Santa Rally – Flight Delayed?

  • Pre-ECB complacency evaporated and VIX is heading higher
  • Market skittish ahead of FOMC – global equity under pressure as Oil plummet
  • A delayed Santa Rally? Bearish view among analyst and projections of a dire 2016 economic situation
  • Questions if Yellen et al can really hike – credibility or the economy first?
  • Weaker dollar heading towards FOMC decision – bull lack confidence or seasonality at play?
  • Market expecting a small rate hike but a very DOVISH Yellen (this is what it’s showing on the surface but is there a hidden agenda?)
  • Euro, Sterling and Yen enjoy continued rally though commodity currencies suffer
  • Precious Metals consolidated throughout the week but end of year positioning takes priority
  • Traders prepare for more volatile and violent FOMC week? Low volume trading to match with irrational move?
  • Ever since our December post-we maintain that risk reward has shifted for PM and remain to be so for now

Weekly

A break out higher on the VIX sent global equity market skidding lower. Distressing signs are showing yet again as we head to FOMC December meeting with volatility rising. Chart just show how sentiment has just shifted from a pre-ECB complacent take to a more cautious view on what Miss Yellen has to say next week.

Daily

Dollar Technical Outlook

There you have it, we called the resistance at 12150 as per last week and it seems the dollar index does not see a V shape recovery fit enough. Traders were left with end of year book squaring and holding the dollar at such current price is not the plan ahead of the low volume and holiday season. Concern about a very dovish Yellen

Technically, the dollar index can build support as the daily chart has confluence of 100 ma, mega-phone formation with 50% Fib retracement. However, we cannot rule out a break lower followed by a steady recovery. The next ideal support stands at 61.8% Fib retracement which confluence with long term rising channel and 200 ma. This is merely an assumption as traders will need to digest what the Yellen et al bring on the table. Thus, only if dollar bull can reclaim above 12150 we can only envisage a choppy period as we head to end of year low volume trading environment.

Well what a week it has been – kicking off the last trading month of the year with a bang. Mr Draghi was the highlight after coming in so close yet so far. It was an outcry in the market as a big U-turn signs was posted on the dollar index, taking down as many wrong-footed traders as possible. It was a super Thursday or also a nasty one to the late comers. Dollar bull was set to break higher but post ECB has triggered an exodus – with everyone running out of the exit. A weekly bearish engulfing candle does not bode confidence into next week – yes we expect more weakness but are also wary that a massive “V” shape recovery could be underway as we head into the next risk events.

Technically, the daily chart has a potential of a megaphone formation – thus a short term dollar recovery cannot be rule out. A short term bounce to retest what was once support now resistance at 12150 is possible. The other scenario is a complete “V” shape recovery that we mentioned above (watch the daily chart that has a potential double bottom).”

Weekly

Daily

Gold Technical Outlook

Gold consolidated and the short covering rally dissipated – despite weakness from the dollar index, the yellow metal fail to capitalise higher – leaving the small bull camp disappointed. The verdict is still out there and the risk reward to buy the dip remains for now. Any retest lower is another opportunity to reload long with several key level of interest 1046, 1032 and 1008. A break above 1087 could trigger another fresh round of short covering for higher gold price.

Mario shoot blanks was the theme from last week – allowing gold to rocket higher. As we highlighted last week, the risk reward has changed and a bounced is in store. Looking ahead into next week, we cannot rule out a retest of last week high – potentially tripping above but we are wary of a dollar index recovery as we head into FOMC 16th December meeting. Note that Draghi came out to keep the Euro advance under the lid.

Technically, gold should advance next week after posting a bullish engulfing candle. Short covering action and failure to find fresh sellers has made the bounce possible with resistance now standing at 1098 and 1117.”

Position Valid Date Price Action Stop Loss Target Results
LONG   1050 Live 1030 moved to 1060 1100  
LONG   1033 Order Placed 1000 1066  

Weekly

Daily

Silver Technical Outlook

The white metal failed to move higher and resumption lower to a new 12 months low. Chinese economic data may have added fuel to test lower – creating a weekly bearish engulfing candle. Current price action may suggest further weakness ahead as the weekly RSI broke support and head lower (it has not reach an oversold condition yet). Only a break above 14.20 (daily 20 ma) will give us the confidence to head higher. Trading wise, we will step aside and wait for a clearer direction.

As per last week report, we entered a short term long on Silver on the break of the daily 20 ma at 14.22 and stops have been raised for break-even. Our modest target is at 14.85 and then we will re-assess where silver prices could go. Our long term scenario is a new low in Silver again before a see a much higher rally.”

Position Valid Date Price Action Stop Loss Target Results
LONG   14.22 Closed 14.22 14.85 0

Weekly

Daily

Platinum Technical Outlook

Oops, we hope we have not jinxed it but Platinum did have a short term bounce as mentioned last week. However, it is noteworthy to know that this is an inside week candle which may carry some weight of a reversal. Only a break below 2015 low will invalidate this and start the leg lower. A break above 890 could see further short covering activities but with the lack of bullish momentum, the trend will remain as your friend. Red box on the weekly chart remain as a the primary sell zone while the green box offer a short term bounce.

The anticipated short term bounce is underway but we will remain cautious and cancel our previous long order for now. More often than not, the market is showing signs of mixed sentiments and we remain steadfast that this could just be a one-off short term bounce – potentially with more selling in the next few weeks. Watch this space as Platinum could make lower low again.

Position Valid Date Price Action Stop Loss Target Results
LONG   795 Cancelled 785 840  

Weekly

Daily

Palladium Technical Outlook

We stick with our long trade and yes it is rare that we got filled on Palladium and running in profit. No change in strategy but we will let this run and trail accordingly. Daily chart is in a potential megaphone formation We could let it price action hit our stops and reload on long at the lower end of the formation.

We maintain our outlook as per last week – current price action seems to suggest that palladium could well have hit bottom. Scrolling out the chart back to 2011 there is support here and a potential triple bottom. Buyers flock in at 530 levels and as long as buying interest appear here then expect a return to the upper channel.”

Position Valid Date Price Action Stop Loss Target Results
LONG   525 Live 505 moved to 535 610  
LONG   515 Order Placed 505    

Daily

This article is written according to the author’s views and by no means indicates investment purpose.

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