Dead Cat Bounce OVER – Inter Market Analysis

Risk On

  • ABInbev buy SABMiller for £68 billion – pound benefited – an OPEC of Beer?
  • Luxury brand LVMH beat quarterly sales as Europe and US shine (china suffer)
  • SAP rises as Q3 profits beat analyst expectations
  • All risk on factors and stimulus talks have been priced in
  • German CPI came in line as expected no surprise there

Risk Off

  • Risk off sentiment as Euro rocket higher – talk is cheap as previously referred that despite ECB officials making sound about additional QE – there is no concrete evidence they will yet
  • Asian shares suffered in early trading hours as pressure of China slowdown (lack of import and higher trade balance)
  • LME week general take away is oversupply, China slowdown and transition from demand related country to a supply led industry / talk of recession in the emerging economies
  • Global growth concerns continue to linger – Merger and Acquisitions are underway to reduce competition, cut waste and improve efficiency, could be the only solution to keep the large corporation afloat
  • Credit Suisse cuts global wealth forecast on economic slowdown / Oil company workers kiss their perks goodbye (Ouch!)
  • Dollar index continue to suffer on Fed uncertainty
Market oversupply is a big worry and doing interest rate hike underway will be a great solution to force the market to re assess and correct the current imbalances that may help curb deflation, improve efficiency and reduce distortion of asset prices. Watch out for tomorrow CNY CPI numbers followed by US PPI numbers.

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

Serious concern as exodus of dollar bull continues given the lack of supporting data for a stronger dollar. Over the last few weeks, we have seen a large rotational flow of money off the dollar – into other high yielding commodity currencies. Daily chart seems to suggest the usual support should kick in but failure to do so may well kick start a very severe turnaround.

German Bund

Daily

4 hour

We warned about the potential recovery in Bunds and hope many shorts have covered. The bounce from the daily 200 ma and a double bottom is a strong enough signal for a recovery. Bunds could test higher on a break of 156.80 so pullback is a potential buy.

Bunds are trying very hard to stay above the daily 200 ma and if we have a strong bounce here, we may have a W recovery to retest previous high. We also added another scenario that an AB=CD formation could play out but only if price break below the daily 200 ma. One thing for sure, the short term selling seems to have abated so an early warning signs for sellers.”

Eur/Usd

Daily

4 hour

No respite here as the Euro continue to unwind the short – dollar weakness only add to the break higher but on the 4 hour time frame we may have to assess if it needs a pullback first. The buying is not impulsive and we see how price action is building strong staircase of support. Seasonality of dollar weakness also spur demand for the Euro trade.

German Dax

Daily

4 hour

Well the daily Doji suggest that buyers met with resistance here and a pullback that we mentioned which was overdue could be playing out today. As long as it close below 10000 psychological level, we could see follow through selling on DAX.

We will not rule out test higher but are worried it is in danger of overextended as panic buying ensues despite sets of poor economic data. Despite a stronger Euro, DAX remain steadfast for higher prices but we sense a pullback is due.”

Gold

Daily

4 hour

The pullback week is here as dollar found support and the gold daily chart shows the usual sign of a false breakout on the Bollinger band with a rejection. Taking out the low of 1130 could seriously put a gloomy mood back on the bull camp.

One of the concerns is the lower time frame is signalling a RSI with a bearish divergence. Yes, price broke above 1156 and on a 1 month high but the real question now is if we get a follow up buying. Otherwise, we could start to short on any spikes.”

Silver

Daily

4 hour

Perfect alignment with a potential triple top around 16.10 levels after price action retest with an RSI that was diverging heavily thus sellers dominate. Dollar come to short term support could easily push Silver lower as per previous commentary.

Daily chart, silver looks overextended although it still has a bullish momentum as it trade above the 20 ma and 50 ma crossing. However, we are leaning to short term pullback to retest support zones before another strike higher. Right now, we are waiting for daily chart to confirm a short trade for this pullback since it hit the daily 200 ma and often this is a big resistance.”

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