Intraday Market Thoughts Archives
Displaying results for week of May 19, 2019GBP & Anti-Consensus PM Play
What will change in GBP after PM Theresa May's resignation announcement? Why is cable's implied volatility down sharply? Here's what I think really matters. Article.
تطبيق نظرية الداو للتداول
كيف نطبق ربط مؤشر الداو الصناعي مع نظيره مؤشر النقل لتطبيق " نظرية الداو" للتداول؟ الفيديو الكامل
On Moving Stops
Moving stops on your trades is not necessarily problematic as long as you have a solid reason with high probability and most importantly your entry is realistic. On Tuesday, we raised the stop on our short DOW30 trade for Premium Insights subscribers to 25960 from 25870 based on several proprietary metrics suggesting equity indices will be forced back down. One of these metrics was the Dow Transportation 20 index (see chart below), which failed to confirm the upmove in the DOW Industrials 30. Entering the short DOW30 on Monday may have been poor timing, but the decision to raise the stop the following day was based on 3 objective metrics—one of which was the TRAN20 “misconfirmation”. Understanding intermarket dynamics is key, but applying it to technicals and trading is the more crucial and challenging task. What do we do next with the existing short? Close here? Go the other way? Enter a risk-equivalent trade in FX. Stay tuned.
May asked to Leave
Testing times for the pound and PM Theresa May as the fate of her Withdrawal Agreement is overshadowed by her future as Prime Minister. It's highly probable that a fresh vote of no confidence could be allowed if May does not step down by Friday. Global indices extend their sell-off with the yen the top performer, followed by the franc. The GBP short was topped out at 1.2630.
التوازن بين الاسترليني و الداو و الذهب
The fact that the UK Parliament's agenda for the week of June 3rd does not contain any list the Withdrawal Agreement vote, highlights that PM future as PM will be the key issue after an expected drubbing for the Conservative Party in today's EU Elections. Markets resume their selling, with 25200 in the DOW30, and 2800 in SPX seen as crucial support levels, while 11870 for the DAX looms large.
هل ستؤثر الانتخابات الأوروبية على الإسترليني؟
يجتاز الجنيه الإسترليني أسوأ شهر منذ 12 شهراً، حيث تواجه رئيسة الوزراء “تيريزا ماي” معارضة متزايدة من جميع الأحزاب الرئيسية وهي تحاول طرح تصويت رابع في البرلمان. لنلقي نظرة على الجنيه والانتخابات الأوروبية في هذا التحليل المفصل
World Trade Overshadowed by Indices
It is a session light of data with the USD edging higher and the Aussie underperforming all major currencies following fresh rate cut hints from the RBA. Global indices are in the green after a late session rebound in NY yesterday. Activity picks up tomorrow with UK CPI and Fed minutes, EU Elections on Thursday and UK retail sales on Friday. Also watch any response from Beijing to US ban on Huawei. The video for Premium subscribers below focuses on GBP, gold and indices. A new trade action will be issued on one of our index trades.
Trade Becoming a Problem
Now that the US and China have demonstrated they're in no rush to reach an agreement over the trade spat before June, the impact on global growth could well become a problem, sufficiently serious to not be adressed in time by the Fed and other major central banks. Here are some figures:The WTO said in its latest report that out of the 7 indices of international trade (such as merchandise trade volume, auto production and exports) 5 indices are falling below trend. The WTO is sticking to last quarter's decision to downgrade its projections for 2019 global trade growth to 2.6% from 3% in 2018.
According to Bloomberg's calculation of the latest Dutch Bureau for Economic Policy Analysis index, world trade fell 1.9% in the three months ending February from the preceding 3 months, marking the sharpest drop since May 2009.
What does this all mean to FX and indices traders? Aside from Asian currencies resuming their descent and the Aussie suffering along to the benefit of the US dollar, the matter will become an urgent issue for central banks. Today, the probability of the Fed cutting rates in September stands at 46%. This compares to a 72% chance of a cut in December. Stock indices have cooled down to a trading range after no longer manifesting optimism over the elimination of rate hikes. By mid summer, markets will shift to worrying that odds of a rate cut are not high enough, and this will be the Fed's next policy mistake.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| CPI (y/y) | |||
| 2.2% | 1.9% | May 22 8:30 | |
Where to now for GBP?
You know the market is admittedly clueless about sterling's future direction when the experts themselves are saying: "it could go 1% up or 1% down" or, to hear an answer worded in the following manner: “If the Withdrawal Agreement is accepted…., then we will see ….and if it is rejected, then….”. I highlighted in last week's chart that implied option volatility on GBPUSD for appears excessively supressed, considering the sharp descent in spot GBPUSD. Those who are bearish GBP will tell you the market is being complacent and volatility is underpricing the risk of heightened political uncertainty (PM May having to leave and allowing a leadership vacuum behind her). Those who are bullish or neutral GBP will explain the relatively low volatility by either indicating that it's too early, referring to the vote in two weeks' time. Others would stated that a smooth Brexit is inevitable.
So what do we think? Will Theresa May wait for the outcome of Thursday's European Elections to map her strategy for the Withdrawal Agreement vote the following vote? How about technicals? We currently have two existing trades on GBP for the Premium Insights. On Friday, I added an update to Friday's trading update with three charts and notes (also in Arabic) to lay out the case for the trades. Our record in the Premium Insights for the GBPUSD has been improving, with 11 out of 19 trades closed at a profit over the last two years (since May 2017).
NOTE: UK CPI on Wednesday, EU Elections on Thursday, UK retail sales on Friday
