DENIAL IS GOOD? Denial by China and Kuwait that they are not unloading EUR-assets is the most popular fundamental explanation for the rebound in stocks + risk currencies, but technically, major US indices needed more fear to post a close below their "flash crash" lows of May 6 lows. We must emphasize the importance of a weekly close in Dow and SP500 above their 200 day MAs (see prev IMT). Players are already talking about next week's release of the US jobs report, which is exp to show a net creation of 415K due to the hiringof 2010 U.S. Census workers. The US Commerce Department said 574,000 temporary census workers were hired for the week ending May 15 vs. 156,000 for the week ending April 17. CADJPY still favoured as the preferred risk currency vs USD and JPY going into next week's policy decision. Last 5 IMTs have continuously favoured CAD due to the anticipated BoC tightening.
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By ITMS News on May 26th, 2010 11:53pm Eastern Time
► Japan's Topix pushes higher 0.5% in early afternoon trade
► Japan's Nikkei bounces 0.3% in afternoon trading
► China's Shanghai Composite sinks 1.4% to 2,590.03
► Hang Seng Index drops 1.1% in early trade
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GOLD THE NEW ANTI EURO: Price gold action is increasingly tied to the euros broad performance and less so to the USD. Since March, the yellow metal has proven to be among the few safehavens away from the Eurozone sovereign woes to the extent that the correlation between GOLD/USD and EURUSD has become notably negative. Not only are European investors seeking refuge into the safety of gold at each and every release of bad news, but this also spilled on to the price of gold vs. other currencies. This was clearly manifested last week during the bounce in the euro (resulting from SNB intervention and rumours of the same from ECB), which coincided with falling gold from 1200 to 1160s. Staying away from the euro, traders assaulted the Aussie, loonie and Kiwi. But things did change on Monday and Tuesday when renewed EUR selling (Bank of Spain seizing savinsg bank and ECB buying fresh govt bonds) lifted gold against all currencies, WATCH ASHRAF's TAKE ON GOLD AND THE EURO in yesterday''s CNBC intrerview http://bit.ly/cn6M4yRead more…
Hi all...Just looked at the charts again. Since the last blog post, the support target box has worked a treat!I even went Long at 4918 after the bounce with stoploss at 4895... and running it.However, there seems to be a slightly mixed picture and 5020 is the key to sorting it out.If 5020 IS taken out, it is very very likely that the 4898 low is not to be broken.If 5020 IS NOT broken soon, the alternative view is one more dip bellow 4898 and then a strong bullish rally.At the moment, FTSE is being quoted at 5018 after the Dow rallied hard after the european close...so it is looking very very good, but thought I would let you know that there does seem to be a possibility for one more small dip bellow 4898.Either way, yours truely is still feeling BULLISH and expecting a strong bounce...hopefully sooner rather than later, but we shall see.
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By Gareth Soloway on May 25th, 2010 11:53am Eastern Time
Global drama continues to hurt the markets. Last night the futures were getting crushed as Asia and Europe sold sharply as continued worries about Spain and Portugal killed the Euro. In addition, North Korea and South Korea seem to be one bullet away from a major confrontation. The Dollar soared again but into a major double top from last week. Since the opening highs of the Dollar, a pull back has occurred. The markets in response have inched higher into the gap down low from Friday. On the SPDR S&P 500 ETF (NYSE:SPY), this level is $105.90. The SPY has hit it many times today and has yet to break through. As long as the markets stay below this level, look for a possible retest of the lows of the day. Should the markets inch above this $105.90 level, the markets may continue to advance higher for the rest of the day.
The key for this market remains Europe and the Euro. Europe must find some way to calm the fears of default and get the Euro to inch higher. So far this has not been possible.
Stocks continue to trade off their lows. While commodities are under pressure, AK Steel Holding Corporation (NYSE:AKS) is surging higher. Citigroup upgraded the stock from neutral to outperform citing valuation. They gave it a $19.00 price target. The stock is trading at $14.20 +$0.68 (5.03%). This happens to be one of the few long plays Chief Market Strategists have given out in recent days. Sure enough, regardless of the markets fall, all members who got the entry on AKS are in the money nicely. Other steel players are not doing quite as well. United States Steel Corporation (NYSE:X) is down about 2.40% on the day.
While most financial stocks continue to be under pressure, Goldman Sachs Group, Inc. (NYSE:GS) is trading nicely higher. The stock is at $138.53 +$1.84 (1.35%). This is in a sharp contrasts to stocks like Wells Fargo & Company (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS) which are all solidly lower on the day. One has to wonder if Goldman Sachs is making a killing on the crazy volatility in this market. Earnings may be insanely huge when they report for the current quarter.
Gareth Soloway
Chief Market Strategist
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BLAMING THE DEEPENING SELLOFF solely on the tensions in Korea is akin to attributing the 9% intraday market selloff of May 6 to fat finger errors. And for last Fridays market rebound to have been the attributed to reports/rumours of Goldman Sachs settling with the SEC only highlights the shaky role of sentiment in exacerbating the selloff in equities and risk currencies. We spent sufficient time focusing on the downside risks for the euro and the Aussie, calling for $1.21 and 0.80 as immediate objectives. But the loonie is accelerating losses, catching (down) with the Aussie. USDCAD breaks to new 2010 highs penetrates through 1.0780 to eyeing a retest of 1.0860 top, followed by 200-week MA of 1.0920. But interim USDCAD downside could eyes as low as 1.0680 trendline. CADJPY eyes short term bounce towards 83.80s. Weekly stochastics suggest 81 remains viable for the week.
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GLOBAL MARKETS SELLOFF extends into US futures, which are down 2.5% following another 3% decline in the Nikkei-225. S&P500 futures -2.4%, testing the Feb 4 low of 1044, a break of which calls up the 100-week MA at1023. Escalating tensions between the North Korea are providing the latest excuse for the sell-off, but if Korea were truly the main reason, then JPY would be weaker and not stronger. JPY has taken over from USD as warned in earlier IMT. USDCAD eyes 1.0820, which is a clear break of the 1.0780s congestion resistance from last November. UK Q1 +0.3% as expected from prev 0.2%, but thats unlikely to retest 1.4230s, with resistance limited at 1.4330s. Watch Ashraf's CNBC appearance breaking down GOLD vs EUR http://bit.ly/cn6M4yRead more…
