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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
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  • World Markets Brief 12/24: AVA FX WARNS: BEWARE THE ILLIQUID PRE-HOLIDAY TRADING SCAM, Forex, Commodities Trading Outlook 1 comment
    Dec 24, 2009 4:28 AM
    NB: THE FOLLOWING IS AN ABRIDGED VERSION FOR FULL ANALYSIS AND CHART ILLUSTRATIONS OF RECOMMENDED TRADES GO TO http://fxmarketanalysis.wordpress.com/   AND SELECT "DAILY OUTLOOK" FOR TODAY'S DATE
     


    Stocks: Prior Day: Asia, Europe, US up, Today: Asia, Europe up. Pre-Holiday thin liquidity is dangerous –don't be scammed –stand aside and enjoy the holiday.
    -           FX: bias against safety currencies [JPY, USD, CHF in order of safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite appeal], USD retreats against everything as poor housing data serves as profit taking excuse despite the prior day's even more positive housing data
    -           Main events: Mon: JPY: BoJ Monthly Report, Trade Balance+ CAD: Core Retail Sales m/m, NZD: Current Account, AUD: CB Leading Index, Tues: GBP Current Account, USD: Existing Home Sales, NZD: GDP q/q, WED: GBP: MPC meeting minutes, CAD: GDP m/m, USD: New Home Sales
    -     Big Theme: Profit Taking on USD Rally Spurs Bounce In All Anti Dollar Positions on Pre-Holiday Thin liquidity: DON'T BE SCAMMED BY ILLIQUID MARKETS – SEE RECOMMENDATIONS BELOW FOR THE COMING DAYS
    STOCKS
    US: Disappointing new home sales, personal spending, and UoM Consumer sentiment numbers caused stocks to surrender opening follow up from Europe gains , however, the rebound was resisted at session highs and left gains to chop their way into the close.
     
    Asia: Asian stocks gained on Thursday, with Tokyo shares hitting their highest in three months, while the dollar edged away from recent peaks on weak U.S. housing data.
     
    Europe:  Europe's leading share index, the FTSEurofirst 300,  rose for a fourth straight session on Thursday and remained on track to post its best yearly gains in a decade, but volumes were low as several markets including Germany and Italy were closed.
    ASIA- DOWN
    N225I +1.91%
    HS +1.12%
    SSEC +0.76%
    FTSTI +0.63%
    AORD +1.39 %
    EUROPE UP
    FTSE +0.82%
    DAX +0.20%
    CAC +0.32%%
     
    US- UP
    S&P +0.23%
    DJIA +0.01
    NASDAQ +0.75%
     
     
    THIS MORNING  UP
    N225I +1.53%
    HS -0.88%
    SSEC +2.59%
    FTSTI -0.14%
    AORD +0.99 %
                              UP
    FTSE -0.06%
    DAX +0.20%
    CAC +0.03%
     
     
    Commodities: Dollar index closed Monday with a 0.4% gain, the fifth straight advance for the Dollar Index. The move undercut commodities considerably, sending the CRB Commodity Index from a 0.6% gain to a 0.5% loss,
     
    Oil:  Oil prices extended gains above $77 a barrel Thursday in Asia as a larger than expected drop in U.S. crude supplies fueled investor optimism that consumer demand is improving.A falling USD on low-liquidity pre-holiday profit taking also supported oil and other commodities, as well as the fact that they have reached oversold levels and were due for a bounce on any USD weakness, which was the prime short term driver behind their decline.
     
    Gold:    Gold prices inched up closer to $1,100 per ounce on Thursday as a recent drop to seven-week lows spurred some bargain hunting in a holiday-thinned market. As with oil, gold's sharp selloff on the USD rally left it ripe for a bounce on any USD weakness.
        Traders said the market was in a downtrend in the near-term, but that buying from Asian investors in the dip could lift prices above $1,100 before London opens for a half-day later. Some believe prices could then be capped as London players often use a rise in Asian trading hours to take profits.
    .
    CURRENCIES: Current bias against safe havens (JPY, USD,CHF), as stocks rise USD lower against all. Illiquid trade unlikely to have much meaning, though it may be volatile, especially if there are any surprises
     
    USD: Wednesday the USD index dropped vs. all majors 0.4%, as disappointing New Home Sales data, which has a negative impact on jobs, consumer spending, and thus expectations for stimulus removal and interest rates, causing the dollar to sell off against everything.
     
