaonese Wealth over the coming weeks and months we may see 1.20 in the Pair before the End of the Summer.
The EUR/USD pair has been constrained between the 200 DAY MA at 1.29 and 1.32 topside. The Market thinks that the Big Panda (Asian Central Bank) has a large DNT (do not touch) Option in play here and is playing the ranges with big money on both sides. The play here is to go with a daily close under or over these parameters or simply trade at extremes of this 300 Pip Range.
We will have some order levels up later once America wakes up.
Good Luck in the Markets. Lowkey
A quiet start to the week with no Tier 1 Data from Europe this morning with Traders awaiting the Retail Sales Data from the States at 13 30 this afternoon.
Thursday and Friday were two days completely dominated by Dollar Strength. We saw the USD/JPY push from below 99 to nearly 102 in just two trading sessions. Strong U.S. Data combined with a rumour that FED watcher John Hilsenrath's weekend articles had a direct interview with a member of the FOMC and a detailed plan about the FED's exit strategy proved a catalyst for Dollar Strength with a number of significant levels being breached. These included 1.30 to the downside in the EUR/USD pair, parity in the AUD/USD pair, 100 to the upside in USD/JPY and the break of the narrow trading channel in spot Gold. This was a break of the 1440-1480 range, where we broke to the downside before recovering with a low print seen at 1419 on Friday, we trade at 1431 Spot as I type.
Over the Summer Months one of the Markets main risk events will be how the Fed plans to reduce/halt/continue/increase its Asset Purchase program as the Markets have become petrified that their training wheels could potentially be removed in Q4 of this year. Even on Thursday afternoon a rumour that John Hilsenrath's weekend press contained details of a Fed exit strategy from its current program caused a 60 point drop in the Dow Jones before it rallied back after the close of U.S. trading. This clearly shows the Market is overly long and looking for any reason to short the market. Trading Equity Indices in this current climate involves no knowledge of Company Performance, technical skills or Analysis. The Market simply revolves around Central Bank policy and nothing else and this evidently won't stop until Bernanke or Yellen or whoever chairs the Printing Press starts to draw out the Liquidity in the System causing a huge Stock Market Crash and hopefully resetting the Market in a more rational and transparent mind set.
The Move over 100 in the USD/JPY confirms that the Market believes in Kuroda and his easing Policies and bid to beat deflation once and for all. With Japanese nationals now Net buyers of Foreign Bonds compared to Domestic Bonds it saw the JGB Market being halted on Friday as the Yield grows so small as Japanese Investors are forced out of the Country with their Capital in a bid to Find a 3% or greater Yield for their Money. This is the point that the Yen may start to weaken significantly when Wealth from Japanese citizens is forced into Europe and The United States. If we see more Data supporting the outflow of Jaonese Wealth over the coming weeks and months we may see 1.20 in the Pair before the End of the Summer.
The EUR/USD pair has been constrained between the 200 DAY MA at 1.29 and 1.32 topside. The Market thinks that the Big Panda (Asian Central Bank) has a large DNT (do not touch) Option in play here and is playing the ranges with big money on both sides. The play here is to go with a daily close under or over these parameters or simply trade at extremes of this 300 Pip Range.
We will have some order levels up later once America wakes up.
Good Luck in the Markets. Lowkey
Friday, 10 May 2013
Good Morning Traders
We have seen continued support of this aggressive rally and long may it continue. The trading psychology has been simple, buy any dips as the market is being bought at every given opportunity as retail investors look to get aboard this move. Depending on your trading strategy, I would remain cautious for investors entering at these levels with a long term hold view, in my opinion these levels favour short term day trading strategies with a daily or weekly time-frame in mind. As long as these markets are being supported by accommodative central bank policy these markets can only move higher, the stock markets have become totally un correlated with the health of the global economy. The markets disregards poor economic data and it looks that the only thing that will be able to make them turn around is the speculation of reduced central bank policy.
Yesterday we had some good job numbers from the US, although small the economy is taking a small step in the right direction. The main move we saw off the back of this news was strength in the USD against some of its major currency pairs. One interesting thing to note was the fact that the USD/JPY pair broke through the psychological 100 level, a level it had been testing for the last few weeks. As it is Friday and we have had another strong week with gains across the board we would expect to see some small profit taking across the board towards the close of the US session.
