Vantage FX | Fiscal Cliff deal down to the wire, stocks and Aussie Dollar pressured | 31st December 2012

December 31, 2012 By

Friday night’s big falls in the S&P 500 and the Dow is possibly the best thing that has happened in the past few weeks to push the ever self indulgent politico class toward some sort of deal over the fiscal cliff.

But as we’ve written often lately we should never underestimate the ability of the political class to push things to and through the limit in a game of brinkmanship as they remain fascinated with their own importance and forget about the real impact of their decisions. So as we have just 1 day to go in US time before the cliff the Senate and the House are feverishly still trying to hammer out a deal that can pass by the deadline or at least patch something together that can pass.

But having waited till now to sort things out and with John Boehner’s authority as the leader of the Republicans in the House less strong than it has been we remain wary that even though the President has the better hand and even though he is positioning the Republican’s nicely as the villains in this drama there is no guarantee that a deal will be done in the time allotted.

So today and tonight’s pre-holiday trade could be volatile in either direction as trade goes with the flow of news headlines.

The latest one from CNBC is that there has been a “major setback” in talks.

So all we have is price to lead us and on that front the sharp fall in the S&P 500 on Friday and the related move in the futures we track has left the index right on the support we noted last week.

s&p 500 index, spx index quote - (snc) spx, s&p 500 index index price

I noted on Friday that my indicators were pointing lower and one of my trend following systems is now short (on a futures basis) at 1395 with a stop at 1428.35. Small position with 1% equity at risk – dangerous at a time like this but if you have a process and you get signals then you have to take those signals. If a deal is done there is a risk of a 1% loss but if a deal is not done – well we’ll see.

Stocks

Anyway on the physical market at the close the Dow was off 1.21% or 158 points to 12938 while the S&P 500 closed at the previous day’s low of 1402 for a loss of 15.67 points or 1.10%. The Nasdaq was 0.86% lower.

In Europe Frankfurt closed the year (it’s a holiday today) with a fall of 0.57% at 7612 but over the year but having closed 2011 at 5894 the DAX is up more than 29% in 2012 which is a phenomenal performance given the economic and political headwinds that it has faced. As you can see in the chart below from VantageFX (yes you can trade the DAX and other Indices) it  looks like an interim top might be in place.

dax, frankfurt stock exchange, dax quote, dax chart

 

In other European markets the FTSE closed Friday down 0.49% while the CAC was off 1.48%. Milanese stocks fell 0.82% while in Spain stocks fell 1.81%.

Looking back to Asia on Friday it was a more positive day with gains in most markets so look for these to be unwound sharply if a deal is not done today.

Global FX

bad news for the equity markets even though it is sourced in the US and firmly of the making of US lawmakers is still good news for the US dollar and so it was again on Friday night. This combination stopped the Aussie’s rally against the US in its tracks as you can see in the chart below shoing the 4 hour chart of the Aussie versus the S&P 500.

aud, audusd, australian dollar, australian dollar price quote, audusd versus spx

 

The key downside level is 1.0342 in the short term and a move below here would open the way lower. After two days of looking for an Aussie Dollar rally it is clear it will only eventuate in the short term if a deal to avert the cliff is done and stocks rally. Against the crosses the Aussie did better largely across the board except for GBP and this may continue if the weakness continues in stocks.

eur, eurusd, euro, euro (eur) price quote

The Euro is still dancing on the spot and only a break of 1.3150 would open the way lower or a push up and through 1.3315 giving more topside momentum. This range is defined in the turquoise box on the chart above.

Dollar Yen hit, breached but closed below the trendline we have been targeting for a while now on Friday and unless or until we see a close above that level then it should remain resistance. There is a chance that an interim top is in for USDJPY but overall the trend to a substantially weaker Yen over coming quarters is in train – just like new PM Abe wanted.

Commodities

The 200 day moving average was once again solid resistance for the Nymex Crude contract and $91.71 is a key level in the short term as a result. Crude closed at $90.62 Bbl. On the precious stuff Silver was off 0.87% to $30.04 oz. while Gold dropped 0.47% to $1653 and is resting on trendline again. $1635 remains the level that would see me call a trend chain.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: December, Market Wrap Tagged With: , , , , , , ,

Vantage FX | Stocks and Aussie recover from Fiscal Cliff fears | 28th December 2012

December 28, 2012 By

It is all about the Fiscal Cliff again overnight with stocks and risk assets generally under pressure and the US dollar catching a bid after Democrat Senate Leader Harry Reid said he thought the US was headed over the cliff. The S&P fell to a low of 1402 before a slight recovery after Republican Senator Scott Brown posted on Facebook and Twitter that he was jumping on a plane to review a plan from the President.  News that the House will sit on Sunday December 30 at 6.30 pm from Bloomberg gave the recovery more fuel.

