Tuesday, May 11, 2010

Tuesday 11 May

The S+P has retraced to the 61.8fib retracement of the flash crash and is sitting on the long term daily trendline from the March lows.  A key inflection point and where we go from here might determine what the market does for the next few weeks.  A rally from here would likely see news highs and a break lower sends us to retest the lows.
The FTSE Futures shows how these previous support turned resistance are holding across the board.

In FX the market feels heavy.  The EU's bazooka or "debt baguette" seems like an invitation to me to all the EU banks to try and dump their toxic Sovereign paper and ZH reports European Banks now feverishly betting against Euro.  My new target for EURUSD is 113.  BUT this is a very one-sided trade and short sharp squeezes are likely.

Sterling is heavy with the election still unresolved and the possibility of a LIB/LAB pact and talk of ratings agency downgrades with the uncertainty.  Not even good manufacturing data could lift it this morning.  Cable has bounced at a retest of the trendline and is a pretty safe bet to retest the lows now.  My only worry is now MS likes it short too!
GBJPY also retested old daily trendline and 61.8fib and has been rehjected.

All the JPY crosses look weak and Yen looks strong as USDJPY has been rejected at the 93 level and previous trendline support.

If stocks do indeed break lower today I will be looking to short AUDUSD which has struggled to get back above the 9000 level.

USDCAD also is a good looking long opportunity
if it successfully holds above the previous trendline resistance and at least we know where to put the stop.

CRUDE is extraordinary.
 I have never seen such a big drop in crude without a bounce.  We now hover just above the 75.00 level and I would not be surprised to see this broken and then a retrace higher.  I think some longs may be getting pretty squeezed down here.  When we bounce we could go all the way back to 82 and I still keep my bearish view and sell rallies but for now 78 is pretty strong resistance.

GOLD is a one way ticket north.  I missed it and I have been reluctant to chase it at these prices but while the mood continues today may be the day we see new highs in Gold.  The broadening wedge in Silver continues and I am watching for a test of the top and the 19.00 level.

Time to wait for the US to open and see how risk appetites does today but the bullish chatter in my twitter stream has quietened down a lot .... actually that might be a buy signal ;)

A quiet day here
GBPJPY short addition closed 25% @6R 137.80 (+1.5R)
USDJPY short addition closed 50% @3R 92.55 (+1.5R)
GBPJPY short addition 25% balance stopped out 139.40 (+0.5R)
USDJPY short addition 50% balance stopped out 93.05 (+0.5R)
CRUDE third addition 50% balance stopped out 77.20 (+0.5R)
CRUDE short 77.00 stop 77.40 PT 75.00  - try again

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
USDJPY short 93.75 stop 94 - 1/4
GBPJPY short 140.90 stop 141.40 - 1/4
CRUDE short 77.00 stop 77.40 PT 75.00


  1. Mornin Nic, thanks for the update.

  2. usdx lookin a lil toppy, only gaps left to fill are in aud, audjpy, ymm0 n ESM0

  3. lovely gap still to fill in FTSE

  4. I agree that the price action in WTI is quite unusual. I think it did not bounce hard yesterday because of anticipation of high build up of crude inventories - some articles yesterday pointed out that current data is underestimating actual crude inventories, so wednesday data should be important...

  5. Unlike the previous presidency, the obama administration needs a lower oil price to enable ongoing economic recovery. Hence why we havnt seen a recording of the bearded one. Under 70 id say we start to see some sabre rattling from Iran but that should be abt it.

  6. I agree Alexander, maybe inventories will be a great trade, like they were in the crunch.

  7. Ouch
    Silver has broken out of the wedge and blown right through my level. Have to see how we close.

  8. daily r3 weekly r1 and channel res here

  9. Yeah its looking better and if Gold double tops here too ...

  10. Nic,

    what's your take on silver? I've got basically no read from a wave count on that chart...what a mess.

  11. McF
    I need to study Silver more tonight, I think there is a good short opportunity coming there.

  12. Thats a Dead-Brown-Bounce in cable :)

  13. Thanks Nic. I'm interested in seeing what you come up with. I had some success shorting silver last year, this year that's been a tough trade on both sides.