Intraday Market Thoughts Archives

While stocks have yet to prove that the last 2 down weeks will not be part of a temporary decline as was seen in June, yesterdays 6-POINT JUMP IN THE VIX to a 4-month high and above the triple top of 29, suggests the potential for sharper declines in equities. Watch the 100- WEEK mov avg at 32.45 and 200-DAY moving avg 32.70. Remember how the VIX was LOWER in March (when indices were at 12-yr lows) than it was in October (when indices were higher than in March). This could signal prolonged losses in equities ahead, with our key support seen at 990 in the S&P500 and 9,100 in the Dow.

Ashraf Laidi believes that the worst of the panic is behind us ONLY "for now" as "the consumer may not be able to do for the economy what traders are doing for the stock market." event:url|http://bit.ly/2tk3tu

Ashraf will also be co-hosting CNBC Squawk Box on Monday at 06:20 GMT

MARKETS BACK WHERE THEY WERE ON WEDNESDAY as risk appetite is on the decline. US October consumer spending was flat, showing that the October side of the story (more recent) is the truer reflection of the US consumer after the expiry of cash for clunker programs, which was instrumental in propping expenditure in the Q3 GDP (ended in September 30). All targets in the morning IMT were hit (GBPUSD at 1.6460, USDJPY at 90.70 and oil at 78.50). Wait for NY lunchtime hour to unwind before a fresh selling wave prompts renewed risk aversion to the benefit of USD and JPY.

Yen regaining some ground after the BoJ voted to stop buying corporate debt by end of year. Decline in Jpns unemployment for second straight month prompted the Bank to vote in favour of withdrawing some liquidity. Nikkei futures back below 10K, Dow futures -21 pts while S&P500 futures -2.6 to 1061. Markets to await key US data on personal spending and consumer sentiment (see previous IMT on expectations). Any renewed negative readings in consumer spending would support the notion that last months increase was mainly driven by the now expired cash-for-clunker programs. EURJPY and USDJPY losing ground, eyeing 134 and 90.70, while GBPUSD still unlikely to regain 1.66 and pressured towards 1.6460. Watch oil as it fails to regain 80.40 and possibly retest 78.50. In conferences all day so updates will be less frequent than usual.

Oil 4-hr chart tops out at $82.20, which is the low on Oct 22-23 and the high of Oct 20. $USDJPY eyes interim target at 91.00 from 91.30, but key trend line support rises to 90.70. WATCH OUT from Sep US PERS SPENDING (12:30 GMT) exp -0.5% after +1.3% and Chicago PMI (13:45 GMT) seen 49 from 46.5. FInal UMich cons sentiment seen revised to 70 from 69.4.

Risk appetite and risk assets were given a big shot in the arm by not only the stronger than expected 3.5% increase in US Q3 GDP, but also by the robust 3.4% jump in consumer spending (highest quarterly rise since Q1 2007) after -0.9% in Q2. Regardless of whether such spending were propped by inventory restocking (strongest contribution to GDP since Q4 2005), cash-for-clunker and 1st time home buyer credits, markets saw had an ideal set-up to the drive the risk trade at the expense of the USD and JPY. $1.47 in EURUSD and 1,045-47 in S&P500 barely held up (but successfully) on Wednesday before being fired up post-GDP. A Friday close above these levels constitutes a WEEKLY and MONTHLY close, requiring a revisit above 1,080 and 1.49 into subsequent week for the rebound to hold up. GBPUSD recovery faces the next test at the right shoulder & 76.4% retracement at 1.6720, coinciding with the left shoulder on June 30th. USDJPY capped at 91.70, EURJPY eyes 136.30 resistance. Watch out for CHINESE Oct business sentiment survey 1:35 am GMT and PMIs.

Yen continues its broad rise, eclipsing the dollar among the lower-yielding categories. Nikkei-255 dropped 1.8% to 9.891, illustrating a pattern of lower highs typical of most JPY crosses. Watch out for the 1.47-1.047 SUPPORT COMBO http://chart.ly/bpxsnn , with the levels serving as key trend line support for EURUSD (1.47) and S&P500 (1047) holding since the March lows. 1,047 is also the 55-day MA of the S&P500, a close below which now paves the way for 998, and a potential 1.4410 in EURUSD, which is the 23.6% retracement. USDCAD BREAKS below the 90.70 trend line support, now resting the 90.20 low, before the key 89.60 target. OIL recovery seen failing at 78.45-50, with interim target at 75.00.