There really isn’t much to say about the outlook here given that it is so tied up with the whims of US politicians and their ability, or not, to reach a deal on the cliff. Can they? Will they? Who knows? A deal will get done eventually but it might take the Cliff and market’s reaction to get the deal done as it did back in 2008 when the Senate didn’t pass Hank Paulson’s first rescue bill. One big issue that we have no way to judge the impact of on negotiations is the apparent slip in Republican House Leader Boehner’s grip on power and the leadership after last week’s vote debacle. Can he really speak for his colleagues in negotiations or is he just an empty vessel now?

It makes it much harder to know what the outcome might be but suggests that if the President wants to land a killer blow then he can do it but the cliff might come first.

Anyway we may not be able to judge the actions of the people involved and only guess at the outcome but we do know there are some significant levels to watch  in the S&P 500 which is still driving sentiment and outcomes in other markets.

s&p 500 index, spx index quote - (snc) spx, s&p 500 index index price

 

The blue box on the chart above contains two trendlines and the 200 day moving average at 1390, 1387 and 1385 respectively. Should the S&P fall down through here then the outlook darkens and a move back to recent lows at 1337 comes into the frame.

Now we always say respect levels until they break and aggressive traders can use this zone for longs with a stop and reverse should they wish to trade that way (usual caveats apply folks and please see disclaimer) but my indicators at the moment are pointing lower.

jpy, usdjpy, yen, dollar yen, dollar yen quote

Elsewhere many eyes have turned to Japan and the new Government taking office. The Yen was under pressure again yesterday as it closes in on the old trendline we highlighted yesterday. Given it is above the 200 week moving average for the first time since 2007 it is clear that the trend in the Yen is turning but on the dailies it is looking extremely overcooked at the moment so we’ll see what kind of resistance this 86.45/50 region provides.

aud, audusd, australian dollar, australian dollar price quote, audusd versus spx

For the Australian dollar its last 24 hours have been heavily influenced by the moves in the S&P 500 as you can in the hourly chart above of the relative price moves since December 7th. The low of 1.0343 overnight was almost exactly at the point of the equity low and the move back to 1.0376 where the Aussie sits now has been on the back of the recovery of the S&P from more than 1% lower to just 0.23% lower with 33 minutes to go in US trade.

aud, audusd, australian dollar, australian dollar price quote, audusd

 

As you can see in the AUDUSD chart above this turned the last day’s candle from a negative to a positive and the bias based on the 4 hour charts is for a further recovery toward the 1.0420 region we highlighted yesterday.

Stocks

As noted above the US is recovering from the lows and with 29 minutes to go the S&P 500 is off just 0.2% at 1417, the Dow is down 0.21% at 13,087 and the Nasdaq off 0.17%. Earlier in Europe and before the harry Reid comments the FTSE was unchanged, the DAX up 0.26%, the CAC rose 0.59% and Italian stocks were 0.45% higher.

In Asia yesterday it was another positive day for Japanese stocks as the Yen weakened with the Nikkei rising 0.91%. The Hang Seng was 0.35% higher but in Shanghai stocks fell 0.59%. In Australia the All Ords rose 0.34%.

Commodities

Crude is approaching its 200 day moving average at $91.79 and closed trade at $91.00 overnight. Gold was uo 0.17% to $1662 while silver was 0.67% higher at $29.98.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: December, Market Wrap Tagged With: , , , , , ,

Vantage FX | Yen up Nikkei down, Aussie finds support | 27th December 2012

December 27, 2012 By

Central banks have taken the lead in this crisis over the past 5 years driving interest rates to zero in many jurisdictions and providing their balance sheets in order to perform quantitative easing. All of this has been aimed at lowering the return on saving and driving money into the stock market and other areas of the economy  in the hope that where the stock market goes so goes the overall economy.

While the US, European and Japanese economies continue to struggle with high unemployment rates and generally low rates of aggregate demand their stock markets have certainly benefited from the unconventional monetary policy.

