The Inbetweeners

Countdown begins to the long awaited FOMC September statement. Ongoing jostling between the 2 camps – no rate hike and rate hike has reached deafening levels. Traders are set to jump on the opportunity to interpret as best as they can and take advantage of the next big move. Moving away on the side line is a form of trading as well and certainly one that many has taken ahead of an important market data release. A choppy price action look set to continue into early next week, all aimed at creating as much market noises so as to shake out all the weak hands.

Various reports that we gathered from leading economists and analysts all pointed to similar conclusion. A rate hike scenario will give the market breathing room to perform its main task of price stability in the medium to long term. Certainty and market confidence is lacking at the moment while the VIX fear index remain elevated. Such scenario does not conform to a fertile market to invest in. We call this the hiccup period – as the market is trying to find its footing and if all is well this is only a temporary phenomenon. A thriving market needs stability and central bankers all around the world has made it clear that additional stimulus is on its way. They are now waiting for the final jigsaw to fit in the puzzle and that will be the FOMC statement which rules them all.

A likely scenario is for a rate hike but what about the case of no rate hike as Yellen stress concern over the global economic health? Well one thing for sure – the equity market will not like it at all – recent dovish remark from central banks has not ended very well – except it has a short term effect followed by a big sell off. Typical bear market rally that trapped as much buyers before it continued lower. No rate hike will also left many within the business sphere to guess when they can make certain investments. Consequently, if the Fed does not hike the interest rate when will they do it then?

On the global front, we see unison central banks who will come to support the ailing market. We continue to stress the fact that they will do anything in their power to keep the music running in the belief that they are doing this to bring good for all people. Further talks of rate or not to rate could only damage the Federal Reserve credibility of backward thinkers and laggards – we disagree and think that the rate hike for September is imminent and will be out of the way. Like it or not, the Fed will kick start the normalization machine – setting a precedent to control imaginary inflation. Taking the rate hike debate out of the equation, we will soon have another debate – September Debt Ceiling. Happy volatility days and yes, wake us up when September ends.

Dollar Technical Outlook

A stunning 2 weeks recovery and now the dollar index is pulling back as traders look to position ahead of the FOMC week. No surprise since protecting one position for the volatile week is always a good strategy. We envisaged the dollar to gain strength going to FOMC to retest the high – with the following scenarios:

Rate Hike – retest high without taking out the ascending triangle (resistance line) followed by a sell off.

No Rate Hike – a run for the exit as the dollar index lose appeal – retest of the lower trend line within the ascending triangle.

It would be anyone guesses on how the dollar index will react so staying on the side line may remain as the most viable option.

β€œWe expect the dollar index to find a period of consolidation ahead of the above resistance. On a break above the ascending triangle formation, the index has several key resistances and any sign of a blowing top will indicate a possible turnaround in the dollar index.”

Weekly

Gold Technical Outlook

Our tactical short position played out to perfection as gold traders run to cover their longs ahead of the FOMC week. It is a typical move after price action rejected the weekly 20 ma and a week before the FOMC; the mood in the gold camp remains unclear. Downside correction continues and gold continue to find a decent support.

Having completed the AB=CD move, the next ideal support is 76.4% at 1094.55. No doubt this is a very key level and if price break below there then previous low will be the next opportunity to find support as a double bottom. As long as the daily gold price fails to break and close above 20 ma, downside is very much preferred.

β€œWe are impressed with the corrective move on gold prices and this is a healthy market that is pulling back technically. We are not ruling out a retest lower for support and If price bounced off the 1100 level then we could be in store for that inverse head and shoulder.”

Position Valid Date Price Action Stop Loss Target Results
LONG 1040 Order Placed 1030 1180
SHORT 31st – 4th Sept 1140-1145 Closed 1140 (move to breakeven) 1100 +40

Daily

Silver Technical Outlook

Several attempts on the daily chart to overtake the 20 ma has failed on multiple times. Silver broke lower on the close of Friday and we cannot rule out a potential bear flag that is forming on the daily chart. Despite that, the current price action looks rather like an accumulation phase before price explodes higher.

Weekly chart has loitered at the lower end of the Bollinger band for 3 months and a reconnect of the weekly moving averages could be in store. If previous fractal serves us right, we could be in store for a retest of previous low – forming a strong base to explore higher prices in the next few weeks.

Trade: Worth a long if we see price retest 14.00 levels again.
Position Valid Date Price Action Stop Loss Target Results
Long 31st – 4th 14.00-14.10 Order Placed 13.90 16.00
Long 14th – 18th Open Order Placed 13.90

Weekly

Daily

Platinum Technical Outlook

Last week analysis was spot on as we see further weakness in Platinum – given that we have a sell-off in gold and silver. Further concern of Chinese economic growth added pressure on commodity prices and Platinum is no exception (this is despite better manufacturing data from European countries). If fractal serves us right, we may see a retest of 940 levels before a decent bounce again – thus a retest of key support level must hold. Should support hold, then platinum could target the weekly 20 ma at 1050 levels.

Trade:
Position Valid Date Price Action Stop Loss Target Results
Long 14th – 18th 940 Order Placed 930 1040

Weekly

Palladium Technical Outlook

Daily price action managed to break and close above the daily 20 ma but for how long? Palladium often lagged behind but the short term view looks rather positive. We envisaged Palladium to retest lower again and any rise in price could be an opportunity to short but with a tight stop (given the overwhelming bearish market).

Position Valid Date Price Action Stop Loss Target Results
Long 521 Β Order Placed 510 630

Weekly

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate.

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