As mentioned in previously blogs this strong equity performance can be attributed to the fact that other asset classes continue to produce negative gains. Money has been taken out of both Gold and Bonds as investors look to cash in on the recent move in the equity market. That is why I don't see any correction in sigh unless we see some substantial news that will force individuals to sit on the sidelines.
Happy Trading
@lowkeycapital
We have seen continued support of this aggressive rally and long may it continue. The trading psychology has been simple, buy any dips as the market is being bought at every given opportunity as retail investors look to get aboard this move. Depending on your trading strategy, I would remain cautious for investors entering at these levels with a long term hold view, in my opinion these levels favour short term day trading strategies with a daily or weekly time-frame in mind. As long as these markets are being supported by accommodative central bank policy these markets can only move higher, the stock markets have become totally un correlated with the health of the global economy. The markets disregards poor economic data and it looks that the only thing that will be able to make them turn around is the speculation of reduced central bank policy.
Yesterday we had some good job numbers from the US, although small the economy is taking a small step in the right direction. The main move we saw off the back of this news was strength in the USD against some of its major currency pairs. One interesting thing to note was the fact that the USD/JPY pair broke through the psychological 100 level, a level it had been testing for the last few weeks. As it is Friday and we have had another strong week with gains across the board we would expect to see some small profit taking across the board towards the close of the US session.
As mentioned in previously blogs this strong equity performance can be attributed to the fact that other asset classes continue to produce negative gains. Money has been taken out of both Gold and Bonds as investors look to cash in on the recent move in the equity market. That is why I don't see any correction in sigh unless we see some substantial news that will force individuals to sit on the sidelines.
Happy Trading
@lowkeycapital
Tuesday, 7 May 2013
Good Morning Traders
We are all back in the office this morning after the extended bank holiday weekend and we have al European markets open for trading. It is amazing to reflect back on last week as we saw the SPX make new historic highs and this was re-enforced by a strong close above the 1600 level. So we ask ourselves where to next? There has been a lot of speculation that we might see a 5-10% correction across some of the equity markets, as some analysts have called for some profit taking coming into the month of May, but the 'Sell in May and go away' ideology may be a thing of the past. It was normally seen as a time when traders would leave the office in May to attend summer events and take a break from the market after locking in some nice first quarter profits but with the advances in technology traders can access the markets through a variety of mediums (Laptop, Ipad, Iphone) so I think this may be a thing of the past and I would take it with a pinch of salt.
The current environment is dominated by low interest rates and central bank aggressive easing policies and this is being reflected in the equity markets across the globe. In sort the SPX trades over the 1615 level, the Dow trades above the 14070 level, the Dax 8130 all of these levels in extreme over bought levels signalled by the RSI indicator. But there is nothing we can do and it is not a wise move to be fighting the central banks and their whatever it takes attitude. We saw last week that the ECB reduced interest rates by .25% in an effort to stimulate the Eurozone, and it was hinted that they would be keen to reduce interest rates going forward if things don't improve. This market will remain in a strong up-trend unless we get some significant news headlines, and as of yet there is nothing in sight to cause a turn around so expect to see markets move higher. Also take note that poor headline data will not be enough to trigger this correction it will in fact be seen as a catalyst for more easing or a reduction in interest rates so we will be faced with the 'Bad news is good news' scenario for the coming months.
In terms of the FX market all of the easing measures adopted by central banks should be negative for domestic currencies, but with all economies taking this approach the effects may be slightly diluted and not as drastic as previously expected.
In conclusion these are very unusual trading times and volatility is widespread across all asset classes, we have seen some of the safe heavens such as gold and silver react in a volatile manor, which has caused a rotation into the equity markets as investors hunt for gains. If there is one bit of advice I can give you, don't fight the central banks and don't look for a top in this market regardless if you feel that the market is too high, buy the dips as we continue to move higher.
@lowKeyCapital
We are all back in the office this morning after the extended bank holiday weekend and we have al European markets open for trading. It is amazing to reflect back on last week as we saw the SPX make new historic highs and this was re-enforced by a strong close above the 1600 level. So we ask ourselves where to next? There has been a lot of speculation that we might see a 5-10% correction across some of the equity markets, as some analysts have called for some profit taking coming into the month of May, but the 'Sell in May and go away' ideology may be a thing of the past. It was normally seen as a time when traders would leave the office in May to attend summer events and take a break from the market after locking in some nice first quarter profits but with the advances in technology traders can access the markets through a variety of mediums (Laptop, Ipad, Iphone) so I think this may be a thing of the past and I would take it with a pinch of salt.
