Jittery Global Market (Transitory?) – Inter Market Analysis

Risk On

  • PBOC provide more liquidity into the market – Tuesday rate cut has not provided enough cushion
  • Priced in negative news – revised expectation of world growth have gone underway
  • Potential talk of QE rumour thrown the market higher

Risk Off

  • VIX or the fear index remain alleviated – global uncertainty remains a concern
  • Lack of dip buying in the current market despite stimulus could be “transitory”
  • Rate hike tantrum as market reassessed future growth in this weak economy
  • Dead cat bounce indeed as traders lose interest in holding
Dead cat bounce, potential end of month short covering, profit taking, positioning of new month, fund flows – watch out as the VIX remains high-though there is certain alleviation of safe haven trade

Extra Stimulus has yet to kick in but wary of the build up to Santa rally

Multi Time Frame Analysis

USD index

Daily

4 hour

We maintain the same outlook on the dollar index as a potential dead cat bounce. Today close will be important since the index could hit resistance and any turnaround from the resistance will determine the next play.

German Bund

Daily

4 hour

Bunds closed below 20 dma and attempts to retest breakout level have failed. With that in mind, we are not ruling out that Dax could move higher on lower bunds – confirming the bounce in European equities in the short term. We could look to add on short Bunds on a retest of the break.

Eur/Usd

Daily

4 hour

Could the dollar index come into resistance soon? Euro is into support but any breakout of dollar strength could unwind the long euro trade for a pullback.

Point here is that there are too many shorts and it is an overcrowded trade – safe haven play has also beset Euro as the place to be. Is this done yet? Well we think a pullback here is healthy but the consensus remains that there are more squeezing to do and one should not be surprise to see a 1.18 to 1.20 euro back in play. As for equities, we remain steadfast this correction is not over yet.

German Dax

Daily

4 hour

Any recovery rallies are squashed – investors lack confidence to hold on long trades – confirming the biased that risk off could continue here on global equities. Expect more turbulent trading – some sort of dead cat bounce before we take another peek of previous low or even lower.

Gold

Daily

4 hour

Gold continue to pullback healthily – finger cross we are not about to see an impulsive selling. This further confirms that the market corrects and may have rooms for higher prices. Only a break below 1090 will invalidate this. Going to the end of the week and month, this profit taking process is normal – a break above 1170 will spur more short covering activity.

Silver

Daily

4 hour

With poor outlook on the global economy, price action suffered a volatile recovery then sell off. Daily RSI divergence gave a clear sell signal and the current outlook has a potential view of much lower prices to come.

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