A-B-C-D Trade - page 193

 

BAJA bearish divergence on left 1-hour chart after close of 06:00 candle. We are now at the European session open..

 

Positive ADP Employment Change released at 12:15, Gold, CFD XAU_USD back down to High $1662. This is alos where Moon 90-degree intersects with Mard 180-degree.

 

This is week of BOE and ECB Rate decision (Thursday) and U.S. NFP Friday. We will be off Friday.

 

The big news in currencies is the surprise interest rate cut by the Swiss National Bank (central bank of Switzerland). The EUR/CHF chart illustrates the spike up during the 07:00 candle period.

Although the pair has come down, further intervention jitters exist (to weaken CHF).

The CHF has gained strength to historic highs, in an environment of fear.

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Split screen both 1-hour charts illustrates swings and S&R.

Left chart: horizontal fibs (white) with High = 1.44528 and Low = 1.41418

Fibo fan (blue)High = 1.44528 and Low = Aug 2nd high 1.42820

Pair dragged up by EUR/CHF due to aforementioned surprise SNB rate reduction. Price hit resistance at the 61.8 horizontal and 61.8 fan ray.

Right chart: displays PSQ9 and fib plot previously posted. High = 1.42815 and Low = 1.41869.

We mentioned the 138.2 extension to the downside yesterday, and the revisit to the High.

We labeled the 07:00 candle area with SNB to denote their unscheduled rate decision this morning.

The top is where the Mars 0-degree (gold color) intersects the Moon 270-degree (red). This is also the 161.8 extension to the upside.

 

The 01:00 GMT hour saw a massive spike to the upside, and it was later confirmed to be physical intervention by the Bank of Japan.

The hints were given ahead of time, so it should not have come as a surprise to those who trade Yen crosses. However, these events are capable of dragging other cross-pairs.

The last time this occurred last September, we made mention of Japan's exports being adversely affected by a strong Yen. For example, Toyota loses approximately 30 billion Yen for every dollar (100 pips) the Yen strengthens. That's USD 380 million at the current exchange rate.

Here' an old article on the Toyota loss estimates.

Japan auto co's dollar exposure rises - Hindustan Times

Attached is 4-hour chart.

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BOJ, BOE, and ECB all held rates Trichet speech dovish and EUR/USD reflective, reaching support at 1.4141. Attached is previous fib plot.

12:30 U.S. Initial Jobs Claims came in good.

All eyes on tomorrow's NFP.

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Continued sell-off in the major stock markets. Trichet's comments were considered by many to be his realization that the sovereign debt problems pose a greater risk to the EU than he previously wanted to admit.

Together with the U.S. debt problems, investors have been bailing out and fleeing to safety. Oil likewise weak as demand outlook projected to be hand-in-hand with global economic outlook. Gold profit taking after setting additional record highs.

We look at CFD that mimics the 2 large U.S. stick indices DOW JONES 30 and the S&P 500.

US30 daily chart plots Low = Jul 6th 9563 High = May 2nd 12,919

Today, we saw indice clear June support area occupied by cluster of lows. The current price level 11550 is near Mar 16th low (aftermath of Japan's earthquake). This level also near Nov 2010 high.

The 50% fib price level of 11,241 is near Mar 2010 high of 11,280. These pivots marked with blue "X".

Notice BAJA at most recent high, with "X" marking 2nd peak's drop in strength and volume (MFI). Even the EFT registered this bearish formation.

SPX500 daily plot Low = July 6th 1008.4 High = May 2nd 1375.9

The S&P 500 indice generally moves in tandem with the Dow. This CFD broke faced the same 2 support areas as the Dow. It is currently at the March 16th-17th pivot.

We plotted a tighter yellow retrace fib, where today's low is supported by it 78.6. This level also near April 2010 high.

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Obviously, tomorrow's NFP will impact the markets.

Japan has indicated it will use more stimulus. The ECB's interest rate hike plan is now on hold. The U.S. is still swimming in its big mess, and may see a double dip recession.

That is only from the technical sense, when 2 consecutive quarters have negative GDP. This economy has been re-inflated by QE2 and has been a bubble waiting to pop.

The large western industrialize economies are all saddled with high levels of debt.

 

Attached chart plots 4 instruments on the same chart: USD/CHF, EUR/CHF, XAU_USD (mimics gold futures), and SPX500.

We inserted a vertical line where on May 26th, the green USD/CHF price action decoupled from SPX500 (pink), as it had done previously on April 21st.

Swing and Position traders often look for leading signals like this with inter-related instruments.

Normally, when the SPX500 moves down, CHF pairs strengthens, as investors flee to safety. When they are in divergence, they will eventually meet again. Often, one will snap back in step with the other.

In this example, SPX500 peaked on May 31st, and snapped backed down sharply. The astute trader therefore had about 4 days lead time. We made a similar, but intra-day, live call with USOIL as the leading indicator in divergence.

This happened again when USD/CHF lead on July 20th, ending that day lower, while SPX500 went up. 2 days, later SPX500 started its move down.

Years ago, one trader was successful formulating his own "leading" indicator when he recognized that the e-mini Nasdaq index lead the S&P. He eventually sold his systems to institutional traders and hedge funds.

The multi-instrument indicator has been posted in this thread.

 

Obviously, there is panic in the markets. The trigger was assigned to Trichet's comments and the anticipated ECB bond purchase in attempt to prop up their situation.

The US30, which tends to mimic Dow Futures is moving down again. We think that the November 12th open price near 11,260 is going to be support. That date is significant as it was the start of the U.S. QE2 program.

Obviously the forthcoming U.S. Change in Non-farm Payrolls (NFP) will have impact. If the number comes in well below projections, the Dow will plow through that price level.

This instrument is at 11,339 at the moment. The attached chart uses a fib plot based on High = July 22nd 12,799 and Low = June 16th 11,838. The 161.8 = 11.248, which is in the same area.

Italy under attack even after their P.M. tried to calm markets with austerity proposal. Generally, European banks (including those in Italy) are under attack and some are down as much as 40-50% this year.

These banks have heavy exposure to the P.I.I.G.S. debt. As per our recently posted diagram of who owes what to whom, it paints a daunting picture.

Investors are fleeing this sector as well as any risk assets. As the Asian stock market session was set to open, they monitored one indice's futures market and saw that they should anticipate a 700 point drop at open! How's that for a punch in the eye?

We first noticed the large drop in the CFD GER30, which tries to mimic the DAX, on Aug 1st and posted the chart. It has dropped an additional 700 points since then.

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