RBNZ due in 30 mins (20:00 GMT) could escalate the selling in the high yielding currencies in the event that it leaves short term rates steady at 2.50%. While we could see more losses in NZD, AUD and NOK against USD, but there is more downside against JPY. NZDJPY and NZDUSD eye 65.30 and 0.7150, while AUDJPY is vulnerable to 78.90. USDJPY capped at 91.25-30 but is vulnerable to a Q3 GDP disappointment, which could drag it towards the 90.40 target.

S&P500 BREAKS BELOW the 55-day MA of 1,050 and the key trend line support of 1,047 (see yesterdays weekly chart setting confluence point of TLines from 666 low and Aug lows). Despite higher highs in US indices, there are lower highs in their oscillators, deepening their bearish divergence. More damage in the YEN crosses as risk aversion sets in. Despite smaller than expected build in crude oil inventories (800K vs exp 1.8 mln), crude oil breaks below the 78 support, making CLASSIC H&S pattern w/ the right shoulder at 80 and interim target at $76 before weeks end, with 70% probability of seeing $74 before weeks end. EURJPY targets 132.50 (down 270 pips from last nights IMT). No fundamental reason why GBPUSD is bucking the trend, but resistance still stands at 1.6470. Ashraf is on travel so updates will be less frequent than usual.

Yen strength remains at the forefront of today's trading as warned in our twitter updates (twitter/alaidi.com), while CAD WEAKNESS intensifies due to 1) more comments from BoCs Carney expressing concern over Loonie strength and 2) oils renewed break below $79.00. We expressed our scepticism with yesterdays Dow gains being mainly driven by IBMs announcement to buy back $5 bln worth of stock. USDCAD breaks 1.0730, eyeing 1.0780. Weekly stochastics suggest 1.0860. CADJPY eyes 84.20. EIA inventory data could trigger more oil downside as crude inventories are seen +1.8 mln barrels. USDJPY eyes 90.55. GBPUSD eyes 1.6250.

The EURJPY chart posted few hours ago is now up 150 pips

http://chart.ly/9cafcx

Still bearish CADJPY and EURJPY

I will be travelling on business for rest of the week so updates will be lighter than usual.

AUSSIE CPI PREVIEW: The upcoming Aussie Q3 CPI (00:30 GMT, 20:30 EDT) is expected +0.9% q/q from +0.5% in Q2, while on y/y basis it is expected +1.2% from +1.5%. Also watch the RBAs favourite CPI measure known as trimmed mean CPI, expected +0.7% q/q from +0.8% q/q and exp +3.2% y/y from +3.6%. BUT DO REMEMBER that Monday's release of the PPI was WEAKER than expected. Considering the high correlation between Aussie PPI and CPI, there is a chance of slower than expected figure. BOTTOM LINE, if the q/q CPI comes in at or ABOVE the expected 0.9% (following +0.5%), then we could see a rallying Aussie on increased market certainty of AT LEAST 25-bps rate hike at next weeks RBA meeting. Only a figure of 1.0% or more would help Aussie reach the 0.9230 resistance. A figure at or below 0.7% could see a gradual pullback in the currency, especially if Asia remains in the red. Also expect the bulk of the losses to occur in AUDJPY (near 83.20) in the case of weak figure.

Latest Chart on EURJPY vs. SP500. http://chart.ly/9cafcx

Ashraf's Latest VIDEO ANALYSIS on FX, STOCKS, OIL

http://bit.ly/T939q $$

Dow is up but S&P500 and NASDAQ are down mainly due to IBM's announcement of its intention to repurchase $5 billion worth of stock. Stock buybacks have proven positive for equities in the latter stage of the last bull market. USDX faces 4-mth trend line resistance at 77.77.