The current environment is dominated by low interest rates and central bank aggressive easing policies and this is being reflected in the equity markets across the globe. In sort the SPX trades over the 1615 level, the Dow trades above the 14070 level, the Dax 8130 all of these levels in extreme over bought levels signalled by the RSI indicator. But there is nothing we can do and it is not a wise move to be fighting the central banks and their whatever it takes attitude. We saw last week that the ECB reduced interest rates by .25% in an effort to stimulate the Eurozone, and it was hinted that they would be keen to reduce interest rates going forward if things don't improve. This market will remain in a strong up-trend unless we get some significant news headlines, and as of yet there is nothing in sight to cause a turn around so expect to see markets move higher. Also take note that poor headline data will not be enough to trigger this correction it will in fact be seen as a catalyst for more easing or a reduction in interest rates so we will be faced with the 'Bad news is good news' scenario for the coming months.
In terms of the FX market all of the easing measures adopted by central banks should be negative for domestic currencies, but with all economies taking this approach the effects may be slightly diluted and not as drastic as previously expected.
In conclusion these are very unusual trading times and volatility is widespread across all asset classes, we have seen some of the safe heavens such as gold and silver react in a volatile manor, which has caused a rotation into the equity markets as investors hunt for gains. If there is one bit of advice I can give you, don't fight the central banks and don't look for a top in this market regardless if you feel that the market is too high, buy the dips as we continue to move higher.
@lowKeyCapital
Tuesday, 30 April 2013
Good Morning Traders
Yesterday we saw another strong rally in the equity markets, and are we surprised? Not really. Over the last few weeks we have seen a lot an analysts trying to call a top of the market, but no news seems to be good news and markets continue to move higher. We saw the SPX trade above the 1594 and it looks as though 1600 is the next stop if the relative weakness in the USD continues. The trading day yesterday could be characterised by a total lack of volume and it was interesting for traders to see the morning momentum faded into the US close. As we noted yesterday all eyes will be on the ECB come Thursday and all of the Equity markets have largely priced in a rate cut, if Draghi does not deliver on this expect to see some panic selling across the board.
One of the biggest movers in yesterdays trading day was AAPL having its best day in over 3 months, it might be a bit early to call but I think there is a bottom in place and traders have begun to move money back into the tech giant as it now trades above its 50DMA. In the commodity market the USD weakness helped the commodity market pick up some gains with Gold, Silver and Brent all trading higher.
This morning we have seen the EURUSD pair give back some of its gains as the pair found soem significant resistance at the 1.31200 handle and now trades down below the 1.30800 handle, this USD strength is dragging the commodity market lower in morning trading. In terms of advice for today's session, we will be paying close attention to the Eurozone data due out during the course of the morning session, all in all the morning has been relatively quiet and we don't expect to see any aggressive swings until Thursdays decision, if anything we would favour a move to the downside coming into this meeting but we expect to see all equity markets confined in their immediate short term risk ranges.
As we all know, we start a new month tomorrow, 'May' and the 'sell in May and go away' psychology is bound to be on the back of some traders minds, we have come a long way in a short period of time and this could be seen as an excellent opportunity to lock in some profit and take some money off the table.
Happy Trading
@lowkeycapital
Yesterday we saw another strong rally in the equity markets, and are we surprised? Not really. Over the last few weeks we have seen a lot an analysts trying to call a top of the market, but no news seems to be good news and markets continue to move higher. We saw the SPX trade above the 1594 and it looks as though 1600 is the next stop if the relative weakness in the USD continues. The trading day yesterday could be characterised by a total lack of volume and it was interesting for traders to see the morning momentum faded into the US close. As we noted yesterday all eyes will be on the ECB come Thursday and all of the Equity markets have largely priced in a rate cut, if Draghi does not deliver on this expect to see some panic selling across the board.
One of the biggest movers in yesterdays trading day was AAPL having its best day in over 3 months, it might be a bit early to call but I think there is a bottom in place and traders have begun to move money back into the tech giant as it now trades above its 50DMA. In the commodity market the USD weakness helped the commodity market pick up some gains with Gold, Silver and Brent all trading higher.
