Intraday Market Thoughts Archives
Displaying results for week of May 10, 2020Intermarket & Sector-Driven Trades
As bearish voices intensified during Asia and the early Thursday morning US session, Head-&-Shoulder enthusiasts flexed their muscle regarding the major US and European indices… until the indices snapped right back. We mentioned on Tuesday to our VIP subscribers via WhatsApp Broadcast Group (See snapshots below) that DOW30 would extend losses from 23700s to 23000, at which time would be a decent buying opportunity for short-term traders. It is one thing to give an idea….another thing is to back it up with facts. The charts below combine the intermarket view alongside equity rotation, metals' technical analysis to make the case for short-term bounce in risk (indices). A new Premium Insights' Trade was issued earlier today.
The first chart highlights the ongoing uptrend in the Cyclicals/Defensives sector ratio, which not only bottomed 3 days before the SPX, but continued to rest on a perfect trendline support since. Candelsticks analysis enthusiast have the potential daily doji on dailies as well as persistent horizontal base support.
Finally, the chart on the right-hand side answers the question “Why is gold is not falling as stocks selloff like it did this year?”. As the Gold/SPX charts rebounds off key support, it highlights further gold outperformance relative to indices, which is only a sign of improved risk appetite (as well as increase probabilities of zero rates in the US). This was useful about 3 hours earlier when the rebound in gold and silver during indices' selloff suggested the selling was not at all part of a panic that forced gold holders to sell their winners, but a harmless pullback/readjustment in stocks. For the bigger picture, being selectively long indices (sectors) is a long-term proposition worth your while.
And don't forget Friday's Premium Trade in silver. Today, XAGUSD further broke away from its 55-DMA (like it does every 5-6 months for the past 3 years -- before accumulating further run-up).
That's what we call actionable Intermarket Analysis.
Opening Access to English Video
Im opening access to Tuesday's Premium Video to help you understand our rationale for approaching recent market moves. Full Video.
Fed, RBNZ Manoeuvre Around Zero
Fed Chair Powell manoeuvred his way around the negative rates verbal landmine in today's webinar at the Peterson Institute, stating the Fed isn't looking at negative rates, preferring to focus on the importance of fiscal aid (more below). The Kiwi is the biggest loser of the day after the Reserve Bank of New Zealand expanded its QE and said “a negative OCR will become an option in future” (more below). That's good news for our Premium NZD trades, opened earlier this week. Here's open access to this week's Premium Video.
Powell: "With interest rates at ZLB and no desire to use negative interest rates, the Fed will rely heavily on existing tools such as forward guidance and balance sheet policies.” Basically, Powell is seeking new ways to say negative rates are not an option but would not rule them out. Even hawkish Cleveland Fed's Mester is personalizing the issue, saying "I still am not thinking that would be a go-to tool for me".
Meanwhile, the RBNZ increased bond purchases to a NZ$ 60 billion, indicating that “discussions with financial institutions about preparing for a negative OCR are ongoing." For currencies, the implications of one central bank going to zero may not have lasting significant implications if most key central banks will end up at the same destination.
USDX fluctuations are at their tightest since early February, keeping key USD pairs relatively directionless. GBPUSD, however, merits a close look as it breaks below 1.2250s. More importantly, EURUSD is undergoing some key RSI patterns, seen only in three past occasions in its 21-year life.
We said in yesterday's IMT “we're watching … the NASDAQ's attempt to fill and break the Feb 24 gap.. the semiconductors index 1800 resistance ”, hours before indices began their broad selloff later in the session. There was no trade issued to Premium subscribers, but a suggested trade was sent to the WhatsApp Broadcast Group of VIP Premium subscribers.
Sideways Trading & Diverging Arguments
As US indices trade at their tightest range in three months, it's time to monitor for opportunities of breakouts or breakdowns. The fundamental narrative contains plenty of arguments for further upside or downside (see below). US CPI fell the most since 2008, while core inflation posted its biggest decline on record, raising questions on real interest rates becoming negative, and their impact on precious metals. Below is this week's Premium Video, detailing the current and potential trades for premium subscribers. The WhatsApp Broadcast Group for VIP Premium subscribers is now fully operational.
Equity bulls point to to the gradual reopening of the economy and consumer expenditure, and any renewed sellin in indices will be cushioned by sector rotation towards the usual defensive sectors and technology. Add to it the US govt's readiness to deliver additional stimulus and the restart of US-China trade talks. Bears argue markets have returned to overvalued levels given the ongoing deterioration in earnings, not forgetting the fact that the consumer spending (and employment) have not yet reached their worst levels yet and fresh doubts on the effectiveness of the US-China trade talks beyond the headlines.
A few things we're watching are the NASDAQ's attempt to fill and break the Feb 24 gap. The semiconductors index 1800 resistance is another. In FX, EURUSD is seen recapturing 1.0950 and gold 1723. There are also crucial developments on the metals space (as per Friday's Premium trade) and the signals behind the prolonged momentum in EURGBP—all discussed in today's video.
Traders' Visibility Clouded
Traders' visibility is being further reduced as price consolidation persists in FX and indices in the face of deepening deterioration in macro data. Friday's release of the US jobs report showing a drop of 20.5 mln jobs and a 14.7% jobless rate prompted Minneapolis Fed's Kashkari to predict that the worst is yet to come for the US economy. A confrontational ECB response to Germany's constitutional part to challenge the latest asset purchases. The PBOC said will use “more powerful” policies. A new Premium trade was opened today and another on Friday. The USDJPY trade was closed for 110 pips.
US indices have been in a relatively quiet range, with the DOW30 not showing a daily % change of +(-) 3% in over 4 weeks, while the S&P last changed by more than 3% in Apr 20. Bond yields are on the rise, VIX fell below its 100-DMA and EURUSD remains stuck near 1.08.
Goldman Sachs equity strategy team released a report, predicting indices will fall by 18% in the next 3 months. They expect a 27% drop in capital expenditure and zero plans for growth this year, adding that the bulk of the last 6 weeks' gains were driven by FOMO (fear of missing out).
As countries and cities deal with the challenging task of gradual re-opening, traders keep an eye on any evidence indicating a reversal in the recent declining trend of Covid19 cases. China has already announced that the Northeastern city of Shulan has been put in partial lockdown since Saturday. Further adding to the confusion/consolidation is the swinging pendulum around the US-China trade rhetoric.
ندوة أشرف العايدي مع أوربكس مساء الثلاثاء
ما هو أسلوب التحليل الذي تلجأ إليه صناديق الاستثمار لقراءة القوة المتغيرة في كل من مؤشري الداو جونز والأس آند بي؟ انضموا إلينا في 12مايو في الساعة 9 مساء وتعرفوا على التحليل الكمي واستخداماته للتسجيل من السعودية فقط وللتسجيل من باقي الدول