The election of Shinzo Abe in Japan and his overt attack on the Bank of Japan’s independance is a game changer for Japanese markets and the Yen and potentially a negative game changer for the globe. On his first day in office yesterday Abe upped the ante on the BoJ saying that  ¥90′s, against the US dollar, was very different for Japanese business than ¥80′s. The Wall Street Journal is reporting that he said,

as a minimum if the U.S. currency “is above ¥85, companies that haven’t been paying taxes until now” because they are making a loss would be able to pay taxes.

Mr. Abe also repeated calls for the central bank to set a firm 2% inflation target at its January policy-board meeting and threatened to take legislative action to force the bank’s hand.

Adding to the speculation that the Abe election is a game changer were the minutes from the recent BoJ meeting which showed a desire to explicitly target a weaker Yen.

jpy, usdjpy, yen, dollar yen, dollar yen quote

As you can see the USDYen is up sharply and holding above 85 this morning at 85.60. It is now above the 200 week moving average for the first time since December 2007 and approaching an old support resistance line that stretches back to 2009 and comes in at 86.61 at the moment.

NKY Chart - Nikkei 225 Index - Bloomberg

As a result of the combination of Abe, the BoJ and the USDJPY sell off the Nikkei was up almost 1.5% yesterday and the index, as you can see in the Bloomberg chart above, has now clearly broken a multi-year down trend and taken out the high for 2012 on very strong volume suggesting that fresh money is being put to work.

These moves are based on hope more than anything concrete but clearly the new Japanese Prime Minister has won a mandate to tries his policies and try he will – so markets are giving him the benefit of the doubt for the moment.

Elsewhere the big news was that even though house prices fell in October they are still up 4.3% year over year according to the Case Shiller house price index in the US but this news has been more than overshadowed by disappointing results for the holiday shopping season from US retailers and the enduring Fiscal Cliff Shenanigans.

Stocks

So with 23 minutes to go before the close the S&P 500 is off its lows for the day and is down 4.96 points or 0.35% to 1421.70. The Dow is only 0.09% while the Nasdaq is off 0.61%.

Global FX

The Aussie Dollar was under pressure and fell as expected over the Christmas period finding support just above the old downtrend line it broke up through a little while ago – it’s funny how these old lines work when in theory they have little relevance but it simply suggests that like me traders and strategists leave them on their charts.

aud, audusd, australian dollar, australian dollar price quote

You can see this pattern on the chart above. As it stands this morning the 4 hour and daily charts suggest a short term rally as long as the AUDUSD are above 1.0335/39 with a target of 1.0420 maybe 1.0447. On the downside we have support at this 1.0335/39, 61.8% retracement of the 1.0150-1.0584 at 1.0314 and below this the 200 day moving average at 1.0294. 1.0280 is a very big level as well representing the 6 week low.

The Euro  sits at 1.3219 this morning while GBP is at 1.6132 with a bias to fall further once 1.6090 gives way.

Commodities

Gold sits at $1660 oz largely unchanged while Silver is up 0.48% to $30.19 oz. Oil and copper were big movers however with nymex crude up 2.69% to $90.99 Bbl and Copper rose 1.50%. The Ags were smashed lower however with Corn down 1.56%, Wheat fell 2.52% and Soybeans fell 1.06%.

Filed Under: December, Market Wrap Tagged With: , , , , , ,

Vantage FX | Merry Cliffmas – no deal, Aussie and Stocks fall | 24th December 2012

December 24, 2012 By

Just before I kick off with the overnight report can on behalf of VantageFX can I wish our readers and their families all the best for Christmas – it is a wonderful time of year for family and friends to get together and reconnect. The job of course will be to keep those connections strong all through the next year. If possible we would wish this and good health as our Christmas gift to you.

Greg McKenna

Now to the report

The week ended poorly for stocks and the Aussie Dollar as the lack of a deal on the Fiscal Cliff and John Boehner’s self inflicted obvious defeat appeared to leave the negotiations no closer than they had been at any stage since they began. The push for the Republican vote and then the reality that Boehner can’t even carry his own caucus hit markets on Friday with US markets off something in the order of 1% and the US dollar and the Japanese yen gaining.

Over the weekend Boehner said there is still a chance of a deal but now that we know he has between 40 and 50 members he can’t carry then we retain hope of a deal but it looks like it will fracture his party and or his leadership and we wonder is he prepared to go that far – does he have that vision. We hope so.

