Friday, May 7, 2010

NFP Friday

It's NFP day and it might all be a let down after yesterday's history making day.  The biggest intra-day drop in US stocks and historical drops in yen crosses (at the height of the market’s fear-driven run CADJPY plunged 9.6 percent, AUDJPY dropped 9.4 percent, GBPJPY tumbled 8.2 percent and even USDJPY fell 5.9 percent) and it was all over within an hour.

I lay awake last night thinking about this for ages.  If you look at a chart of the January 9% correction (also right after earnings) it took a couple of weeks to play out and most bears were able to participate and profit.  Yesterdays drop of a similar magnitude took place in a couple of 5 minute candles, almost as though all the big players decided to pull the bid simultaneously, and then we bounced off the lows very hard and very fast.  Never mind good luck getting filled, most people I know couldn't not even get in to their brokers platforms.  And then last night the US Senate votes to reject the Brown/Kaufman bill to limit the size of Banks to 2% of GDP.  Is that a coincidence?  I am struggling to believe it is.  It is almost as though they wanted to scare the senate but didn't actually want anyone to participate or profit in the moves.
I realise this makes me sound like a bit of a tin-hatter but this market correction has been on the cards for some time.  The stock market has moved higher and higher in a bearish rising wedge held up by huge taxpayer cash injections and no volume.    There are lots of things being blamed, The ECB fiddling while Rome is burning in Europe, The mining disaster followed by the Gulf oil spill hitting energy and commodities hard, China tightening, etc..  There isn't a technical analyst on the planet that didn't predict this correction but to have it all done in an hour where if you took too long for lunch or went to the bathroom you missed it?
Now we have a wide trading range to back and fill for the next couple of weeks while the market sorts out what is what.  I would expect that we retest these lows at some point but we could be bouncing around for a while and also do some retracing.

Last night the BOJ intervened for first time since Dec, injecting 2 trillion yen to weaken their currency. 

Cable has dropped 300 points in the hour before the open on news of a hung parliament and Soveriegn CDS are widening again, UK CDS are 16bps wider at 102 bp, a record.  This is sterling negative.  European bourses that missed the afternoon fun are about to open.  Normally markets would be quiet running in to NFP but this is not a normal NFP day.  NFP forecast is for +190,000 jobs and no change to the jobless rate at 9.7%.

Has broken trendline support from the lows of 2009 and is sitting on the daily 200 moving average and the 61.8fib retracement of the recent Feb low / April high swing,  which is support for now.  I expect a good retracement before more downside but that might be a move for next week and I am looking at 81.00 or 82.20 as levels to reload shorts.
Here is Phil's crude chart with TL support and a large bearish rising wedge 

Continues to sit on the big daily trendline I pointed out yesterday.  A massive double no touch option is rumoured to be at 1.25 / 1.35 which would explain why EURUSD did not participate in yesterday's big drop (that must have cost someone a lot of money).   I would sell a retest of 1.30 or 1.3120

These are the hot risk meter charts ... although CADJPY was the biggest loser in yesterdays moves.

Below the short term trendline and 92.50 I like this short and I am a seller of rallies.  If 92.50 does not hold I would sell 93.50 and a test out of the breakout level.

EURCHF balance 25% stopped out 1.4145 (+0.5R)
GBPJPY short 1.35 stop 1.3550 PT 1.32 
CABLE short 1.4650 stop 1.4710 PT 1.4350 - post election
GBPAUD short 1.6440 stop 1.6490, PT 1.61 break of daily TL
GBPJPY short addition stopped out (-1R)
GBPAUD short closed 1.6470 (-0.4R)
CABLE short closed 1.4680 (-0.5R)
4hr hammers forming everywhere on sterling thanks to Moodys for saying hung parliament no threat to AAA
GBPJPY short 135.30 stop 136.10 PT 130
GBPJPY short addition closed 1.3450 - stocks rallying hard - (+1R)
EURGBP balance stopped out 86.25 (+0.5R)

Open trades:
CRUDE short 86.75 stop 87.15 + 79.70 stop 80.20 - both 1/4
EURUSD short 1.3110 stop 1.3135 PT 1.30 - 1/4
EURGBP short 0.8650 stop 0.8675 PT 0.8446 - 1/2
USDJPY short 93.75 stop 94 - 1/4
AUDJPY short 84.65 stop 85.05 - 1/4
AUDUSD short 0.9035 stop 0.9050 - 1/4
GBPJPY short 140.90 stop 141.40 - 1/4