This morning we have seen the EURUSD pair give back some of its gains as the pair found soem significant resistance at the 1.31200 handle and now trades down below the 1.30800 handle, this USD strength is dragging the commodity market lower in morning trading. In terms of advice for today's session, we will be paying close attention to the Eurozone data due out during the course of the morning session, all in all the morning has been relatively quiet and we don't expect to see any aggressive swings until Thursdays decision, if anything we would favour a move to the downside coming into this meeting but we expect to see all equity markets confined in their immediate short term risk ranges.
As we all know, we start a new month tomorrow, 'May' and the 'sell in May and go away' psychology is bound to be on the back of some traders minds, we have come a long way in a short period of time and this could be seen as an excellent opportunity to lock in some profit and take some money off the table.
Happy Trading
@lowkeycapital
Monday, 29 April 2013
Breakfast Blog
Good Morning Traders,
This is the start of a big risk week for all the Major markets with the ECB's monthly meeting on Thursday followed by The Non-farm Payroll's on Friday afternoon from the States. The European Equity markets rallied all last week on bad news and have already priced in a cut to interest rates, so if the ECB don't cut rates on Thursday you can expect a massive pull-back in equity indexes and for a significant rally in the Euro currency.
Friday saw the release of the U.S. GDP for Q1, which came in much softer then forecast at 2.5% against the 3.0% growth expected. The Market took this data very well as it supports continued quantitative easing for the United States which will allow the Stock Markets to drift higher and higher. This is a very difficult thing for the Market bear's to accept as good and bad news pushes the Stock futures higher and complacency seems to be at an all time high as the VIX approaches all time lows. From a technical point of view the S&P 500 and the DAX look to both be forming the second shoulder of a head and shoulders reversal pattern on the Daily charts. This is an extremely bearish pattern as it shows the price struggling to go higher. Along with the Sell in May and go away saying that old fashioned investors coined about the Stock Market making its yearly gains in the first 4 months and the fact that the Market topped out on the 25th April last year their would be a lot of arguements to start entering short positions now.
However saying this, from a fundamental point of view the stock market looks like it could continue to drift higher towards 1620 or higher on low volume, maximum complacency and an attitude that the Market will be supported by central banks no matter how poor the economic data is.
Looking at Currencies, the EUR/USD is approaching the 1.31 handle as I type, supported by the formation of a new government in Italy over the weekend and with Italian bonds under 4% and the Dollar weaker from recent poor data the EURUSD could well drift higher regardless of a rate cut or not.
Today see's the release of German CPI data at 13 30 and some consumer confidence figures this morning, But all Traders will be waiting for The big risk events on Thursday and Friday and we suspect the markets may be quite range bound until then (Famous last words)!!
Some good levels to look out for in the EURUSD is 1.3020 downside and 1.31-1.3120 topside. Both Levels will be well defended. Looking at the Dax on a daily chart, There will be a lot of resistance around the 7,890 level, were at 7850 as i type. As I mentioned earlier, the 7890 level is the first shoulder of this Daily head and shoulders pattern that is forming. Looking at the S&P 500, it looks well supported on the downside as it tested the previous all time high of 1576 on friday post the GDP release and it held and may see further upside towards 1592 today, however if it breaks down through 1576 i would imagine a lot of traders shorting it as it would look like a topping pattern.
Good luck in the Markets. Lowkey
This is the start of a big risk week for all the Major markets with the ECB's monthly meeting on Thursday followed by The Non-farm Payroll's on Friday afternoon from the States. The European Equity markets rallied all last week on bad news and have already priced in a cut to interest rates, so if the ECB don't cut rates on Thursday you can expect a massive pull-back in equity indexes and for a significant rally in the Euro currency.
Friday saw the release of the U.S. GDP for Q1, which came in much softer then forecast at 2.5% against the 3.0% growth expected. The Market took this data very well as it supports continued quantitative easing for the United States which will allow the Stock Markets to drift higher and higher. This is a very difficult thing for the Market bear's to accept as good and bad news pushes the Stock futures higher and complacency seems to be at an all time high as the VIX approaches all time lows. From a technical point of view the S&P 500 and the DAX look to both be forming the second shoulder of a head and shoulders reversal pattern on the Daily charts. This is an extremely bearish pattern as it shows the price struggling to go higher. Along with the Sell in May and go away saying that old fashioned investors coined about the Stock Market making its yearly gains in the first 4 months and the fact that the Market topped out on the 25th April last year their would be a lot of arguements to start entering short positions now.