Before we move to the close of the markets a couple of things worth noting in the data Friday night was the strength of Durable goods in the US which rose 0.7% in November which was much stronger than the 0.2% expected and the non-transportation component was up 1.6% against expectations of -0.2%. There was also good news on the personal income front which rose 0.6% in November. Elsewhere the UK’s Q3 GDP data came in around expectation at 0.9% but as the budget deficit worsens so too then is the Triple A rating at risk.

Stocks

Stocks in Europe were all lower with the FTSE down 0.31%, the DAX off 0.47% and the CAC off 0.40%. Spanish and Italian stock markets went in different directions with Milan off 0.40% and Madrid up 0.35%

At the close the S&P 500 was off 13.54 of 0.94% to 1430 which is a big down move but the recovery from the low around 1423 still leaves the market up on the week so its a relative sell off over the cliff and suggests that on balance the market still thinks that a resolution will be achieved. The Dow fell 0.91% and the Nasdaq was off 0.96%.

In Asia on Friday it was Fiscal cliff fear and disappointment about the BoJ that hit stocks with the Nikkei off 0.99%, the Hang Seng down 0.68%, the Kospi down 0.95% and Shanghai off 0.69%. The All Ords was down 0.25% but the SPI200 futures have recovered from the lows so like the US markets a weaker end to what was still a pretty positive week.

Global FX

The Australian dollar, suffering under the weight of a very long speculative community, cracked also and went down and to the key 1.0380/1.04 region we identified on Friday morning  and it closed the week below the uptrend line from the October low of 1.0150.

aud, audusd, australian dollar, australian dollar price quote

On the 4 hour chart the Aussies slide is looking a little over cooked and it may find some support in the 1.0380 region we had identified as our target. Equally suggestive of some AUD recovery is the fact that the AUD is oversold relative to the move (and recovery from the lows) of the S&P 500. The target for a bounce might be 1.0447 which is the 200 period moving average of the 4 hour chart. The previous uptrend comes in at 1.0348 today so if the Aussie slips further this would be first support.

We are not going to fight this emerging sell off because we know that the large levered community is or has been very long Aussie Dollars on the IMM and so there is plenty of selling pressure from this quarter and associated accounts if this fiscal cliff mess drags on and if the US dollar retains a bid tone.

Elsewhere in Global FX land the weakness in stocks saw USDJPY under pressure but as stocks came back so too did dollar yen. It is pretty clear that 83.77/81 is the support zone for USDJPY and a break is needed to open the way lower.

eur, eurusd, euro, euro (eur) price quote

Euro was also off its highs  and it too seems to have a fairly obvious support zone that would need to break or indeed trigger a deeper retracement. That level is 1.3139 as you can see in the chart above.

Commodities

Crude reversed off the recent target we had for it on Friday with a fall of 1.63% to $88.96 Bbl and you can see in the correlation with many other markets that this is a fear/USD move.

gold, gold price quote, XAUUSD

Consequently you won’t be surprised to see that Gold and Silver reversed recent weakness as well climbing 0.86% and 1.79% to $1654 oz. and $29.66 oz. Gold’s rally in particular dragged the Yellow metal back inside the big multi-year uptrend so it hasn’t broken yet on that basis as you can see in the chart above.

Data

Nothing until Thursday night – so enjoy.

We’ll be back Thursday after the Christmas and Boxing Day Holiday’s here in Australia.

Feliz Navidad

Filed Under: December, Market Wrap Tagged With: , , , , , ,

Vantage FX | Gold falls hard, Boehner ups the fiscal cliff pressure| 21st December 2012

December 21, 2012 By

Just when you think it is OK to focus on Christmas and forget about the fiscal cliff the need of the political class to poke each other in the eye and get their faces on TV knows no bounds. Overnight we learnt that US Republican leader John Boehner is planning to take his “Plan B” to the vote in the House of representatives this week but Democratic Senate leader Harry Reid said that it won’t get through the Senate.

Just so you can see the stupidity of this argument below is a graphic from MarketWatch which shows the difference between the Obama and Boehner plans.

Trivial difference between Boehner and Obama

It’s cream pies at 20 paces folks and it’s just posturing and is plain stupid. All the while the ranks of the American poor grow, markets are on tenterhooks and the chance of a repeat of the debacle of 2008 in markets after the Lehman collapse grow. But at least the Politicians get on the telly.

