Given where we are, lets rush through some charts..
Here the super important Eurusd.. this pair is the major construct for the DX (dollar basket) and seems to define the entire direction of the market (most of the time). The risk on off correlation to eurusd is weakening a little but is still alive for the moment. Unfortunately this pair is also one of the most managed currency pairs in the market. All the central banks and central agencies like the IMF and WB are involved. To the chart. We see a chart looking for direction. The story has been building for the last three years in fact. The chart looks weak. The probability is to the down side. The technical therefore fits with the macro picture. ie the euro zone is in deep trouble without debt monetization by the ECB. The question is whats priced in and what is not? I have to say, as has been the story of the last 18 months, the euro is relatively strong vs the usd given the issues she faces. On good news (ie printing news) the euro may rise in spite of the obvious dilution story. Yet another paradox we might well say but we have to accept what price is showing us. For the moment the risks are to the downside and for as long as Europe extends and pretends there is a non printing route the euro has the potential to fall off a cliff.
Next here the sp500. The picture isn’t all bad here. Its much more positive than the eurusd chart in fact. The Aug to Oct retrace-ment bottomed at a key level. The current push back northward is in danger here and now but hasn’t broken quite yet in that this could be a very normal stop hunting manoeuvre to push price beyond the support trend momentarily. The uptrend remains intact imo therefore.. but she is clinging on for dear life now. The real issue continues to the macro news re the euro area. Debt deleveraging grips the eurozone until the ECB prints. Can US equities cling on to the uptrend against this backdrop.. the chart suggests yes at present. Though the next few days/week are all important. She needs to climb again and ideally get above some key levels beyond 1250 imo.
Here the all important CRB. She is maintaining her uptrend but she is bouncing around the bottom of the uptrend which she needs to hold and push on. Remember we have oil strength here which is supporting the CRB as she is a major component. Therefore many commodities have actually broken their up trends. Oil is supporting the crb excessively at present. If oil collapses the CRB support line is in great danger with the obvious implications for the AUZ$.
Next up the Copx or copper miners index etf.. Not a good chart.. at all.. I remain lite copper miners for this very reason.
A big bounce from the early Oct low support but no higher high as yet and price starting to wander into dangerous territory again.
Next up one dear to the hearts of many in the markets. The Gold/HUI chart.. Both these charts are strong charts. The HUI is weaker than the Gold chart but even the HUI sell move in late sept early oct did not produce a lower low. The range held and so the chart remains positive with the probability to the north. This is supported by the gold chart. Having said this, neither seem to offer much in the way of a high momentum move to the north side right now. They are both starting to suggest a sideways period of range bound trading from a purely technical comment unless they regain momentum in the next few weeks. Macro wise there is much on the radar to suggest such a momentum stimulus may well emerge so lets wait and see.
Next up more troubling is the silver miners chart.. SIL.. This is not a good chart. We got that lower low. Was it a fake move or a real indication of forward direction? Silver has been acting like a commodity rather than a monetary metal and so the technical probability remains to the downside for now with the annoying possibility of some really nasty downward momentum move against the silver miners. This goes against all the fundamental evidence. This instrument/asset class is perhaps one of the most difficult to read here i.e. where the technical picture so contradicts the fundamental picture. I have a big cash and leverage option position on the silver miners through individual listings. I have to decide how to play this..? Im thinking option puts to catch some of any massive potential move to the downside. I prefer puts to futures as the upside is enormous on the silver miners. I would certainly not want to be on the end of a fully exposed short on the silver miners so an option put is the better vehicle. The issue here is historic volatility making them expensive.. Ill run some nos and examine what is available. (So much of wealth and fund management is the proper selection of instruments rather than purely directional entries and exists it seems).
Lastly for now i wanted to comment on the refiners.. I’ve been watching the crack ratio. The ratio having been so uber positive has been smashed.
The margins for oil refiners has been destroyed just as nymex has risen again over 100usds. This is interesting from a macro sense as it means prices at the pump in the US have barely risen just as the raw commodity has risen in price by over 30% in a short period of time. From a purely tactical sense i sold all my refiners a few weeks ago as i posted. It looks to have been absolutely the right call as the sector has been smashed subsequently. Here one of the stocks i sold from the sector WNR, as an example.
But before we get too despressed think of the poor souls in the following sector.. Euro Stoxx Banking index here below.. A horrid horrid chart with no obvious bottom in sight.. Stay away..
All the best guys..
Rich
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