However saying this, from a fundamental point of view the stock market looks like it could continue to drift higher towards 1620 or higher on low volume, maximum complacency and an attitude that the Market will be supported by central banks no matter how poor the economic data is.
Looking at Currencies, the EUR/USD is approaching the 1.31 handle as I type, supported by the formation of a new government in Italy over the weekend and with Italian bonds under 4% and the Dollar weaker from recent poor data the EURUSD could well drift higher regardless of a rate cut or not.
Today see's the release of German CPI data at 13 30 and some consumer confidence figures this morning, But all Traders will be waiting for The big risk events on Thursday and Friday and we suspect the markets may be quite range bound until then (Famous last words)!!
Some good levels to look out for in the EURUSD is 1.3020 downside and 1.31-1.3120 topside. Both Levels will be well defended. Looking at the Dax on a daily chart, There will be a lot of resistance around the 7,890 level, were at 7850 as i type. As I mentioned earlier, the 7890 level is the first shoulder of this Daily head and shoulders pattern that is forming. Looking at the S&P 500, it looks well supported on the downside as it tested the previous all time high of 1576 on friday post the GDP release and it held and may see further upside towards 1592 today, however if it breaks down through 1576 i would imagine a lot of traders shorting it as it would look like a topping pattern.
Good luck in the Markets. Lowkey
Friday, 26 April 2013
Good Morning Traders
Another strong day for the equity markets yesterday,while the Euro lost some ground against its major currency pairs. One thing that has caught my attention over the last week or so in relation to the European equity markets is that they are beginning to trade very similar to that of their US counterparts. The US equity markets have been trading off the back of FED policy and whether news will effect QE, this has begun in Europe over the last week as all moves have become correlated to news relating to interest rate cuts. All interest rate related headlines have managed to cause aggressive swings and this play is likely to continue until next Thursday.
Today all eyes will be on the GDP figures for the US economy, traders are expected to see data showing that the US economy has grown in the first three months of 2013 at the fastest rate in more than one year. But don't be fooled the initial look at GDP often paints an exaggerated image of the economy. We are expecting to see a figure of 3.2% for annualised growth. We will be looking to see what sectors of the US economy are improving, and it will give individuals and government officials an indication of the success of QE.
Expect the morning to be quiet, we might see a move lower coming into the news release as traders take a bit of money off the table and lock in healthy gains from this weeks session. In Europe the news flow is quiet, so expect to see the market react to any comments made in relation to interest rates.
Happy Trading
Another strong day for the equity markets yesterday,while the Euro lost some ground against its major currency pairs. One thing that has caught my attention over the last week or so in relation to the European equity markets is that they are beginning to trade very similar to that of their US counterparts. The US equity markets have been trading off the back of FED policy and whether news will effect QE, this has begun in Europe over the last week as all moves have become correlated to news relating to interest rate cuts. All interest rate related headlines have managed to cause aggressive swings and this play is likely to continue until next Thursday.
Today all eyes will be on the GDP figures for the US economy, traders are expected to see data showing that the US economy has grown in the first three months of 2013 at the fastest rate in more than one year. But don't be fooled the initial look at GDP often paints an exaggerated image of the economy. We are expecting to see a figure of 3.2% for annualised growth. We will be looking to see what sectors of the US economy are improving, and it will give individuals and government officials an indication of the success of QE.
Expect the morning to be quiet, we might see a move lower coming into the news release as traders take a bit of money off the table and lock in healthy gains from this weeks session. In Europe the news flow is quiet, so expect to see the market react to any comments made in relation to interest rates.
Happy Trading
Thursday, 25 April 2013
Breakfast Blog
Good Morning Traders,
A lively week so far in the Markets, which has seen Europe adopt the "bad news is good" policy towards its Equity Markets. Poor German Manufacturing and Services Data was followed by a weak IFO Business Climate report Yesterday, which surely should have been negative for the Euro and for all European indexes, but instead we got a massive rally on the hope that the ECB will provide more accomodative policy and either cut interest rates or provide some sort of quantitative easing program to support the single currency. As I type now the German Dax is 350 points higher then it was this time on Tuesday Morning, with the Spanish Ibex and the Italian FTSE MIB realising similar gains.