Right, enough of the rant for the day because there was a little bit of positivity in the markets which are up in the US as I write this morning with the 3rd read of Q3 GDP which took the annualised pace of growth up to 3.1% from the 2.8% expected. Of course hardly anyone expects this to be replicated this quarter thanks to the concerns over the Cliff but the fact that personal consumption which was also released overnight came in at +1.6% as expected gives some hope growth has not collapsed. The Philly Fed index was likewise positive printing at 8.1 from -10.7 last and against pundit expectations of a -3 print. Existing home sale were also up at 5.9% from 1.5% last. On a darker note however jobless claims increased 17,000 to 361,000.

Gold

Of bigger interest overnight given the discussions of the past week and my view that Gold was going to tank was the price action in precious metals. Gold fell $21.20 and is down 1.27% at $1645.30 oz. as I write but off the low of $1637.60 according to Reuters.

As we head into the weekly and then very soon the yearly close I am watching Gold very closely. Some of my systems are already short gold but a press below $1635 oz. would for me be the decisive break of the multi year uptrend line and a signal of a much deeper retracement to come. Even Gold bull Jim Rogers is cautious yesterday I saw him quoted as saying,

“Most things correct 30 percent every year or two, even in big bull markets – 30 percent corrections are normal and yet gold has only done that once in the past 12 years,” Rogers said. “Gold on any kind of historic market basis is overdue for a nice correction.”

gold, gold price quote

 

As you can see in the chart above gold has been trending lower for some time now and the lower of the two red lines stretches back to the start of the Gold bull run which commenced in 2008. If we get a weekly and or monthly close below $1635 then I’ll be looking for a run to $1434 in time.

Stocks

At the close Europe was largely unchanged with the FTSE, CAC and DAX all 0.05% either side of square.

In the US with 48 minutes to go the S&P is up 0.36% to 1440.98, the Dow is 0.19% higher and the Nasdaq is up 0.15%.

In Asia yesterday it was a case of buy the BoJ rumour sell the BoJ fact. The Bank of Japan said that it would expand its asset buying program by ¥10 Trillion to ¥101 Trillion but the Nikkei and other traders seemed disappointed that they did not point to a the 2% inflation target that Abe and his conservative colleagues are pushing for. No doubt the BoJ can count and knows what this might do to the country’s finances.

At the close the Nikkei was 1.19% lower, but this was largely japan specific profit taking after the big run recently. The Hang Seng was up 0.16%, the Kospi rose 0.32% on the day that they elected their first Female President and Shanghai was 0.28% higher. In Singapore the Straits Times rose 0.54% and in Australia the ASX All Ords was up 0.29%.

Global FX

Not big moves over the past 24 hours but some decent ranges with Euro trading a low of 1.3187 to a high of 1.3295 and is currently up 0.11% at 1.3241. Stirling is up 0.20% to 1.6279, Dollar Yen largely unchanged at 84.38 while USDCAD is down 0.12% at 0.9837. The AUDUSD spent the last 24 hours dancing on the spot and is roughly unchanged at 1.0481.

eur, eurusd, euro, euro (eur) price quote

The 4 hour charts for EUR suggest a double top around 1.33 and are signalling a potential fall back to last nights lows and if that gives way 1.3145/55.

aud, audusd, australian dollar, australian dollar price quote

The Australian Dollar made a low at 1.0459 over the past 24 hours which was in my 1.0450 region identified yesterday. The bounce has been encouraging for those looking for more positive price action. Should the 1.0450 region break then the big support comes in at the bottom of the uptrend channel that comes in at 1.0400 today.

Commodities

We have noted gold above and Silve also had a big fall, in fact much bigger then gold as it lost 3.91% to $29.83 oz. As we wrote recently we had a target for a fall to $30.60 which has been materially exceeded overnight and the charts look like it may want to test important trendline support at $29.45/55. We’ll keep an eye on it.

Oil tired to break up through yesterday’s high and our target level but has closed below it at $90.21 for a gain of 0.26%.  Copper was 1.93% lower while the Ags were also off sharply with Corn down 0.92%, Wheat off 1.77% and Soybeans 2.09% lower.

Datawise

BOJ Monthly economic survey in our time zone today and then French Business Climate tonight together with UK GDP and Public sector borrowing out. In the US the Chicago Fed index is out as is Durable goods and more personal income data.

Catch me on Twitter @gregorymckenna or @FX_Global

Filed Under: December, Market Wrap Tagged With: , , , ,
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