Rescued by China & Dudley – Inter Market Analysis

Risk On

  • China state pension fund expected to invest in equity markets
  • Asian market stabilises and into green territory first time this week – no Limit Down
  • Spanish consumers propel economic growth in 8 years
  • Ukraine wins debt reliefs despite fighting continues
  • Strongest rally in US equities – rumours of hedge fund covering large amount of shorts
  • Dollar index resumed higher – US GDP under scrutiny
  • VIX or the fear index sold at the end of trading day
  • Talk of delaying September rate hike has calmed the market

Risk Off

  • With China stabilising its market ahead of its National day – everything seems rosy
  • Note the snap back rally in equities are fast hitting resistance – Euro into support
Huge rally has certainly put a dent – after several attempts of higher lows. Remain cautious on any potential bear flag or a wave 4 out of 5 – any more concern about Chinese stock market could easily take prices lower again.

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

Dollar daily has a potential inverse cup and handle pattern. With the RSI diverging heavily away from price action, it was a matter of time for the bulls to exit and we have the selloff completion with another higher low. Meanwhile, the 4 hour chart suggests the dollar index is coming to resistance which is confirm by the daily as it stop advancing above its 20 dma and there is a potential IHS on this pullback. After a 2 day massive rally, pullback will be healthy for the dollar.

German Bund

Daily

4 hour

As mentioned yesterday, weakness in Bunds continues which saw a big relief rally in German Dax. Meanwhile, 4 hour chart shows Bunds coming to support at 200 ma and RSI has a bullish divergence. With that in mind, we expect Bunds to test higher in the short term and a pullback in Dax.

Eur/Usd

Daily

4 hour

We have the pullback and Euro long will need to find support in this market. Unwinding the long trade ahead of US GDP is a decisive call – while the pullback remains corrective and in a tightening wedge formation. A retest of 1.12 is possible and then it needs to bounce hard. With the dollar index coming to resistance then a break out of this wedge will offer a strong directional play.

German Dax

Daily

4 hour

The market started strongly yesterday – ignoring the limit down in China but as US open, traders start dumping Dax – potentially forcing weak longs out and allowing US traders to get a piece of the action if they were to drive this higher. It seems that the US took control and dictated the tempo after Europe close. This morning, we gapped higher as the Chinese stock market had a late rally before the news of using Pension funds money into equity was released. Daily chart suggest we are into resistance here but not ruling out a test of 400 levels though we envisage a break lower first. Note that any break below 10 000 means retest of previous low, higher low or new low!

Gold

Daily

4 hour

Should the global equities confidence return, we could see lower gold price. Current price action has gold on make or breaks level – while the VIX index is much lower than previous high – any concern about the market could easily send the yellow metal higher. We are not ruling out a retest lower while the short term upside potential looks capped at the moment unless 1170 is taken out.

Silver

Daily

4 hour

What was support now resistance – Silver prices suffered new bout of selling pressure on the back of poor global outlook on economic growth. Unless we see uptick in industrial demand, discounted price at current level will have bargain hunters entering again. However, lower prices remains the way forward and any rebound to 20 dma are selling opportunities.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s