Going to "Kububrum" PART 2

So we continue "Kububruming"....

Honestly, I was impressed by German GDP and in the beginning my emotions took over and it felt like we might even post the low for the time being. Yet, markets did not think this way. Like French say "Bon..." What are we looking at now?

S&P threatens to close down under all short term and long term moving averages. Moreover it gapped through 50d moving average. Whatever happens this is not a "buy" market. Looking for a retest of "flash crash" lost at 1062 and possibly lower, as momentum is still not oversold. Keep in mind that fundamentals have yet to catch up with the price action so the move there might be choppy from here.

EUR has its old skeletons resurfacing with long term solvency of Greece, Ireland and Italy being in question... I still think that it is France that will have a problem, as it is a ticking bomb with soaring social security costs and high taxation. Good 2Q GDP numbers do justify rally off 1.18, however market is discounting slowdown if not contraction....Last support to be taken out is May highs that coincide with 50d moving average:

Oil's summer rally looks to be coming to an end as we roll through all moving averages. There is some support that comes with bollinger bands and channel support line, but overall price action looks corrective within larger bear trend:

Even feels like Copper will give up in such environment, but technical picture is not yet turning bearish... probably this is another shoe to drop in overall bearish environment:

Overall no sign of bottoming in risk assets yet. But again, sentiment got hit but we need to see fundamentals catching up with the price action. Have a good weekend!

Going to "Kububrum"

Going to "Kububrum". This is the new word in the English dictionary that probably describes best my feeling about today's markets. Feel free to ask me for proper pronunciation. Anyway...

There is no such thing as "market went to far to fast" or "market is cheap or expensive". There is only direction or no direction... have a look at currencies today. EURUSD lost 300 pips... something we have seen only in time of crisis or when we had a big surprise... I doubt yesterday's FOMC statement was a surprise, we all knew Chinese economy was slowing, but not falling off the cliff. So where did surprise come from? I don't have an answer to this question. Read my posts instead. Market can bite you hard if you are unprepared...

Where to from here? While Asia still has to absorb European and US mood, which is clearly turning grim, I will take evening off and will not make any suggestions as it feel like this week's move is done.

Respect the lines

Asia is gaining more weight in leading the rest of the world markets, so I looked at Chinese markets...

You rarely see horizontal support and resistance lines for Shanghai composite. However if there is one, market respects it. Whether current pattern is head and shoulders in development is uncertain, but, from here, I am looking for a retest of the recent lows if we stay under the line.

Another instance of such behaviour occurred in June-July 2008 when financial crisis was just in the beginning:

Don't you worry, FED is there to save us again! Or not?

Have I missed much last Friday by taking a day off? Well, not really, but at least I spent a day out of the markets out in the air... Fresh look at the markets and looks like we have new dogma: "Fed is going to save us again!" Tomorrow is the FOMC decision and looks like this idea is on the mind of people. At least it is keeping the market supported ahead of it. That's good news. The bad news is...


Must be frustrating for US officials to acknowledge their economy is doing worse then Europe. Especially when Europe is undergoing budget cuts that could eventually limit growth. In the US this looks like happening even without forced budget cuts. Well, some states have understood that the cannot borrow more and decided to cut on employees expenses as it can be seen from the latest NFP report.

Where do we go from here... I doubt FED has enough bullets  to meet expectations of the market. Downgrading economic outlook is damaging by itself. Acknowledgement of this has to be followed by certain promises, but as I said it would be difficult for me to imagine something that markets does not know already. And not meeting expectations might just the last shoe to drop...

I think we might be even better of if FED does not say anything about worsening economic outlook. We'll see tomorrow.

