Inter Market Analysis – 7th July

Inter Market Analysis 07th July 2015

Equity

World markets

Shanghai 3,727.12 -48.79 (-1.29%)
S&P 500 2,068.76 -8.02 (-0.39%)
Nikkei 225 20,376.59 +264.47 (1.31%)
Hang Seng Index 24,975.31 -260.97 (-1.03%)
TSEC 9,250.16 -5.80 (-0.06%)
EURO STOXX 50 3,363.07 -2.13 (-0.06%)
CAC 40 4,699.64 -11.90 (-0.25%)

Risk On

  • Deal in less than 24 hours? EU Juncker wants to avoid Grexit
  • Tsipras new plan is to have EZ to give them more money
  • Positive talk between Merkel and Hollande
  • New Greek financial minister to continue talk of a deal
  • Asian equities found support and could be on the verge of reversing higher (relief rally)
  • QE from PBOC may take time
  • UK industrial output is better than expected

Risk Off

  • Greece Capital control (priced in) potential Grexit (not priced in)
  • UK retail, commodities and other sector dragged FTSE lower at the open – Oil sector is badly hit
  • Air strikes in Yemen – ongoing and priced in

Outlook: Double GAPS on European stocks and until the dust settles, we will wait for an opportunity to swing long. HEADLINE trading today with EUROGROUP summit – expect volatile trading

Biased: Today bias is RISK ON but stay cautious of a flash dump then pump to cover both GAPs as we approach deadline. A weaker EUR/USD should support EZ equities

Currencies

  • Safe haven trade is at its peak thus a strong dollar index but we reiterate that once a deal is clinch then expect a selloff in the dollar
  • EUR/USD and various other commodity currencies have all given up its gains
  • commodity currencies will need China to do extra stimulus or a show of stabilisation in its stock market
  • in less than 24 hours if there is no deal then Euro could suffer more but expect rally on a deal

Outlook: will be a volatile day in the currency market and stay alert with tight stops

Biased: Dollar rally may unwind soon but need a blow off peak first to create island reversal. Post Greece deal, holding the dollar is still the way forward

Bonds

  • BUND onto resistance here on daily 50 ma and still trading within the ascending triangle
  • RSI continue to show bullish divergence

Outlook: GAP filled and selloff in EUR/USD is helping BUNDS higher – safe haven buying continues here = risk off scenario

Biased: Sell Bund should it retest 153.00 with a tight stop of 30 points to target the 20 DMA 151.30 at the time of writing

Commodities

  • Oil & Copper tanked
  • Various safe haven assets spiked higher but unable to hold on to gains

Outlook: Global commodities meltdown = more deflation?

Biased: Expect weaker commodities going forward but bargain hunters could come in depending on US dollar strength    

Watch list

USD index

Rising channel and future dips are to be bought for now – although our bias could change depending on the headlines out of Greece. Strong dollar does not bode well for US equities

German Bund

GAP filled and Bund rallied overnight – into resistance here but 50 dma has been broken. Next could target 154.45 if price break out.

Copper

We remain cautious to take a buy here – catching a falling knife is not recommended. RSI is heavily oversold and copper could target previous support zone at 2420

German Dax

Watching for a potential new low and we want to highlight the 200 dma as a potential target 10663 as of the time of writing. Dax started well in the European open but sellers outweigh buyers with continued Greece uncertainty. However, we will look for opportunity to swing long.

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