Intraday Market Thoughts Archives

HISTORICAL PARALLELS OF DOW-30 & S&P500. The DJIA is up for the 8th consecutive week, while the S&P500 ended the week lower after 7 straight weekly gains. In the case of the Dow, the last time there was an 8-week winning streak was in March-April, before the index dropped 13% coinciding with the week of the Flash Crash. The weekly RSI on the Dow has exceeded the 70% level for the 1st time sincethat same last week of April. Aside from the Mar-Apr 2010 period when the Dow gained for 8 straight weeks, it was back in Nov 2003-Jan 2004 when such an interrupted winning streak occurred. The time before that was in Jan-Mar 1998. As for a winning streak longer than 8 weeks, youd have to go to 1995 when the Dow-30 rallied for 10 straight weeks (Mar-May 1995). In the case of the S&P500, it posted 7 consecutive winning weeks, the longest period since 2007. We have to go back to Nov 2003-Jan 2004 to find 9-straight winning weeks in the S&P500. COMBINING THE HISTORICAL implications of these extended rallies with the overstretched oscillators, equity markets could be looking at the much anticipated sell-off that many of us market watchers have gotten so wrong. There are other elements supporting these analysis emerging in FX MARKETS as well as in the INTER COMMODITY COMPLEX to which I will dedicate a 1/3 of my time in Day-long intensive FX/Interdynamic workshop on Sunday in London. Here are the details to register.

http://www.ashraflaidi.com/products/workshop01/

EURGBP BREAKS ABOVE 0.8450 so what does it mean? Ive pointed out in my latest Reuters Video that 0.8450 was the immediate resistance. Now that we broke it this level, the remaining barriers stands at 0.87s, which is the longer term trendline, extending from the Oct high thru the Dec high. A lower resistance would be found at 0.8580, which is the 55-week MA. GBP strengthening remains built on higher inflation and the possibility of a rate hike this year. EURUSD extends gains above $1.3550, eyeing the next resistance at $1.3640, with the weekly chart suggesting possible additional gains next week into $1.3720.

Aussie continues to struggle across the board on a combination of inevitable Chinese tightening (from robust China data) and the ongoing economic drag from the floods. With Australian housebuyers starting to feel the pinch from higher interest rates and employment showing preliminary signs of cooling, the impact of higher Chinese rates should have a higher impact. Disappointing US earnings also helped accelerate Aussie lower on risk aversion. GBPAUD extends gains to fresh 6 week highs at 1.6140s, which is the trendline resistance from the June high as well as the spring lows. AUDUSD breaks its June trendline support, eyeing 0.9820 and 0.9750. 3 DAYS LEFT TO MY INTENSIVE LONDON WORKSHOP where I will go over the trade calls that worked and that did not http://www.ashraflaidi.com/products/workshop01/

Ashraf's latest Video for Reuters Thomson on EURGBP and GBPCHF

http://link.reuters.com/gyq27r

Ashraf's interview with CNBC Arabia http://www.youtube.com/watch?v=mmw-ZG0WmH8

Ashraf's London Workshop Coming up THIS SUNDAY. Register here:

http://www.ashraflaidi.com/products/workshop01/

We will also go through the calls that worked and those that did not.

USD INDEX extends decline below the all-important 200-week MA (79.6) after closing below it last week. Note in the chart that the USDX never could close above the 55-week MA (blue). The fact that the index has quickly reversed under the 200-week MA suggests the possibility for losses to extend towards the 3-year trendline support near 77. Note this trendline support did hold up in Nov 2009 and Nov 2010. In the event that USDX fell below 78, EURUSD would likely retest $1.37. EURUSDs weekly stochastics have improved significantly. Greek officials denied newspaper reports that Germany was considering a debt restructuring plan, which would allow Greece to buy back its own debt. The rumours pushed up Greece-Germany 10 year spreads 8.63% (highest since Jan 11). Euros latest advances occurred this morning after Irish PM Cowen won a vote of confidence to lead the ruling Fianna Fail party. The vote secures his position until Parliamentary elections are held in March.

Sterling regains $1.6 as UK inflation hits an 8-month high of 3.7% y/y leading to further speculation about a BoE rate hike. While I disagree with such speculation, it does not take away from the improving technicals in GBP vs USD, AUD and NZD. Cable eyes 1.6130s with 1.6040s an interim target. EURUSD regains $1.34 amid broadening USD weakness, but EURGBP was dragged down to 0.8330 to confirm the downtrend for an eventual 0.8250 and 0.8150. A close above $1.34 is technically likely to add to fresh gains towards $1.38. The fundamental doubts in the Eurozone partly emerging from the extension of the size of the European Financial Stability Facility are being shadowed by rallying global equitiesdespite a revenues miss from Citigroup.