Thursday, June 10, 2010

Contrarian signals

Bank of Montreal yesterday told their clients to get out of equities and  "Go To Cash - In Plain English".

Last week this was the cover of Newsweek:
However my favourite contrarion signal is GS lowering it's target for EURUSD today to 1.15 for clients.  (I am pretty sure that it will go there eventually and lower but they got EUR wrong twice and three times is a charm.)

Bearish sentiment is now at an 11 month extreme.

So we could a little uber-bearish and due a risk bounce.
I am not suggesting that we are starting a new bull run or that anyone should buy euro's but there is a possibility of a bounce and a new place to sell more ...

I posted last month about the S&P  and I think the 1038 low of 25 May has become one of those key line in the sand levels.   Wednesday's candle and close is bearish and if the 1038 low does not hold then supports are at 1000, 981 and 952 and we will likely hit them very sharpish if that 1038 breaks.  But while we hold above 1038 with no follow through I am looking for a rally to 1122 or 1150 to sell again but we have to break kryptonite fib retracement levels at 1075 and 1083 to get there.


AUDUSD has bounced off a key SR level and pivot from 1995
Monthly chart






Daily chart:
If the descending trend line breaks I am looking for a rally to 0.86 or 0.873 to short again.

FX options indicate that AUDUSD might be set to rise also and AUDJPY looks to have put in a base around 72.00 and I am looking for a rise back up to 80.00

CABLE / GBPUSD
Cable is in a pretty clear descending channel, three waves down, and has bounced off the bottom put in a lower high and today's daily candle is a bullish engulfing.  I like this long to at least 1.49 / 1.50  but 1.52 is a better level to look for shorts again.
Thursday is the Bank of England rate decision ... no change in policy expected for now.

CRUDE: 4hr chart
Crude looks to have put in a bottom and broken trendline resistance.  I am looking to buy dips for a counter-trend rally back to 78.00 or 79.50.  In the event of a good short squeeze 81.00 is not ridiculous.

Dollar Index.  The dollar index broke its double top / bull flag.  It has now rallied for 6 straight months and it has never rallied for 7 months in its 39 year history.  I am a big time dollar bull but this month may be a month for a correction for the dollar.  Check this chart from Bespoke Investments.

PS - I was going to say I think Gold could be putting in a double top but I won't mention it because everyone loves Gold except me.

My positions tonight:
AUDJPY long 75.50 stop 74.90 PT 78.00
GBPAUD short 1.7440 stop 1.7480 PT 1.7250 (break of daily IB and trendline support)
CRUDE long 75.00 stop 74.50 PT 78.00

GBPAUD daily chart.
This pair is inversely correlated with stocks

18 comments:

  1. Nic,

    Good to have you back. Saw you ask about the wave count over at CV's. Some of the prominent wavers have us about to enter a very violent wave 3 of wave 3 of wave 3 down....ultimately this would push the dow to around 8,500. I'm quite skeptical of this count and don't really favor it at this point in time.

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  2. EWI used that mag cover in their update last night....

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  3. the "mood" toward the euro is very similar to the mood toward the dollar last fall.

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  4. I very much agree although the Euro might really be doomed, the USD still owns its printing presses

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  5. SPX touched that kryptonite 1083 level (61.8fib retracement). I am banking half of my profits here letting the rest run.

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  6. plus the move off the Tuesday low in SPX is two equal moves (AB=CD). So might be high for now ...

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  7. AUD shorts watch out:
    Miners may beat Australian tax: Rumor has it that Australia's prime minister Kevin Rudd is set to announce "major ... http://bit.ly/bs9vea

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  8. BP has hit a low of 330p, bang on the 61.8% retracement of rally from 1992 low to all time high. It might be a good contrarian buy now ...

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  9. BP open interest, Jan11 $70 calls...most popular call strike...

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  10. SPX and AUDJPY now two equal moves off Tues low and at fib resist. I think high might be in for today and maybe this week.

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  11. Kaboom, market keeps squeezing. AUDUSD has broken trendline resistance shown in above chart

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  12. Yay! Great to have u back Nic!!

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  13. Welcome back, certainly some funny business tuesday in the s+p... but sell on I shall

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  14. Yeah the macro-man guys commented on how it was funny that Tuesday night as the S&P approaches key lows that Bernanke gets rolled out for a speech ...

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  15. watching the 4 hrly 300 lwma crude and previous support now turned res for s short
    http://my.jetscreenshot.com/demo/20100610-2zbi-235kb

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  16. Yeah its a good level. Tomorrow looking like a down day, or pullback day. Max pain for max participants etc :)

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