The ECB's monthly meeting is next Thursday and the chance of a rate cut this soon is quite unlikely with only a handful of analysts predicting the cut to come next week, a more likely scenario would be a cut at the June meeting which would give the ECB time to analyse the Economic data before making a decision. I would expect some very dovish rhetoric from Mario Draghi next Thursday which may in itself help reduce the Exchange rate of the currency even though they claim this is not a mandate for them.
American Data has been very soft this week and is also helping to support EURUSD price action, this is also helping to support the American Equity Indexes aswell because with bad news they have the promise of never ending Quantitiative Easing. Today we see the release of the weekly Initial Jobless claims, which is the only tier 1 data from the States today with tomorrow's big Q1 GDP number on every traders mind.
Some good levels to look out for in the EURUSD pair is 1.3080 topside as a big resistance level and 1.30 downside. Looking at the S&P 500, 1576 is a previous high and there is not much in the from of resistance now until 1600, so any bullish data may see the market return to this level quickly.
Best of luck in the Markets.
A lively week so far in the Markets, which has seen Europe adopt the "bad news is good" policy towards its Equity Markets. Poor German Manufacturing and Services Data was followed by a weak IFO Business Climate report Yesterday, which surely should have been negative for the Euro and for all European indexes, but instead we got a massive rally on the hope that the ECB will provide more accomodative policy and either cut interest rates or provide some sort of quantitative easing program to support the single currency. As I type now the German Dax is 350 points higher then it was this time on Tuesday Morning, with the Spanish Ibex and the Italian FTSE MIB realising similar gains.
The ECB's monthly meeting is next Thursday and the chance of a rate cut this soon is quite unlikely with only a handful of analysts predicting the cut to come next week, a more likely scenario would be a cut at the June meeting which would give the ECB time to analyse the Economic data before making a decision. I would expect some very dovish rhetoric from Mario Draghi next Thursday which may in itself help reduce the Exchange rate of the currency even though they claim this is not a mandate for them.
American Data has been very soft this week and is also helping to support EURUSD price action, this is also helping to support the American Equity Indexes aswell because with bad news they have the promise of never ending Quantitiative Easing. Today we see the release of the weekly Initial Jobless claims, which is the only tier 1 data from the States today with tomorrow's big Q1 GDP number on every traders mind.
Some good levels to look out for in the EURUSD pair is 1.3080 topside as a big resistance level and 1.30 downside. Looking at the S&P 500, 1576 is a previous high and there is not much in the from of resistance now until 1600, so any bullish data may see the market return to this level quickly.
Best of luck in the Markets.
Tuesday, 23 April 2013
European Morning Review
Good Morning Traders
We are coming to you slightly later than usual this morning as we decided to wait for the heavy news flow out of the EU to pass before writing the blog.
This week we have got off to a slow start, and we seem to be still hovering around this levels stuck in a tight range. There has been repeated speculation that this may be the top of the equity markets both here in Europe and across the water in the US but we have failed to breach our short term resistance levels for this play to be confirmed. This mornings news-flow can be seen summarised below;
We are coming to you slightly later than usual this morning as we decided to wait for the heavy news flow out of the EU to pass before writing the blog.
This week we have got off to a slow start, and we seem to be still hovering around this levels stuck in a tight range. There has been repeated speculation that this may be the top of the equity markets both here in Europe and across the water in the US but we have failed to breach our short term resistance levels for this play to be confirmed. This mornings news-flow can be seen summarised below;
- French Services PMI 44.1 vs 42
- French Manufacturing PMI 44.4 vs 44.3
- German Manufacturing PMI 47.9 vs 49
- German Services PMI 49.2 vs 51
- Eurozone Services PMI 46.6 vs 46.6
- Eurozone Manufacturing PMI 46.5 vs 46.8
The morning started off on a positive note as the French figures beat analysts expectations, however early gains were wiped away as the German data was at its lowest level since 2009. The Eurozone figures came in broadly in line with analysts expectations. In between all of this we had hints on the newswires that the ECB may in fact be stepping closer to cutting interest rates off the back of the relatively weak data. As we know this would be positive for the European equity markets and be negative for the Euro currency against its major pairs.
We have seen the European equity markets move back to session lows and the US equity futures are trading in the negative. We will remain cautious over the next few hours as any further hints in relation to a rate cut could cause a significant move to the upside. At the time of writing the EURUSD is trading below its significant 1.30 handle.
One of the big headlines today is the Apple Q1 results due our after the closing bell of the US session. Analysts are expecting a lower figure and earnings per share to fall slightly year on year. If its a big miss we could see the US equity indices lose some significant ground in after hour trading.
