Stocks make new alltime highs dragging Aussie with them, Yen trying to break out

November 18, 2013

Markets are nothing if not ebullient after the Yellen induced rally combined with strength in the Nikkei and a weaker than expected NYC Empire manufacturing number (-2.2 v +5 expected) to further reinforce the Yellen rally.

The result of course was the S&P 500 and the Dow both closed on new all time highs in Friday’s trade and higher for the 6th week in a row.   The markets closed on their highs with the Dow up 0.54% to 15, 962, the Nasdaq rose .33% to 3,986 while the S&P 500 was up 7 points or 0.41% to 1,798. No one seems to be fighting this rally at the moment and only fears of Dectaper can really derail it at the moment.

In Europe early weakness gave way to recovery and the FTSE finished up 0.4% to 6,693, the DAX rose 0.21% to 9,169 and the CAC was 0.19% higher. IN Milan the FTSEMIB dropped 0.39% and in Spain the IBEX fell 0.13%.

Our own market has had a stellar recovery from last week’s lows around 5316 with the ASX on Friday up 0.86% in what was very positive Asian trade lead by a big 1.95% rally in the Nikkei as the Yen weakened up through 100. On the Sydney Futures Exchange the SPI 200 contract rose another 8 points to 5417 bid.

The SPI 200 just won’t go down and as noted has rallied off the 5316 low of last week as was really expected given the oversold nature of the 1 and 4 hour charts. The question of course is where to now.

Looks like the parameters of a box forming, we know the low and the high. I’m short again with a stop above 5483.

On Forex markets the US dollar lost ground everywhere except against the Yen where it rose 0.21% to 100.21. Technically though USDJPY has not broken yet and it is worth thinking about the nature of breaks. Sometimes the breach of a trendline leads to a big move higher or a cascade lower, other times price action too’s and fro’s indecisively for a few days.  So it i with USDJPY at the moment.

As you can see in the chart above the top of the little uptrend that USDJPY has is roughly concurrent with the bottom line, now resistance, of the pennant USDJPY broke out of, and down, back in September.

Resistance below 100.50/70 is going to be solid and I’m not convinced of a break higher unless the upper level gives way – then USDJPY can run to 104 otherwise it is biased toward 99 in the first instance.

The Aussie dollar was up 0.47% as risk appetite boosted buying and the Euro rose to 1.3491 up 0.25%. Sterling’s Carney induced rally continued and it was up 0.32% to 1.6114.

It’s worth thinking about the Aussie’s look technically and ask how high can the Aussie rally?

Clearly the Aussie has found a base over the past 4 trading days – is it about to rally to form the right shoulder of a big head and shoulders and then crash or will it just keep heading higher.

The blue line is the potential rally, the red line the potential crash.

For the moment the base is in so we’ll deal with the move higher unless or until the low of last week at 0.9266 breaks.

On commodity markets Gold was largely unchanged at $1,288 an oz, Nymex Crude was 0.1% lower at $93.66 and copper rose half a percent to $ $3.18 lb. Our friends in the Bitcoin market which never closes took it up to a high just under $520 over the weekend a full $220 or more than 66% higher than the low for the week.

On the data front it is a very quiet start to the week but the closer we get to December and the next FOMC meeting so the importance of every data point and Fed utterance grows. So Bill Dudley and Charles Plosser’s speeches tonight are worth watching.

Today Chinese house prices are out and EU current account tonight before US TIC flows which might be important to gauge any impact of the Capitol Hill shenanigans on offshore sentiment toward investing in the US.

Have a great day and good hunting

Greg

 

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