I am either going to be a hero for calling this or a complete loser but the US dollar looks set to bounce this week. With the expected announcement of the next round of QE on 03November this is a counter trend high risk trade so if you are short the dollar against everything the safe trade is to take some profit at these resistance levels and wait for the bounce to be over. QE looks to be pretty much priced in so instead of a correction or dollar bounce we could instead see a couple of weeks of ugly chop. There does look to be some good opportunities in non-dollar pairs.
SPX
At resistance but the uptrend is so strong it is hard to see anything more than shallow pullbacks until QE2 is out of the way. The daily candles are bearish and indicate a possible reversal but needs to break below the rising channel and 1162 to confirm. A break below 1162 sets up a retest of 1150 next and then further support at 1125-1130 area. I am still in buy dips mode with an upside target of 1234 longer term.
FTSE
Bearish bat fibonacci pattern and two equal swings off the August lows suggest we get a correction here. And a break below 5630 confirms. First support is around 5520 but the fibonacci pattern targets are 5415 / 5370 and 5250. Longer term still says buy dips.
Dollar IndexDollar has bounced smartly off the bottom of the wedge and at the very least we should get a dead cat bounce here back to 80.00.
GOLD
Weekly chart bouncing at the 1.27fib extension. There is not enough evidence to short here yet but I am watching it. If I was long I would take some profits here and wait for the next pullback to add.
SILVER
Weekly chart. I like this short. It is a fibonacci bearish butterfly pattern, at the 1.27 fib extension of the 2008 hi/lows and the 1.41 fib extension of the 2008 low - 2009 high. Price has been rejected at 24.90 just shy of the round number 25. A break above 25 sends it to 26.20-27.20 next and the bearish pattern is still valid. I am stalking an entry, a break below 23 confirms we go to 1950 then18.70 next.
CRUDE
Triangle consolidation at the top of a rising channel. Lower time frames show a break of the trendline from 23Sep. Gold is underperforming metals like copper and gold and oversupply is becoming a drag. I am looking for a break lower to test 80.00 and if that breaks back to the bottom of the channel
Will post currencies Monday morning.
Trades:
Crude short 83.70 stop 84.10 - top of the wedge
AUDUSD short 99.10 stop 99.40 (toe in the water)
SILVER short 24.40 stop 24.60
AUDUSD stopped out (-1R)
AUDUSD short (again) 99.30 stop 99.60
Triangle consolidation at the top of a rising channel. Lower time frames show a break of the trendline from 23Sep. Gold is underperforming metals like copper and gold and oversupply is becoming a drag. I am looking for a break lower to test 80.00 and if that breaks back to the bottom of the channel
Will post currencies Monday morning.
Trades:
Crude short 83.70 stop 84.10 - top of the wedge
AUDUSD short 99.10 stop 99.40 (toe in the water)
SILVER short 24.40 stop 24.60
AUDUSD stopped out (-1R)
AUDUSD short (again) 99.30 stop 99.60
Posts
Thanks for sharing your informative charts. I think the USD has bottomed and may well rise for more than a bounce as the EUR comes under increasing selling pressure. The deterioration may arise from a renewed focus on the PIIGS as well as Switzerland (where the liabilities of UBS and other banks exceed the nation's GDP by several multiples. The best long in my opinion would be USD/CHF. The best short I think would be equities because all this talk of QE2 indicates that the expectation is already baked in. My guess is that the BRICs will be able to reshape US policy before the November G-20 meeting. That is, I do not expect QE2 at all. We'll see.... Good luck!
ReplyDeleteHi 99er, I like your USDCHF. I also like the CAD to short better than EUR & GBP.
ReplyDeleteEUR has a lot of debt to sell so we will see if China really does show up on the bid.
Mkt will be very disappointed if there is no QE at all.
MacroMan is reporting that the Brazilians might not even go to the G20 meeting so not sure the BRIC policy thing is going to happen.
ReplyDeletehttp://macro-man.blogspot.com/2010/10/rummaging-in-toybox.html
"There is no better business than acting as a middle man between rich folks who hate each other." Classic.
ReplyDeleteOn the dollar one thing to keep an eye on is strong seasonal weakness -
ReplyDeletehttp://www.seasonalcharts.com/classic_usdindex.html
From this seasonal chart we could perhaps see some dollar strength in November but swiftly followed by intense weakness in December.
The seasonal effect occurs, I think, due to a tax effect, US firms move money overseas for some tax advantage...if anyone has more information it would be helpful on why we get this seasonal pattern.
http://www.bloomberg.com/apps/quote?ticker=.CLLRG:IND
ReplyDeleteOn crude we seem to top out when large specs get to this position size, just another thing I have on my mind.
Thank goodness you are back.. i need the sanity and rational thinking : )
ReplyDeleteHi Karen
ReplyDeleteI missed you all too :)
Sinan I am not sure why the seasonal effect is. The last time the dollar bottomed it was December but it is all driven by QE so its manipulated.
I do agree with you re Crude though.
hey Nic, how ya doing?
ReplyDeletethanks for your post...I hope you can hit the silver short....no mas for me!
great charts.
Hello McF :) Thanks
ReplyDeleteKabuki Brazilian Style
ReplyDelete“This currency war needs to be deactivated,” Mantega told reporters. “We have to reach some kind of currency agreement.”
Countries including China and Turkey are seeking to stem appreciation in their currencies to gain a trade advantage, roiling financial markets and prompting Mantega’s call for a coordinated global response.
Mantega cited the Plaza Accord of 1985, when governments agreed to intervene to devalue the U.S. dollar against the yen and the German deutsche mark, as the kind of agreement that might be required. International policy makers failed to narrow their differences on intervention in currency markets during the International Monetary Fund’s annual meeting this month.
http://www.bloomberg.com/news/2010-10-19/brazil-steps-up-action-in-currency-war-even-as-mantega-seeks-ceasefire.html
Did you see the article in today's FT about a tax holiday for US company's to bring their foreign cash back? If that happens that would be a massive support for the dollar, it reversed a 3 year down trend last time they did it.
ReplyDeleteTax deters return of $1,000bn to US
Companies in appeal for US tax amnesty