We have many instruments at resistances or supports.. We have had an excellent run and the loan data is coming through more positively for both the US and China.
The YM or dow futures having enjoyed a near 20% run up from the Oct lows looking like she needs a breather if merely just to back fill given the run up she has enjoyed. In dollar terms you can add another 8% to the run up. The YM in euros is up around 28% from the Oct level. Quite a move.
Which brings us on to the very important, though note the inverse correlation destroyed by the recent move, the DX or dollar basket.
She remains at the same resistance as was flagged a week or two ago (and prior to that a month or so ago). The dollar is making heavy work of the JPY and remains weak vs the AUD (the new lead indicator for pro risk).
Again the dx needs to take a breather here but the macro and micro picture supports a pro dollar move for now though the Chinese story must be monitored as must Brazil and India. If they start moving then the dollar could once again rapidly become the funding currency even vs the eur as Europe’s manufacturers would see huge growth nos given the recent debasement in the euro. The audusd a good indicator for a BRIC return to the bull trend.
For now the audusd trapped in her downtrend. A breakout would be significant as the correlation to Bric growth so high.
Which brings us neatly on to the CRB or commodity index. As we can see she is still struggling. The recent trend up looks to be running out of steam here.
As we can see above a big failed candle at the breakout of the downtrend. This is an entry bar if this confirms today for a short on the commodities. The euro area news yesterday re no oil embargo on Iran for 6 months lead to steep and rapid falls in the nymex and brent. Oil scored a breakout of the 101 level to 103.5 on the spike but this looks very unsupported without the Iran story so lower oil prices look likely here given ‘fast moves from failed moves’. The Japanese inability to support the embargo also doesn’t assist. China unsurprisingly against.
Coupled with oil’s moves we have a steep move on the agri futures yesterday, downward giving yet more pressure to the crb.
Here two key grains, corn:
And wheat:
Now as an inflationist the agri charts do look cheap but agri is always prone to giant volatility. New acres have come on stream and this is starting to depress forward prices in spite of the obvious demand from emerging markets due to demographics, wealth and changing dietary habits. The agri support companies have provided a smoother investment thus far inc TNH and UAN, MON, DEER etc.
Precious metals wise. We have had a decent move up in recent weeks but from a medium term perspective the charts dont look so promising and due more weakness. Longer term of course they offer huge upside from present levels. Chose your timescales, limit the leverage, manage the trade or investment correctly and all will be well. Macro news flow for the ‘pms’ supports huge spikes (mainly to the upside) so these surprises encourages the maintenance of a core holding.
Gold has a little more room to rise up to 1670 or, in theory, but given the issues above re the dx, crb, eurusd etc sell spikes on the short term would be my approach. Silver remains pretty horrid.
Miners wise as was really.. recent bounce but hard to get too exited here from price and given the issues above more pain to come. Patience oh patience.
Summary, we have had a good bounce especially if you were long USDs and measured your account in euros or pounds. We are at resistances and price clearly shows this. We are overbought on some instruments. The upside is limited here for near term. Taking some profits or playing the bounce off resistances seems reasonable and hedging any long portfolios by betting on a resumption of bearish patterns on instruments looks a good call until resistances are broken.
Luck to all
Rich
(6 votes, average: 5.00 out of 5)
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