Insult adds to Injury as falling global equities add to selloff after US consumer sentiment index falls back below the 50 level, hitting a 3-month low of 47.7 in Oct from 53.4 in Sep. Markets expected 53.1. The Present Situation component of the Cons Confidence index hit a 26-year low of 20.7. The jobs hard to get rose to 49.6 while the plentiful jobs index fell to 3.4 from 3.6. GBPUSD drops 120 pips after failing to regain the $1.6480 resistance. Interim support at 1.6280, followed by 1.6240. AUDUSD vulnerable to retesting 0.9125, while EURJPY eyes 136.20, 135.70. MORE TRADES on twitter/alaidi.com

Ashraf's INTERVIEW ON BLOOMBERG TV earlier discussing the USD rebound, GBPUSD, EURUSD and US GDP Preview.

http://bit.ly/1M5YD2

Ashraf will speak at the BORSA ITALIANA ONLINE EXPO in Milan Oct 29-30

http://bit.ly/2V6LWF

GBP is the best performing currency of the last 24 hours as traders opt for broader selling in EUR, CAD and CHF. Watch out from this morning's UK Oct CBI survey (11:00 GMT) , which is expected +5.0 from prev +3.0. A figure above 4.0 would extend sterling gains towards the next resistance of $1.6480. EURJPY and CADJPY extend damage as warned in last 24 hours, eyeing 135 and 85.00 into mid week. US consumer confidence due at 14:00 GMT is seen unchanged at 53.1.

We mentioned in the am IMT (6 hours ago) about the potential for a triple top failure in EURJPY at 139. W'ere now at 137. On a weekly basis, EURJPY could suggest further pullback towards 135, which is a recurring pattern of the June 4th and August 6th moves. While USD and JPY are both on the rise, the only barrier standing in the way of rising USDJPY could be negative US data (consumer confidence and/or Q3 GDP on Thurs). Short of that, USDJPY eyes 93.30 as the next objective, especially as bond yields maintain their upward moves. GBP traders watch out from the CBI survey at 11:00 GMT. BST (British Standard Time) and GMT are now equal i.e. = EDT+4 until next Sunday when EDT reduces 1 hour.

Watch ASHRAF's VIDEO ANALYSIS on today's USD & JPY rally, and the subsequent targets in GBPUSD, EURUSD, USDCAD, Oil and S&P500 http://bit.ly/2MBkRn $$

RISK AVERSION INTENSIFIES as the banking downgrades deepen the stock damage to the benefit of the USD and JPY. GBPUSD eyes 1.6240, USDCAD hits 1.0690 resistance--61.8% retracement. Next target stands at 1.08

US stocks extend damage after prominent banking analyst Richard Bove downgraded 3 US banks before the bell; US BankCorp, SunTrust Banks and Fifth Third Bankcorp. Two weeks ago, Bove downgraded Wells Fargo. EURUSD hits our morning target of 1.4950, while USDCAD hits 1.0630 target. GBPUSD fails at the $1.64 resistance while EURJPY fails at the 139 triple top. Oil sheds more than $3.00 hitting $78.30. Look for SP500 to test the 9-week trend line support of 1,055, US 10-yr note looking to retest 3.59%.

EURUSD seen struggling at $1.5070 and retest $1.4955, but keep watch on EURJPY as it nears the 139 triple top (expected to fail). Any risk aversion from busy US data calendar (Consumer Confidence and Home Price index due Tues, New Home Sales due Wed and Q3 GDP due Thurs) would boost JPY stabilization at extent of EURJPY. EURUSD also weighed by oils inability to regain 100-week MA of $82.00. USDCAD eyes 1.0590 target (see twitter/alaidi), followed by 1.0630.

Sterling is the biggest loser in Monday Asian/European trade, followed by USD and CAD. Market chatter has it that the unexpected decline in UK Q3 GDP was greatly exaggerated by destocking and that the BoE should not panic into fresh excessive QE easing. CAD remains under pressure after words of concern from BoC governor Carney regarding CAD strength. CAD pressure also driven by oil declines towards the $80. EUR regains strength after ECBs Constancio said a strong euro helped contain inflation, hence EURGBP attempts to regain 0.9270, while GBPUSD aims to regain $1.6360s. USDJPY eyes 91.20 after failing 92.22.