Happy Trading
Thursday, 18 April 2013
Morning Update
Good Morning,
An incredible weak of volatility for all asset classes; European and American Stocks, Commodities, Currencies and the lowest T note yield registered since 2013.
Last Friday Gold breached a very important technical level at 1525, which was a weekly triple bottom. The break of this level started a wave of heavy volume selling, together with rumours of leveraged funds being margin called caused a complete commodity sell off with Silver, Copper and Oil getting in on the act. Gold reached a bottom at 1324 on Monday evening where it bottomed, important support comes in at 1301, and a break of this level will inevitably lead to further declines. Looking at the Equity Markets, The German Dax broke through the 100 day moving average yesterday on Rumours of a German Sovereign downgrade. This downgrade came in the form of a small ratings agency called Egan Jones. The Dax lost over 200 points yesterday, closing below 7500. Strong support comes in for the Dax around the 7450 level (previous highs) and at 7365(200 Day MA).
The S&P 500 has been correcting heavily this week after making new all time highs last week and nearly reaching the 1600 level. It broke through intermediate trendline support at 1557 and reached lows of 1542. Important support comes in at 1537 which is a double bottom and the March lows. A break of this level will lead too a deeper correction towards 1500.
EUR/USD had a 200 pip rally on the back of bad news on Tuesday and then sold off 200 pips yesterday on the back of comments from ECB's Jens Wiedmann opening the door to potential rate cuts either in May or June, The negative sentiment in the Markets also added to the Euro's sell off, Giving the Yen some strength as traders moved money to the safe haven of the Japanese Currency.
American T-Notes also printed a 2013 record low yield at 1.67% as rumours of black box selling of E-Mini contracts and a Buy program of US Ten Year's was noted on Tuesday. Pimco's Bill Gross also came out stating he liked treasuries at these levels. This would lead us to believe that the Equity Market will likely correct sooner rather then later as Investors will put money into Defensive stocks and Bonds until they can Buy the Equity Market back at more attractive levels.
An altogether extremely volatile week for a number of reasons. We believe there will be a lack of direction in all Instuments for the coming weeks, so price action will likely be up and down with big swings in the Equity Market. Best option is to enter the Market with an open mind everyday and take a position on the basis of the Mood of the market and at the extreme's of the range that will likely prove strong Support or Resistance levels.
Good Luck in the Markets.
An incredible weak of volatility for all asset classes; European and American Stocks, Commodities, Currencies and the lowest T note yield registered since 2013.
Last Friday Gold breached a very important technical level at 1525, which was a weekly triple bottom. The break of this level started a wave of heavy volume selling, together with rumours of leveraged funds being margin called caused a complete commodity sell off with Silver, Copper and Oil getting in on the act. Gold reached a bottom at 1324 on Monday evening where it bottomed, important support comes in at 1301, and a break of this level will inevitably lead to further declines. Looking at the Equity Markets, The German Dax broke through the 100 day moving average yesterday on Rumours of a German Sovereign downgrade. This downgrade came in the form of a small ratings agency called Egan Jones. The Dax lost over 200 points yesterday, closing below 7500. Strong support comes in for the Dax around the 7450 level (previous highs) and at 7365(200 Day MA).
The S&P 500 has been correcting heavily this week after making new all time highs last week and nearly reaching the 1600 level. It broke through intermediate trendline support at 1557 and reached lows of 1542. Important support comes in at 1537 which is a double bottom and the March lows. A break of this level will lead too a deeper correction towards 1500.
EUR/USD had a 200 pip rally on the back of bad news on Tuesday and then sold off 200 pips yesterday on the back of comments from ECB's Jens Wiedmann opening the door to potential rate cuts either in May or June, The negative sentiment in the Markets also added to the Euro's sell off, Giving the Yen some strength as traders moved money to the safe haven of the Japanese Currency.
American T-Notes also printed a 2013 record low yield at 1.67% as rumours of black box selling of E-Mini contracts and a Buy program of US Ten Year's was noted on Tuesday. Pimco's Bill Gross also came out stating he liked treasuries at these levels. This would lead us to believe that the Equity Market will likely correct sooner rather then later as Investors will put money into Defensive stocks and Bonds until they can Buy the Equity Market back at more attractive levels.