Meanwhile on some ideas I follow:

- NYMEX gas has broken through long term support channel discussed last week so I don't see any good  upside potential from here for the time beeing.
- Oil looks to be a good sell as it was the most vulnerable following NFP release last week. CFTC report showed increase in the long positions - surely it might be a disappointment for oil bulls.
- S&P remains vulnerable under 1130-1135. see last week graphs for more
- It looks like calling a top in EURUSD proved to be a difficult exercise, but its fall today following some very good European data might be just it. Tomorrows US data and German GDP numbers will give more clarity on the direction.

No graphs today as I am out of time.

What's bothering me now

Before I take off for a long weekend, I just wanted to share with you some risks I see to the markets and that can derail all of my scenarios...

1. Deflation talk continues to accelerate and while it is known that prices tend to fall in such environment, I feel that immediate reaction to acknowledgement of this fact is uncertain. Dollar/commodities/equities relationship in the last several years had not been "real" supply/demand relationship... moreover there is a possibility of food inflation given the drought in Eastern Europe. Yet more and more people talk about deflation and from what I read in the news some are actually buying long dated bonds as protection. Go figure what it will be deflation or inflation

2. Some time ago I spoke about web bot software that predicted increasing tensions involving the US that might lead to a 3rd world war... Feels like that tensions between Iran / Israel and the US are likely to escalate given the assassination attempt of Iranian president and recent report on terrorism by the US where they called Iran biggest state sponsor of terrorism...

Is the glass half full or half empty? PART2

Just a follow up on the recent post...

Please keep in mind I will be out the office tomorrow, so in my absence markets are likely to move hard. call it a bad luck, but experience proves it.

Correlations between assets are picking up and feels like we're going to the normal risk on/risk off mode:

Meanwhile, markets are mostly going sideways at the top of their ranges under key levels, S&P stalled just under 100d moving average and 1130-1135 is the level to watch:

Oil is showing signs of trend exhaustion at the conjunction of various resistances and as I mentioned 82-83 level gives a good risk reward for a short position:

NYMEX gas has turned upside down following an outside bearish day reversal. For this market $4.50 has to hold - which is a channel support off august09 lows. If broken, this will be a significant damage to bull scenario I had speculated about since May this year and I would not be surprised to see a test $3:

Overall, there is a risk of significant correction in the short term as not only risk assets, but assets with low correlation show downside possibility. Put this two together and this makes good case for economic situation to worsen in the nearest future.

Have a good weekend

Is the glass half full or half empty?

My track record of being absent at work and missing something big in the markets is amazing... Keep in mind I will be off coming Friday, so expect something big to happen on this day, possibly NFP's will be a big surprise.


Deflation talk accelerates, now growing into a debate whether FED is to speed up money printing... while important as such, no obvious consensus is seen yet.

Answer the following question: is the glass half full or half empty? There is nothing wrong in answering either way, Eevery day we ask ourselves the same question, when reacting to economic data and majority wins. Yesterday it was the optimist camp that won the battle. However, it feels like yesterday's move was short covering rather then something else as volume in indices was very low. Last month performance in equities resulted in outside month bullish reversal pattern. While it is a sign of caution this actually makes little sense for trading as time frames are shorter for active investor/trader.

Does this change the picture? Are we going higher from here... Ehhhhh, I am not convinced. Start with equities:

S&P500 is still trading in bear market, according to my other scenario: having broken through 200d moving average it is sitting right under 100d and not far from June's peak, only sustainable gains through 1300 will make me change my mind:

The rally on Monday started with Chinese markets and looks like it might end with it as Shanghai index collapsed in the last minutes of trading to end up the day lower then Monday's open resulting in outside day bearish reversal:

Oil, while being up, still shows signs of range trading rather then a strong trend, especially when equities are to remain weak. Probably it is a good sell at $82:

EURUSD has effectively reached head and shoulders target and is currently a function of risk appetite rather then internal strength. my Need to wait for reversal confirmation under 1.31:

Outside bearish reversal day in Nymex gas was a surprise as well, while I think the market will rise over the long term, this signal cannot be ignored - time to tighten the stop losses:

Happy trading all!