Inter Market Analysis – Game Changer

Inter Market Analysis 30th June 2015

Equity

World markets

Shanghai 4,277.22 +224.19 (5.53%)
S&P 500 2,057.64 -43.85 (-2.09%)
Nikkei 225 20,235.73 +125.78 (0.63%)
Hang Seng Index 26,250.03 +283.05 (1.09%)
TSEC 9,323.02 +86.92 (0.94%)
EURO STOXX 50 3,488.77 +19.87 (0.57%)
CAC 40 4,882.64 +12.82 (0.26%)
S&P TSX 14,490.15 -317.94 (-2.15%)
S&P/ASX 200 5,459.00 +36.50 (0.67%)
BSE Sensex 27,780.83 +135.68 (0.49%)
TA25 1,647.46 +6.03 (0.37%)
SMI 8,881.07 +12.68 (0.14%)
ATX 2,413.97 -13.23 (-0.55%)
IBOVESPA 53,014.21 -1,002.76 (-1.86%)
SET 1,504.55 -6.64 (-0.44%)
BIST100 82,087.30 +331.11 (0.40%)
IBEX 10,947.40 +93.50 (0.86%)
WIG 53,107.85 +202.36 (0.38%)
TASI 9,004.09 -55.85 (-0.62%)
MERVAL 9,851.39 -288.93 (-2.85%)

Risk On

  • Additional stimulus from China after the rate cut
  • Asian equities recovered
  • German Retail sales came in better than forecasted
  • UK Final GDP came in line and a rise in business investment

Risk Off

  • EU says the door is open for a deal with Greece
  • Greece referendum uncertainty – not paying the IMF
  • Safe haven play with trade on long yen and bonds
  • Global Equities tumbled with end of month selling
  • Car bomb in Yemeni capital

Outlook: Previous GAP filled and now there is another big gap unfilled right at the top. Unless a deal is clinched, expect more downside as many longs are trapped and giving in. It is a short trading week in the US with 4th July as holiday.

Biased: Corrective rally is expected as risk ON biased outweighs risk OFF simply because Greece Referendum should be priced in while the new Chinese Stimulus has yet to work its magic. However, we may see new low on EZ equities before a decent bounce.

Currencies

  • Long Yen trade is on while the dollar failed to impress as traders jumped to the Euro
  • Short NFP week – dollar and Euro at stake while commodities currency is at knife edge

Outlook: Dollar strength and resilience brought to question here-still trading within a big symmetrical triangle. Price action is trading within an inside day and it hinged on the mid Bollinger band (possible continuation or reversal)

Biased: Yen could further strengthen with no deal in sight. Dollar may aim higher number on the back of US economic data. Weaker dollar is supportive to the weak Equity market  

Bonds

  • A bullish engulfing candle and today price action is trading within it (need to see close for an inside day confirmation)
  • Potentially, this could be a reversal play or another Bear Flag but the optimum trade is currently within the channel
  • PA still trade below the 20 MA and daily RSI maintain bullish divergence
  • Bollinger Band converging for a potential breakout

Outlook: Completed the inside day continuation pattern with a sell off but support found at 149.85. Previous gapped up and out of the downtrend channel, possibly a retest on that breakout level at 151.10 which confluence as the 61.8% and also above the 20 DMA.

Biased: Biased for a retest lower but look to long Bunds at 151 levels to 150.80

Commodities

  • No Iran deal as of yet and might miss deadline
  • Copper broke below the bear flag formation and resistance and the 20 DMA kept upside limited

Outlook: Stimulus happened from China but commodities remain lower

Biased: Weekend safe haven bid happened but the corrective rally fizzles off. We are biased for more downside on commodities front in the short term.

Watch list

USD index

IHS is put into question but it is still possible this week as we have host of US economic data. Price action could continue within this symmetrical triangle. Current PA is trading as an inside day while Bollinger band is converging.

German Bund

Playing the channel line and watching how this will transpire. Possible game changer should a deal be secured.

Copper

Chinese Stimulus happened but price failed to break higher which has put this trade on hold. Rather, we could wait for a retest of 2550 levels. Shorting Copper is possible but RR will not be as great.

German Dax

We will not rule out a retest lower but in the meantime, price may reconnect to 20 dma

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