An altogether extremely volatile week for a number of reasons. We believe there will be a lack of direction in all Instuments for the coming weeks, so price action will likely be up and down with big swings in the Equity Market. Best option is to enter the Market with an open mind everyday and take a position on the basis of the Mood of the market and at the extreme's of the range that will likely prove strong Support or Resistance levels.
Good Luck in the Markets.
Friday, 12 April 2013
Good Morning Traders
We have seen a solid week of gains for all the bulls out there with European stocks posting their biggest four day gain since early January. Across the water the US equity market has continued to make new historic heights and previous highs are now acting as support levels as we test these new levels. In yesterdays US trading session we saw initial Jobless claims falling more than previously estimated by analysts. The important thing we need to look at now is the next move and what we expect to see during today's trading session. I think today could be seen as a great opportunity for bulls to take some money off the table and lock in some gains ahead of the two day Ecofin meeting extension starting today. This meeting amongst European finance leaders should be treated with caution by traders as the agenda includes; bailout extensions for Portugal and Ireland, the ballooning Cypriot bailout and the issue of Slovenia is sure to raise an element of uncertainty.
Already this morning we have seen a lower open across the board, and I would expect to see this direction hold throughout the days trading session.
In terms of the FX markets the EUR has struggled overnight coming off its highs against some of the major pairs. The EURUSD touched the 1.31400 handle in yesterdays session but now trades slightly lower around the 1.30700 level. It looks to me as though the EURUSD pair is on course to the 1.32-1.33 in the short term, and it is also interesting to note that all the analysts calling for 1.16-1 levels on the pair are no where to be seen these days. One of the big stories of the week has been the JPY weakness off the back of Kurodas aggressive monetary easing policies. The EURJPY pair broke through the 130 handle and traded above the 131.100 handle for a brief period, however there has been some EUR weakness overnight and in the early morning session so the pair trades currently at 129.900. One thing we will be keeping a close eye on is the USDJPY we were all expecting to see a test of the 100 level but we fell just short of this a few times during the week, At the time of writing the pair trades below 99.300 so a test of this level is unlikely today but we expect to see the barrier broken in the short term.
In conclusion, the play all week has been to buy the dips and trading has been relatively straight forward however I would be a bit weary today adopting that approach as we could see some profit taking going into the weekend. Things in North Korea look to be getting serious and we have the European leaders meeting in Europe so lets just take a cautious stance in today's trading session and wait for opportunities.
We have seen a solid week of gains for all the bulls out there with European stocks posting their biggest four day gain since early January. Across the water the US equity market has continued to make new historic heights and previous highs are now acting as support levels as we test these new levels. In yesterdays US trading session we saw initial Jobless claims falling more than previously estimated by analysts. The important thing we need to look at now is the next move and what we expect to see during today's trading session. I think today could be seen as a great opportunity for bulls to take some money off the table and lock in some gains ahead of the two day Ecofin meeting extension starting today. This meeting amongst European finance leaders should be treated with caution by traders as the agenda includes; bailout extensions for Portugal and Ireland, the ballooning Cypriot bailout and the issue of Slovenia is sure to raise an element of uncertainty.
Already this morning we have seen a lower open across the board, and I would expect to see this direction hold throughout the days trading session.
In terms of the FX markets the EUR has struggled overnight coming off its highs against some of the major pairs. The EURUSD touched the 1.31400 handle in yesterdays session but now trades slightly lower around the 1.30700 level. It looks to me as though the EURUSD pair is on course to the 1.32-1.33 in the short term, and it is also interesting to note that all the analysts calling for 1.16-1 levels on the pair are no where to be seen these days. One of the big stories of the week has been the JPY weakness off the back of Kurodas aggressive monetary easing policies. The EURJPY pair broke through the 130 handle and traded above the 131.100 handle for a brief period, however there has been some EUR weakness overnight and in the early morning session so the pair trades currently at 129.900. One thing we will be keeping a close eye on is the USDJPY we were all expecting to see a test of the 100 level but we fell just short of this a few times during the week, At the time of writing the pair trades below 99.300 so a test of this level is unlikely today but we expect to see the barrier broken in the short term.
In conclusion, the play all week has been to buy the dips and trading has been relatively straight forward however I would be a bit weary today adopting that approach as we could see some profit taking going into the weekend. Things in North Korea look to be getting serious and we have the European leaders meeting in Europe so lets just take a cautious stance in today's trading session and wait for opportunities.
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