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FOREX, COMMODITIES, STOCKS Brief 1/19: Analysis, Key Events, Trends, Trades


FOREX, COMMODITIES, STOCKS Brief 1/19: Analysis, Key Events, Trends, Trades

- Stocks: Prior Day: Asia mixed, Europe up, USA down, Today: Asia mixed, Europe down

- FX: bias to safety currencies [JPY, USD, CHF in order of safety appeal] vs. risk currencies [AUD,
NZD, CAD, EUR, GBP in order of risk appetite appeal], US Dollar down as jobs data defers stimulus exit, interest rate increases

- Main events Tues: GBP: CPI, BoE inflation letter, BoE Gov Speaks EUR: German, EU ZEW sentiment, CAD: Boc Rate St. overnight rate , USD TIC Long Term Purchases, NZD: CPI, EARNINGS: C, IBM,AMTD WED: GBP: Claimant Count, MPC Minutes, CAD CPI, USD: Building Permits, PPI, Housing starts, NZD, Retail Sales, US EARNINGS: BAC,EBAY, MS, WFC, USB

- Big Theme: Markets cautious, little changed Tuesday ahead of US earnings – SEE RECOMMENDATIONS BELOW FOR THE COMING DAYS

STOCKS: Investors To Stocks: "Justify My Love" (NB: US Markets Were Closed Monday)

US: On Friday better-than-expected earnings from bellwethers Intel and JPMorgan were not enough, as sellers sought more convincing data to justify further gains, and handed stocks their worst loss in four weeks. For the week, the DJIA -0.1%, the Nasdaq -1.3% and the S&P 500 -0.8%. NB: If you look at a daily chart of the S&P 500 with Bollinger Bands (2, 20 settings) note how often, over the past 7 months, it retreats and tests support to around the 50 day moving average once it hits the upper band. Big name earnings this week.

Asia: HONG KONG (NYSE:AP) -- Asian stock markets were mostly lower Tuesday as investors awaited a batch of earnings from major U.S. companies that could yield clues about the pace of economic recovery.The lackluster trade came after Wall Street was closed for a holiday Monday and European shares advanced as investors focused on possible corporate mergers.

European Stock Outlook: European shares rose Monday on little data, down in early Tuesday trade ahead of a busy news and US earnings day


ASIA- MIXED N225I -1.16% HS -0.90% SSEC +0.40% FTSTI +0.24% AORD +0.13%
EUROPE UP FTSE +0.81% DAX +0.79% CAC +0.58%  
US- DOWN S&P -1.08% DJIA -0.94% NASDAQ -1.24%    
THIS MORNING MIXED N225I -0.83% HS +1.02% SSEC +0.30% FTSTI +0.03% AORD -0.94%
DOWN FTSE -0.53% DAX -0.49% CAC --0.55%  

Commodities Outlook: A stronger dollar, which was helped by continued concern about the financial health of Greece, along with lackluster growth data over the past weeks, brought further weakness in the commodities complex, and dragged the CRB Commodity Index to a 1.1% loss. The slide made for a weak finish to an already-feeble week that saw commodities fall more than 3% since Monday.

Crude Oil Outlook: Oil prices rose above $78 a barrel Monday, spurred by bargain hunting amid a weaker dollar and after gains in European shares. This was the first day in over a week that oil held steady. Giving up its gains in early Tuesday trade, but holding above $78

Gold Outlook: Continuing its modest rise, recovering its Friday losses Monday and early Tuesday. Currently around $1138 in early Tuesday trade

FOREX Daily Outlook: Slight Bias to safety fx in early Tuesday trade as stocks in Asia and Europe retreat, Greek debt uncertainty, early Monday on retreating stocks, risk appetite. Liquidity returns with open US markets. SEE WEEKLY OUTLOOK FOR DETAILS on events and forces to watch this week. As of early Tuesday most FX quiet, little movement, tight flat ranges. Lots of news today could change that.

US Dollar Daily Outlook: Modestly down vs. most majors on Monday, little changed in early Tuesday trade, little changed vs. EUR.

