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FOREX, COMMODITIES, STOCKS OUTLOOK June 8th: Cliff's 2 Minute Drill 11:30 GMT




Stocks: Prior day: Asia, Europe, US down. Today: Asia up, Europe down. Stocks plunged again in the US, rallied in Asia, and an attempted follow-through European rally is failing for lack of justification, reinforcing the bearish indicators we pointed out last week in  our special report: Three Powerful Bearish Signs:  S+P 500 Heading To Around 830, Short Risk Assets. Most major indices are forming or have formed bearish ‘death crosses (50 day MA crosses below 200 day MA) signaling a longer term downtrend.

-        US Bonds: Up falling stocks sent investors fleeing into bonds. Yields on the benchmark 10-year Note fell slightly from 3.20% Friday to 3.1840% at the US close Monday.

-           Commodities: Up Oil up on bounce off strong support, gold continues to rise on EUR declines

-           FX:  Overall bias TO safety currencies [JPY, USD, CHF in order of safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GB in order of risk appetite appeal], mostly according to a currency’s place on the risk spectrum, but with the CHF strongest as it catches up to other safe-havens now that the SNB has suspended intervention, decoupling the CHF from the falling EUR.

-           Main events: MON: AUD ANZ Job Advertisements m/m EUR German Factory Orders m/m, CAD BoC Gov Carney Speaks TUES: USD: Fed Chairman Bernanke Speaks CAD Housing Starts WED:AUD Home Loans m/m, NAB Business Confidence, GBP Trade Balance CNY New Loans USD Fed Chairman Bernanke Testifies, Crude Oil inv., Beige Book, NZD Cash Rate/Press Confr/Rate St. THUR: AUD Employment Change/Rate, RGBA Gov Stevens Speaks, CNY Trade Balance EUR French Ind. Prod., Minimum Bid Rate, Trade Balance, ECB Press Confr. GBP Asset Purchase Facility, MPC Rate St. Official Bank Rate USD Unemployment Claims  FRI: CNY CPI y/y, Fixed Asset Inv., Ind. Prod y/y PPI y/y,  GBP PPI Input m/m USD Core & Retail Sales, Prelim UoM Consumer Confidence

        Big Theme: Risk Appetite Gone Again? Friday’s panic selloff in risk assets on news about Hungary and poor US jobs reports continues thus far into the week, as a mild rally attempt in Asia this morning reverses in Europe, further entrenching the downtrends in virtually all risk assets over the past months. For details see out weekly outlook reports: The Week Ahead: Stocks, Commodities, Forex – 3 Key Market Drivers June 7th – 11th (and abridged version for those pressed for time), June 7th – 11th Quick Review/Preview: Stocks, Commodities, Forex,  See also our latest special report: Three Powerful Bearish Signs:  S+P 500 Heading To Around 830, Short Risk Assets in which we discuss how key risk asset charts show 3 major signs of a more prolonged bear market ahead.  



US:  Down – With all major indices in sharp selloff mode since Friday and no compelling news, stocks drifted without direction but in the end downward momentum carried stocks lower, with US stocks down again over 1%, the Nasdaq down over 2%.

The broad-based slide that saw the S&P 500 settle at session lows around the 1050 level, a key level  because this was the low for the last pullback in February.

US Bonds: Up on Monday- Treasuries were predictably higher as the continued stock market selloff sent investors fleeing into bonds in a flight to safety move. Yields on the benchmark 10-year Note fell slightly from 3.20% Friday to 3.1840% at the US close Monday.

Asia Stock Outlook: Up: Most Asian indices closed higher on Tuesday in choppy trade after a key support levels held, with short-covering and bargain hunting emerging a day after the benchmark Nikkei suffered its biggest one-day fall in 14 months. Given the lack of positive news, we view this as a temporary technical bounce off support.

European Stock Outlook: Down – European shares opened higher following Asia but have reversed into the red in mid-morning European trade. No particular news, just a rally attempt failing for lack of any justification or adequate support.

Commodities Outlook Monday and early Tuesday trade GMT: Up , but crude reversing back down with the overall reversal of the early risk rally today in Asia and early European trading

Crude Oil Daily Outlook: Up- Oil futures bounced off strong support at $70 to rise to $71 Monday, and continue rising to over $72 in early Tuesday trade GMT

Gold Daily Outlook: Up 2%- At the US close Monday, A jump in precious metals (+3.5%) helped the CRB commodity index finish in positive territory today, despite four other sectors ending the session in the red. July silver closed higher by 5% to $18.162 per ounce, while August gold ended up 2% to $1240.80 per ounce. Despite the Euro’s gains vs. the USD Monday, there was a rally in gold priced in Euros, supported by a flight to safety, helped push precious metals futures higher today. On the contrary, industrial metals, including nickel, aluminum and copper, all finished the session well lower.

