Friday, July 2, 2010

NFP - risk bounce?

My favourite fibonacci trade is to enter at a pullback to the 61.8fib and the first target for the trade is the 38.2 fib and then I expect a pullback to the 50fib where you add.
This is where we are on the S+P.  Here is a chart from the excellent blog "Afraid to Trade" which I am using because other peoples charts always manage to look cleaner than mine:
We have bounced off the 61.8fib retracement and hit target 1 at 38.2fib and now we *should/could* retrace back to the 50fib.  This chart does look really bearish but markets never move in a straight line and I would not be surprised to see a pull back to the 50fib level at 1121 and then see what happens when we get there.
It has been an extreme bearish week:
There are currently more stocks in the S&P trading below their 50 day moving averages (97%) than there were in the March 09 lows.
29th June was the worst single day for advance / decline readings in the S+P at -498 (1 advance, 499 declining stocks).  Since 1990 this has only happened on one  other day ~ 29 September 08.
Statistically highs or lows for the month are four or five times more likely to occur on the first of second of the month than any other day.
Oscar's three-day-holiday-reversal-rule says that after a three day holiday the market moves in a reverse direction to the trend of the week prior to the holiday.

I could be completely wrong (I often am) but at some point the market will test the breakout of the "head and shoulders" at 1040 to see if it is now resistance and if it doesn't hold then we could be set for 1121.

The big news today was the Spanish bond auction went well.  That is a big deal because in Europe Greece is affordable and Spain is not.  If much of the rally in Gold was over sovereign debt fears and the Euro then those have been (temporarily) alleviated by Spain being able to sell it's debt so it is logical for Gold to retrace.  This might explain why gold was falling along with the dollar and TIP's today.
The trendline break says that an interim top is in and I am waiting to short again 1220 (50% daily retrace) or 1227 (50% swing retrace) 

The close above 1.25 is bullish for EURUSD and the long daily marabuzo gives good levels to look for pullbacks for long entries.  If you are bearish you could short EURUSD here at 1.25                                                   I am looking for price action at 1.2380 and 123.30 to get long again and if I am wrong it will just keep going down :) to 1.2150 where I am definitely a buyer.
My upside targets are 1.2670 and the descending trendline resistance and then 1.3090

USDJPY weekly chart
USDJPY is correlated with 10 yr treasury yields.  If yields go down, so does USDJPY. 10yr yields are at big lows but also technical resistance today (2.883 is the 1.27fib extension and 2.79 is the 61.8fib retracement from Dec08 to June 09) so it is likely to bounce here and therefore along with it the yen crosses.  USDJPY is also at 87 - a level where it found good support in  Dec08 and Jan09.

Finally EURGBP is at 61.8fib retrace of last swing and should dip back to 81.80 here which will help cable up and EURUSD to pullback.

AUDUSD closed 50% @3R 0.8495 (+1.5R)
EURAUD stopped out (-1R)
CRUDE short stopped out (-1R)

Open positions:
AUDUSD long 0.8420 stop 0.8395 PT 85.90 - 1/2


  1. everyones talking about the death crosses [50 under 200] happening all over the place.

    ej continued last night although all the confluence [mas/pivot] is down at 108.30 so we might go visit there sometime

  2. that should have been 108.90

  3. Hey nic - like the fib work on the spx, also put in a hammer, and makes a strong case for a bid.. Thoughts on trading it into numbers though?

  4. Hey
    The thing with these big levels is they sometimes bounce around or retest them a few times before we move the other way. I do think it has the potential to retrace from here and I am looking for a retest and this low to hold.
    I am not trading it into the number, I actually wish I didn't have any positions on.
    It is hard to predict market reaction to NFP but it does feel like we could rally and bad numbers could just push market back down to retest lows.

  5. Richard - Those death crosses are a big deal when they hold and stay crossed but sometimes the ma's kiss each other a few times and then bounce off before that happens.

  6. There you go. US govt spend a couple of trillion dollars, 125,000 still lose their jobs and its good news. Just like last year.

  7. ej 110.45 short [off daily tf 50% retrace]. target -till end of dayish

  8. Nice!
    The sun is shining here and I think I am starting my weekend early.

  9. MS better hope that the BoJ do intervene... or they are screwed !!
    FWIW, I agree. JPY and USTs have come a long way very fast.