Euro Daily Outlook: Little changed yesterday as Greek troubles are balanced by upbeat comments from ECB member Nowotny. Steady in early Tuesday trade.

Yen Daily Outlook: Monday: unchanged vs. the US dollar but sold off vs. other majors on weaker economic data and dovish comments from the BoJ. Little changed in early Tuesday trade

British Pound Daily Outlook: Monday, continued to gain on the US dollar and euro on stronger housing data. EUR/GBP testing support, attempting to head lower.

Australian Dollar Daily Outlook: Continues to chop in a tight range vs. the US dollar and the Yen over the past days and into early Tuesday trade.

New Zealand Dollar Daily Outlook: Continuing to rise vs. the USD

Canadian Dollar Daily Outlook: Continuing Monday's gains vs. the US dollar in early Tuesday trade, but the USD/CAD could see volatility as both countries release important data. Momentum is strongly downward for test of 2009 lows.

Swiss Franc Daily Outlook: Gained against the USD and EUR Monday, reversing modestly in early Tuesday trade

CONCLUSIONS & Big Picture: (US markets were closed Monday. Bias to downside for risk assets as Asia, Europe mixed-down over the past days thus far Tuesday. S&P 500 and other major global stock indexes still in well established up trends, earnings data will be key over the next week. However, as noted above, when the SUP 500 starts to pull back from its upper Bollinger Band on its daily chart, it has usually tested support back down to around its 50 day moving average. Given the downbeat market reaction to US earnings thus far and a relatively light week for news, our bias for risk assets is to the downside in the coming days. See below for specifics on the S&P 500, CRUDE, GOLD, EURUSD, NZDUSD, USDCAD, USDCHF, and GBPUSD

Big name earnings reports are the likely key influence on sentiment. For any trades we try to select only those trades with resistance/ profit targets that are 2-3 times farther from the entry point than the stop loss, for a 2:1 or 3:1 reward/risk ratio.


S&P 500, Other Major Global Stock Indexes:

Advice: As noted above in Conclusions, given its tendency over the past 7 months to retreat back to around its 50 day moving average once it pulls back from its upper Bollinger band, and the dour market reaction to earnings thus far, especially those of the banks, bias to the short side.

The safer move is to wait for a pullback, like we saw on the 12 preferably to some kind of support level, and then jump in when that reverses, as happened yesterday. However, we urge those long on any risk assets to keep tight stop losses in place, given:

· The potential time bombs that continue ticking under the US banking and housing sectors, as well as in

· The Euro-zone sovereign debt default threat area –Update: Portugal received a warning about another downgrade from its current A+ rating following a downgrade January 21 2009.

· The Fed has now warned banks to get ready for rising rates and the certain increase in mortgage defaults. Stocks do not tend to do well in an environment of rising rates. In recent long term treasury bond auctions, the high percentage of awards to direct domestic bidders had many wondering if the Fed is in fact doing a major share of the buying via intermediaries. If so, that suggests flagging foreign demand and eventually falling bond prices and rising rates.

· The very real falling demand for US Treasury bonds, which the US must keep issuing, and thus the very real incentive for Washington to allow stocks to crash a bit and drive up US T-bond demand (hat tip to Graham Summers for that observation).

Because the S&P 500 is so representative of overall risk sentiment, and thus the "One Chart to Rule Them All", always take a look at the daily chart (or other relevant timeframe to the style you trade) for a picture of overall risk appetite or aversion. The current picture is bullish/long but the move may be losing momentum and flattening out.

S&P 500 Daily AVA FX Chart (04 Jan 18 )

** GOLD: Unchanged from yesterday: Await clarification of trend. Moving with stocks and risk appetite, opposite the US dollar. It is currently sitting between Fibonacci levels, no clear support/resistance nearby. Given our overall bias for the coming days to the downside, be ready to take short positions as noted below.