  1. A hung parliament is confirmed.
    Sterling being taken to the woodshed ...

  2. Hindsight but you'd think?

  3. Morgan Stanley out of its Long GBP trade:
    Link text

  4. Wild - S&P pit commentary from the drop yesterday:

  5. mornin Nic, agree with your comments. The only thing I will be watching today is whether or not people are still caught and trying to get out. Also will be interesting to watch some of the commodities to see if there are funds trying to quietly liquidate to free up margin. Out of eurchf at 1.4145 earlier as it was a cheeky trade anyways

  6. Yeah strong number. Now we wait and look for signs of a sell off.
    If there are margin calls going out because of yesterday we will see liquidating before 11

    Hey I didn't realise you are in Chile ... cool place to live, I am jealous

  7. Yeh, originally from the Gold Coast in Australia... went for a swim one day n i just kept going until I hit land... Its a nice country if you can put up with queues for everything and the way people turn into absolute monsters behind the wheel of a car..

  8. Beautiful country :)
    So ...
    290k "added" - 66k census, 188k Birth Death: real payroll number is 36k

  9. Im Bearish on the UK... we all know that pollies put their political future before doing whats best for the long n medium term wellbeing of their constituents... It wont be long before we see the markets test David Cameron and his patched together government.

  10. I think Ams showed if you go back, most elections Sterling rallied into the vote and then sold off the month afterwards. Although the markets favourite guy won, if he can't get a coalition then it could be very disappointing ...

  11. looks like more selling coming from the yens. I and short GJ

  12. Bear do you still have some EUR shorts?
    Hang on to them ;)

  13. short 1 mini dow 11111, short 1 crude 86.35, short 1/0.5/0.5 euraud from 14505 down. watching yen crosses for shorts but so far have not reached my limits. Unlike you I just cant trade the breaks, tend to trade ma breaks and have a crack at tops n bottoms.

  14. Fantastic post, Nic.. I hadn't heard about the bill rejection for some reason. It is all very scary now.. think i'll get to the ATM again and start hoarding US dollars.. (I'm loaded on euros and candos, believe it or not!)

  15. Dump the Euro's Karen haha

  16. oh, great, we are back to 100 pt, ten minute moves on the dow.. i want out of stocks and etfs.

  17. Nic, i'll spend those euros next time i'm there.. i fancy myself as a female jason bourne with a backpack full of currencies.. laughing.

  18. Wonder whether Giselle Bundchen is no longer accepting payment in Euro´s and has switched back to USD....always a favourite long term swing indicator...

  19. Giselle is no dummie for sure

  20. Great wrap amiga... thx.

    Yeah, it was a warning shot across risk assets yesterday.

    See what happens?

  21. So here is the Friday rally.
    I think I am done for the day and hope you all have a great weekend.

  22. Have a safe n relaxing weekend Nic. Thanks for such good insights n comments..take the tinfoil hat off, kickback and enjoy the fruits of your labours fr 36 hrs..

  23. Bear did you see the announcement on forexlive about the ECB giving 600bln loan to banks before the weekend? That is weird one day after the press conf when they said they said No.
    I wonder if they are worried something is in the pipeline. Hang on to those EUR shorts ...
    And you have a great weekend in beautiful Chile too

  24. I know its just a rumour but ...

  25. I think I mentioned a week ago that the ECB was preparing for something. Yesterdays move by the SNB to remove the support confirmed it

  26. Yes you did ... this is getting scary.

    Check the breakout on silver

  27. Nice dig's, didn't realize that you had a blog, now on the top of my list.

  28. Great week's reading, Nic, even after the fact, been too busy all week to stop by for my FX fix.

    Hope you made big $ on those AUDJPY CADJPY shorts, boy you were all over those, did we see that one coming... and AUDJPY 9% DOWN, amazing, but wish you had actually been able to TRADE it in real time. Anyway a sign of things to come. Gaps get filled.

    I am scared too, and I have no risk assets at all. People are walking around in total ignorance.