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Joel Kruger is a former currency strategist turned full-time trader. Joel is also the founder of FirstMacro, an innovative FX and global macro research product.
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  • What Is It They Say About History?

    Analog Comfort - Currencies mostly consolidating declines against the buck into Wednesday, while US equities starting to show signs of potential topping yet again. Right now, we can't get overly excited with the very minor pullback in stocks, but a break below S&P 1740 should get the ball rolling. I have been waiting for the start of a major corrective pullback in equity markets and believe this move is just around the corner. Still, taking up residence in Camp Bearish has not been fun in recent months, and for the time being, it is a very lonely place to be. But there are some out there that share the same views and it is at least nice to know that I am not entirely alone. Zerohedge put out a great little piece on Tuesday, highlighting the power of analog analysis, and I would recommend that all of you take a look. Even if you don't agree, you would have to admit it is a compelling little read.

    Subtle Breaks - Moving on, though we have seen no major moves in FX of late, there have been some notable developments which could be warning of a pickup in the buck's favor in the days ahead. While last week's EUR/USD break below 1.3460 got things going, more recently, Cable has taken out key support at 1.5895, now opening deeper setbacks into the 1.5500 area, while, AUD/USD and NZD/USD have managed to break down below some key multi-week lows, to expose a retest of the respective yearly lows. Another major pair in focus (also warning of USD strength ahead) is USD/JPY. However, things might be a little trickier in the short-term with this one. Technically, I still see USD/JPY locked within a multi-month triangle that has yet to be broken. My analysis shows triangle resistance at 100.00, and really only a break and weekly close above this level would officially open the door for a bullish breakout. Until then, proceed with caution and stand aside.

    Tags: Forex
    Nov 13 11:08 AM | Link | Comment!
  • Is That What You Really Think?

    The Black Gold - We enter the week with some very light trade and markets mostly locked within tight consolidation ranges. Still, there have been some notable moves over the past several days, and it will be interesting to see how things play out with the latest bearish reversal in EUR/USD. The week ahead is stacked with a solid amount of event risk, highlighted by Fed speak, a European Central Bank rate decision, and Friday's US NFP report. Technically, Monday's early break below some key support at 1.3480 is significant, and should we manage a close below this level, we can expect to see a further depreciation in the rate towards 1.3000. While the Euro has now taken out its key support against the buck, the Pound is still contemplating such a break, with the market tracking just over some neckline support of a major double top. The neckline comes in at 1.5895, and a break could then open the door for a test of the 1.5500 area in the days ahead. Elsewhere, there has been a lot of excitement in the OIL market, with the commodity coming under some intense pressure of late and tracking deep in oversold territory on the daily chart. While I like the idea of picking some up, I am now looking for one more drop into the $93 area before doing so. Finally, US equities have been showing some signs of topping after establishing fresh record highs in the previous week, but we still have a long way to go before any legitimate confirmation here. Nevertheless, a Gravestone doji-like formation on the S&P weekly chart could actually offer the necessary catalyst for what I believe should be the start to a major correction in US and global equity markets.

    No Added Value - Over the weekend a close friend of mine (he does not work in the financial markets) sent me a NY Times piece offering some warning signs from market strategists who feared risks of a market melt-up. While these strategists were bullish the market, they were also concerned that we could see an unhealthy acceleration of gains from current levels, that would ultimately compromise the current bull trend. I have two big problems with such views. 1) Is the current price action not already indicative of a market melt-up? We have already seen a relentless rally in stocks to fresh record highs, with no offers in site, despite what might otherwise be some disturbing fundamental developments that have forced the Fed to leave policy at emergency levels. 2) These strategists have been critical of a market that is overly bullish at present, showing no regard for anything that might otherwise dissuade further investment, but at the very same time, have perpetuated such behavior by saying they are also bullish and think the market still could go higher (melt-up). For me, I will be looking for an S&P break below 1740 this week to really get things going to the downside. I have already sold at 1755 as per my recommendation in the previous week and will only exit on a daily close above the current record high at 1779. But a break below 1740 should seal the deal and confirm medium-term topping. Let's see wha November brings.

    Tags: Forex
    Nov 04 5:48 AM | Link | Comment!
  • Boring

    Same Old Story - If it wasn't already more than clear over the past several years, months and weeks, price action over the past several days has certainly sealed the deal. There is absolutely nothing else driving the US equity market and risk assets other than Fed policy. In fact, the direction in the entire global financial markets is contingent on Fed action or inaction. In recent sessions, we have barely seen any pullback at all, and the market continues to push to fresh record highs. Though there have been many headlines in September and October that could easily be weighing more significantly on US equities, the market has easily shrugged off each one of these risk negative stories on the expectation that this only means the Fed will do nothing in the way of reversing policy.

    (click to enlarge)

    Wait For The Break - Last week, I had highlighted 1740 as the key level to watch below in the S&P, and yet, even though the level was a stone's throw away, it was never breached and we continued right into the end of the week to test fresh record highs. Yet, this price action is now more unhealthy than ever, and it almost feels like it is all about to unravel. I am really not sure how much more can be priced in at this point, with the markets now fully prepared for the Fed to stay on hold well into 2014. So with this fact behind us and no other fundamentals truly supportive of risk assets, how much more can we run before bulls smell the end of the line and decide to head for the exit? Surely it can't be much longer. Still, selling the rally has not proven to be an effective strategy, and instead, I prefer looking to sell into a downside break. S&P 1740 is that key level to watch this week, and should we manage a break, I would then recommend taking another shot. Until then, keep that cash on the sidelines.

    Tags: Forex
    Oct 28 10:31 AM | Link | Comment!
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