Trade Suggestion:

Long: Conservative traders should avoid longs for now until it either retests and holds near the the 50% Fib level at $1125.41, or breaches price resistance at 1154 for a target exit around the 23.6% Fib level at 1175.75

Short: We do not recommend opening new shorts until gold breaches the 50% Fib support level with a stop just above your entry point (with then a target exit near 1103, the 61.8% Fib level, OR after gold tests and fails to break over the 38.2% level around 1148.

Gold is moving opposite the dollar, so watch the EURUSD and S&P 500 for indications of gold's near term moves. Also watch the S&P 500 and other major stock indexes and news to see if risk appetite gets a lift from improving spending, jobs, or other data that ALSO boosts USD stimulus exit and interest rate expectations, thus supporting the dollar and driving down gold.

Gold Daily AVA FX Chart (05 Jan 18)

Crude Oil: STILL Virtually unchanged since Friday, sitting right at the 38.2% level, a great entry point long or short with stop loss within about 30 pips. Crude is volatile, so best to accept being stopped out and then just jump on the trend in the other direction. Will move with risk appetite and the dollar, which for this week rests mostly with US earnings and other key events noted:

As noted above, our bias for the coming days is to the downside, so traders should be ready to enter short on a breach below 78.03, with a short term target to at least around $76-75. Oil has been in a range of about $82-$69, so the short side has lots of room should risk sentiment make a longer pullback.

Watch the EUR/USD chart for USD movements, and the S&P 500 chart for overall risk sentiment.

WTI Crude Oil Daily AVA FX Chart (06 Jan 18)

EURUSD: Price and recommendation unchanged: UNCHANGED FROM MONDAY Like many of the anti-USD Forex plays, jumping higher in the wake of the weak US jobs report and weakening USD. Given the clear short term bias to risk assets shown in the S&P 500 chart above, current bias is long.

Recommendations unchanged.

Long: Wait until it breaks the 1.4600 resistance level or retests the 1.4428 (50%) Fibonacci retracement level, with stop loss just below the recently broken resistance turned support.

Short: At or near a break below the 50% Fib level, this has been stubborn resistance lately.

Watch the S&P for overall risk appetite, and the EURUSD for a quick gauge of the USD to judge if oil is ready to stabilize.


NZDUSD: Price and recommendation essentially unchanged, currently at 0.7396, recovery lost ground from last week. Has been gaining on the US dollar like all high yielding or risk currencies, but currently still recovering from Friday's stocks pullbacks. More of that could send it lower.

Long: Can enter around current levels 0.7420 and use the descending downtrend line as a support level to place a stop loss nearby, with a target of 0.7563 for a 3:1 reward/risk level

Short: not yet – wait until some major pro dollar or fear news breaks and enter just below the declining down trend line, placing a stop loss just above it, and with a target around the 76.4% Fib level for a 2:1 reward/risk at least.

Watch the S&P 500 and EURUSD to gauge risk appetite and USD strength. Much will depend on further news on US economic fundamentals and Euro zone sovereign debt issues.

NZDUSD Daily Chart (07 Jan 18) AVAFX CHART

USD/CAD: VIRTUALLY UNCHANGED FROM YESTERDAY: Currently at 1.0255--While it generally follows oil, beware. As the chart below shows, it's in the middle of recent support/resistance, making a low risk entry unavailable. Also, the CAD is a risk currency, and if stocks continue to pullback further, this pair could rise even if oil holds steady. Best to await clarification


USDCAD DAILY AVA FX CHART (image: 08 Jan 18)

USD/CHF: Currently at 1.0247.Moving down as resistance held at the 38.2 Fib retracement level, good entry for short with stop loss nearby, target near the 61.8% level, as the 50% has not been significant. The dollar should benefit more than the CHF if stocks pull back, which, as we note above, is our bias for the coming days. Currently pulling back slightly, so best to wait to enter long after a breach over this resistance level, or go short at current levels.



Long: wait until it breaches the 38.2% Fib level, target just before the 23.6% level with stop loss around the current level of 1.6386.

Short: Wait for a reversal at the current level to see if the 38.% level holds, with target around the 61.8% Fib level around1.6167.

GBP/USD Daily AVAFX CHART (02 Jan 19)



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