Some of those are actually breaking big dynamic formations today.
Below is a quick chart recap of stuff that is at or breaking critical levels.
It will be a long weekend. …Guest Post by Macro Story.
Good Morning. As we head into a three day weekend (US bond and equity markets are closed on Monday) were the fate of Greece as a member of the EU may possibly be decided I wanted to offer a less technical, more macro Morning Brief today.
But first a few technical points and securities to watch on option expiration day. This is a long post by the way but there is a lot going on this weekend in Europe.
That feisty AUD/USD currency pair is back at it again turning what looked like a bearish reversal into possibly another head fake. As of this post it stands only 50 pips from prior highs of 1.0845.
HYG (high yield debt) was weak yet again on Friday and putting in another lower low. This excellent market timer topped on January 26 in a rather bearish high volume double top pattern. Watch HYG to see if it continues to underperform equity. Also watch HYG relative to LQD (investment grade debt). HYG has been underperforming LQD as investor risk aversion has been growing.
Dow Transports topped on February 3 and has been putting in a series of lower highs and lower lows. Thursday the transports did outperform the dow for a change but from a technical perspective it was a simple inside day after selling off 2% on Wednesday.
EMD (mid cap futures) took out another resistance level on Thursday. The next resistance level comes in at approximately 990. EMD is still about 3% below the July highs versus the SPX which is slightly above.
NFP figures shocking many investors. Beating consensus by miles, and above the highest “predictions”, the figures are making the markets go into risk on mode. Let’s see what people figure out after digging into the numbers…(birth/death etc)
We hope to see volume come back, as this number should get people out to trade the market again.
Meanwhile some soaring charts below, at least for now.
Is Santa finally arriving, as people prepare for the window dressing procedure? Despite all the bearish news, market is showing signs of a possible momo rally going into the final trading days of 2011. Liquidity is very poor, so pushing this higher shouldn’t be a problem. With markets staying resilient to the news out of Europe, we wouldn’t be surprised people have shorted into this, and are waiting for the sell off.
Just don’t wait too long, as this could pop higher.
While the HFT news machines scan for the latest Merkonty flashes, below some chart levels by Macro Story.
Another pattern has failed to the downside. First it was the wedge everyone was watching now the flag pattern. Something else to point out is notice on the chart where we are today versus in early August when the market sold off hard.
This is a perfect example of why you need to let a trade run even though the technicals may say remove it. If we are witnessing a global asset liquidation then this market can stay oversold. We’ve been conditioned though the past few months to cover before profits vaporize.
Long post today so I’ll keep the commentary to a minimum. The liquidations, the global risks, the stress within credit markets are still there and growing. The vast majority of market participants will not believe this move lower. They will play the bounce, they will buy the dip. If short be patient here. Don’t let late day rallies shake you out of positions. If looking to go long be patient as well.
What happened into the close today has happened before. The ES (SPX futures) was trading weaker to the AUD by 30-50 basis points until the last hour of trading where it wiped that premium out and ended the day trading in parity. The ES in the long term is still rich to AUD and countless other assets classes.
Interesting to note today the RUT (Russell 2000) was weaker by 50 basis points all day including into the close as further evidence that these late day rallies are more HFT and intraday trader related versus anything else (i.e. put a bid into the ES and hope other asset classes follow automatically).
While we are all fixated on the EUR apparently the market is telling us to be more focused on the AUD. Last night the market showed its hand when a big fall in both currencies on no news caused a sharp move lower in the ES (SPX Futures).
Today the EUR although weak was not the driver of the late afternoon selloff. Instead a sharp move lower in the AUD seems to have triggered selling in the futures.
As I have been posting numerous times the divergence between both currencies and the ES are big so expect further currency weakness to be magnified in moves within equities. As a reference point, here is where the AUD currently stands. A very weak chart for sure.
Markets trading in a risk off mood today. Volumes are light, but the moves are rather big. With volatility crushed over the last days, people will start feeling nervousness creeping up again. As usual, people have sold volatility in “panic”, and will be very surprised if we see SPX 100 handles lower. We believe yesterday was a nice last short covering panic.
Below some short term charts, and for those saying HFT don’t trade currencies, review the charts below…
SPX Trend Channel, market is losing steam.