SChartered – FX Weekly Technical Analysis – 21-Oct13

The usual weekly technical report from SC.

They have turned bullish the eurusd pair up to 1.40 mirroring the jpm shift. Its plain to see that if we could get above the 1.40 level in the coming weeks it would be a game changer for the Dollar basket with all the asset implications this would imply. For now have many participants sticking to the long usd theme but near term hedging their bets up to the 1.40 level. From a trading perspective I would love push the level over to test how many stops would be triggered and what asset allocation implications would occur.With US$ inversely correlating instruments like oil breaking down its not really supporting the push through 1.40 as yet but lets see. The move is still in play for now.

Other pairs long jpy vs usd, short gbp vs usd, etc.

Here their report:

sc-fxwkly-21-10-13

All the best

Rich

 

Weekly Technical Analysis – “Spike in Market Breadth is Bullish, New Key SP500 Support 1729!”

A great report. The market breadth issue is meaningful and as the guys only comment on the technical I’d just make the point that this is fully explained by the shift back down in US fixed income rates in the last 4 weeks. The ten year today has slipped back down to 2.5% and this is providing a wonderful tail wind again to all equity sectors inc the utilities as the threat of higher interest rates has receded, for the moment. The combination of the ‘super dove’ Yellen’s appointment as well as the Bernanke pull back from the “taper” as well as the weak economic data is driving the hunt for yield yet again. Breadth expansion looks correct given these drivers.

Asset markets covered include the US indexes, Euro indexes, Asian indexes which are hitting resistance levels, commodities inc oil, the softs and bullion which the team have scored correctly on.

I’m a little surprised they haven’t picked up on the dollar basket key level issue. Its critical to the commodity sector. Oil’s seasonal issues are clear and drive forward allocations by the large participants, self for filling in this way. My point here though is ‘from failed moves come fast moves”. Ie large participants could easily be wrong footed by the USD developments. And no where would this be more acutely felt than in the oil asset class.  It would be most acutely felt here due to the seasonal expectations of participants. Watch oil for a sharp reversal should the US$ weakness continue. If oil reverses it could be explosive and feed quickly into the various commodity indexes whose weightings are skewed to this asset class.

Ill leave the rest to the excellent Swiss team here:

wklytech-22-10-13

Luck to all

Rich

 

CS-Commodities 22nd Oct 13 & BarCap – China Commodities Oct 21st 13

This is what is so interesting at this point in proceedings. Many large participants are forecasting a continuation of the cyclical commodity bear and effectively the ending of the commodity super cycle.

Fundamental demand and supply wise they could be correct but demand and supply do not drive price moves of commodity instruments any more. Monetary issues such as credit and currency drive their prices.

Monetary wise equities are starting to stretch into an over valuation as earnings disappoint, credit is becoming bountiful as excess reserves accumulate from multiple western qe programs. The search for yield goes to extremes as junk spreads to US ten year rates steepen, (the 10yr T bond falling back down to 2.5% today but junk outpacing her). Asset prices rising and ever stretching the multiple to median household income. Its a bubble certainly. Driven by zero interest rates, fiscal deficits, fiscal tax policy and unlimited qe. The monetary excess typically finds its way into the commodity asset classes at the tail end of over stretch valuations. We appear to be moving into this end game phase would be my comment. The US$ index remains the lead and is breaking key levels as commented last week which requires giant shifts in allocations by large participants who cannot ignore these moves, if they continue.

CS are taking the other side here for a continuation. They are probably in the majority still at present though momentum, and price, is starting to move to the other side. Its a fascinating market event and must be watched, for obvious reasons.

Report here:

CS-Commodities-22-10-13

And I just received a copy of the BarCap china commodities report. (Thank you, you know who you are).

We also see Barcap coming out for the bear continuation here, again driven by the fundamentals, particularly from China and Asia who are the main drivers of demand for the commodity asset class.

As we look at the well research fundamental case outlined in both reports we must recall that trading always beats fundamental issues,  in the near term.

And, furthermore, monetary issues (in our fiat money world) often override fundamentals, for extended time periods.

We are clearly reaching a pain threshold area for participants!

Here the report:

Barcap-commodities-21-10-13

All the best

Rich

 

Hedge Fund Watch – Greenlight “Letter to Shareholders” Oct15 & Hinde Capital “Bullion Miners Focus” 16th Oct 13

Here a couple of reports from the two widely respected, though very different, hedge funds.

Greenlight Capital’s performance record, over the last decade or so, puts her in the upper quartile of the upper quartile. David Einhorn its ceo updates on views, performance and allocations.

Greenlight-Q3-2013

Hinde Capital are the specialist bullion focused hedge fund. Their performance has struggled in recent years as the bullion cyclical bear maintains his grip on the asset class. In their latest report Hinde update on the miners and the likely impact on production from the ongoing carnage in that sector. Given the US$ breakdown in play again today its a timely report. Remember trading wise, even if they are correct that a 100% correction is likely for many miners ie to zero, the ‘crap’ always bounces the highest on short term reversal moves.

HindeCapital-BullionMiners-16-10-13.docx

All the best

Rich

 

 

JPM-Tech Trading FX 18thOct13 “EurUsd Extension Higher to 1.3850 or 1.4010 is Likely”

Raising the forecast for the eurusd pair to the 1.40 level note!

From a purely trading perspective this would be very meaningful for all sorts of instruments.

Note as well the short GBP recommendation vs the USD target 1.435, make or break near term level at 1.6175.

In light of the Eurusd targets this implies the GBPEUR short GBP and long euro would be the highest yielding trading pair!

JPM-FX-tech-nearterm-18oct13

Rich

CS-Weekly Wealth Management – 18th Oct13

Interesting comment and views from CS wealth management.

Their tech team picking up something noted and allocated against a week or so on the forum pages ie the “Stoxx Europe 600 Banks
Index with strong technical momentum” contrary to UBS expectation.

Long high yield junk, which was another theme from the forum allocations a week or so ago.

They remain underweight commodities. (Jury is still out on this element, in my view, dx critical).

Here their report

CS-wkly-wealthman-18-10-13

Rich

 

JPM – FX Technical Strat – 18th Oct 2013

The latest fx report from JP below.

They remain fairly US$ neutral to bullish.

Forecasts for major pairs for euro to weaken to 1.33 or so.

JPY to decline to the 103 level vs US$ and the pound to come off a little.

The dollar basket to hold this level.

JPM-fx-tech-18-10-13

(From a near term trading perspective the team have raised their forecast up to the 1.40 level eurusd in a second tech near term trading report. Momentum wise i concur with this bullishness euro. This will, if correct, feed in, near term, to all sorts of correlating and inverse correlation asset markets).

Pure technical trading report to follow.

All the best

Rich

SC Weekly Macro Strategy, Levels & Allocations – 18th Oct 13

Just off the wires this morning SC’s latest weekly report on global markets inc key levels and their allocation recommendations.

SC also taking a bow at their recent performance and allocations.

They appear to be getting a bit more bullish, at least euro area wise and staying under weight fixed income.

SC-WklyMacroStrat-18-oct13

US$ confusion reigns, for now though some clarity could be starting to emerge.

All the best

Rich