    EUR:   Edging Higher On Light Short Covering Sydney, December 24 in quiet Asian trading with light short covering and EUR/JPY demand helping to support. Currently the EUR/USD sits at key resistance for today, which is at yesterday's 1.4366 high. 
     
    JPY: Gaining relatively little in the general USD retreat, with the USD/JPY still within its upper trend line. Inability to break higher saw some long liquidation and position squaring later.
      
    GBP- little changed from the previous days open, with the dovish BOE expectations contrasting sharply with the hawkish about face by the Fed, preventing the cable from benefiting as much as other currencies from the weaker USD overnight. Once again today we had lackluster trading in very thin markets ahead of Christmas which saw cable trade in a 1.5957/94 range, last at 1.5989. Still within its declining channel line, though testing its resistance there around 1.6010.
     
    AUD: - AUD/USD: Edges Higher On A Softer USD And Rising Gold Sydney December 24
     
    NZD: - NZD/USD opened at 0.7040 in Asia and trades towards the top of a 0.7036/0.7065 range, supported by demand for JPY crosses at the Tokyo fix and the strong Nikkei, currently up 1.3%, after the holiday yesterday. The USD softened in the afternoon,
     
    CAD: Despite disappointing retail sales data and GDP growth, continuing to gain on the USD with rising oil and a now consolidating USD rally. USD/CAD falling through multiple support and appears to be another manifestation of the USD pullback, the 61.8 Fib retracement level at CAD 1.0441 still providing support.
     
    SPECIAL PRE-HOLIDAY RECOMMENDATION: DON'T BE SCAMMED BY ILLIQUID MARKETS: Given the dangerously low liquidity levels prevailing until next week, traders should be cautious, using small positions and tight stops if trading at all, and should stick with the prevailing pro USD trend by WAITING FOR THE REVERSAL of the current USD pullback and rise in its crosses and commodities, and enter near a strong support levels as shown in prior days' charts to catch the continuation of the current pro USD trend vs. other higher risk currencies and commodities.
     
     
     
     
     
    CONCLUSIONS: S&P 500 remains in tight range continuing its consolidation around 1100. It's been in a horizontal trading range of 1090-1112 since early Nov. later Liquidity and low rates support stocks and other risk assets as cash seeks a parking spot, but questions on valuations and still poor fundamentals weigh against stocks, and have many believing the rally is in trouble and that a bearish double or triple top is forming. Dubai again reminds markets of real risk of sovereign debt default from Greece, Spain, and now Austrian banks. However, recent good jobs and spending figures in the US, along with continued China growth, suggests valuations may not be so overdone, upping the chance that the S&P may be able to avoid a major pullback for now. See Trading Opportunities section below. Traders should consider going with the current trend but be ready for pullbacks. See below for specific opportunities with the S&P 500, CRUDE, GOLD, EURUSD, NZDUSD, USDCAD, USDCHF, GBPUSD
     
    TRADE RECOMMENDATIONS: Profit Taking on USD Rally Spurs Bounce In All Anti Dollar Positions on Pre-Holiday Thin liquidity trade. Because we suspect that the Euro-zone's debt travails are far from over, and that some key commodities are still overpriced, our bias is to believe the USD trend up still has room to run, (though much will depend on whether US economic data continues to support a belief in improving jobs and spending. It's unclear if that will happen, though current data suggest more upside than downside potential for US jobs and spending, though the path upwards may well be neither straight nor steady). Overall, there is enough potential EUR debt troubles to support the USD both as a safe haven an anti-EUR play for the months ahead, which suggests trouble for commodities too. Thus we view the current USD retreat on low liquidity as a developing setup for entering new long USD or short USD crosses at support levels.
     
    IN SUM: DON'T BE SCAMMED BY ILLIQUID MARKETS: Given the dangerously low liquidity levels prevailing until next week, traders should be cautious, using small positions and tight stops if trading at all, and should stick with the prevailing pro USD trend by WAITING FOR THE REVERSAL of the current USD pullback and rise in its crosses and commodities, and enter near a strong support levels as shown in prior days' charts to catch the continuation of the current pro USD trend vs. other higher risk currencies and commodities.
     
    AVA FX WISHES ALL TRADERS A RESTFULL AND ENJOYABLE BREAK.
     
    DISCLOSURE: NO POSITIONS


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  • Sharp! I love this blog!
    24 Dec 2009, 04:56 AM Reply Like
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