FOREX Daily Outlook in Monday and early Tuesday trade GMT: Mild rally in risk currencies early today following the rally in Asia is reversing as stocks fall into negative territory.

While we were aware of potential trouble there and elsewhere in Eastern Europe (see here for more) for some time, the region had been of the radar for the mainstream financial press, and thus the news that sovereign debt was not limited to the PIIGS block (rename ‘em ‘PHIIGS’

US Dollar Daily Outlook: Up vs, JPY, NZD down vs. all others over the past day on mild risk rally over the past day, which is retracing down at the time of this writing.


Euro Daily Outlook: Up vs. the USD, JPY, GBP, NZD, down vs. the AUD, CAD, CHF – mostly behaving per its place in the risk spectrum with exceptions: CHF pent up demand vs. the EUR sending CHF higher as SNB intervention appears over for now. Currently around $1.1907 and down since the start of the day. Yesterday’s news from German paper Der Speigel that the German constitutional court may oppose German payments for EU bailouts again raises concerns for us about Germany’s long term commitment to the bailout package but as yet is not getting much attention in either the mainstream press or markets

Yen Daily Outlook: Down vs. all except for the NZD on the prevailing mild risk currency rebound over the past 24 hours, which is currently reversing.

British Pound Daily Outlook: Up vs. the JPY, USD, NZD, down vs. all others, the riskier commodity dollars and the CHF, which is making up for lost safe-haven gains when it was tethered to the EUR by the currently suspended SNB intervention

Australian Dollar Daily Outlook:  Up vs. all except for the CAD, CHF on mild risk asset bounce, after being down vs. all Friday and early Monday, no related news behind the move.

New Zealand Dollar Daily Outlook: Down vs. all as it remains among the weakest currencies during both the risk aversion of Friday-Monday and the risk bounce Monday-Tuesday.

Canadian Dollar Daily Outlook:  Up vs all except for the CHF

Swiss Franc Daily Outlook: Up vs. all others despite mild risk currency rally as the CHF continues to make up for lost ground as the #3 safe haven currency in the broader multi-week risk aversion trend. The CHF missed out on most of this due to market belief that the SNB would continue to intervene to keep it falling along with the collapsing EUR. However, that effort clearly has been suspended as of Friday’s plunge by the EURUSD through strong mult-year support with no relief in sight.

CONCLUSIONS & Big Picture: Friday’s rout of risk assets on news about a possible Hungary default, (also exacerbated by bad US job figures, keeps the multi-week trends firmly down for risk assets, though with such strongly negative sentiment risk assets could always catch a short term bounce higher like we’re seeing today, without even the help of any kind of mildly positive news. Beware, however, as we note in our recent special report: Three Powerful Bearish Signs:  S+P 500 Heading To Around 830, Short Risk Assets. Stocks are the key barometer for risk assets, with the S&P 500 the most indicative of overall risk asset trends. It is showing 3 major bearish signs of more downside to come for the coming months( long term down trend, death cross, average percent drop below major moving averages still suggests more decline). See the above links to out weekly outlook reports for more on likely market moving forces for the coming week and beyond.

Trade Ideas

EURUSD Short: Currently down from around 1.1950 yesterday to 1.1917 today, the1.2200 major support level COLLAPSED in the wake of Friday’s selloff on news of the possible Hungary default.  No real support before 1.1800 – 1.1700 range. Too late to enter now, wait for bounce back to around 1.1950l. Entry point at/near 1.1950, target just above 1.1700, stop loss just above 1.2000, for risk:reward ratio of nearly 3:1



CRUDE OIL Short: Currently around $71 at the 50% Fibonacci retracement level. prices collapsed Friday from $74 and strong resistance both from this price level and the 61.8% Fibonacci retracement level from the lows of July 2009, now at $71.25 Death Cross now officially forming as the 50 day – 200 day  EMA and now touch, suggesting the trend has legs (short bounces along the way, off course). No significant multi-day resistance until just above the 38.2% Fibonacci resistance at around $68.20.

We exited at out profit target from our last crude trade at just above %71. Next trade:

Entry point: around $71, first profit target exit just above $68.20, stop loss $$71.60, risk:reward better than 3:1.