Bill Cara’s Blog for Jan 20, 2011 [See post-close report]
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
About 90 minutes before the North American equity markets opened yesterday, there was the start of a lift to the US Dollar and sell-off first in the Canadian Dollar and then the Euro. Then shortly after the equity market opened at 9:30am ET, the precious metals and the related stocks were sent down along with the NASDAQ and S&P 500 indexes. Immediately the equity markets in Europe sold down. Traders as well as media sought and offered up their own versions of an explanation. With the amount of misinformation flying about, confusion reigned.
The one significant fact that I will base my thinking on, at this point, is that the US Dollar is breaking down, not reversing to the upside. As the Dollar weakens, the equity, commodity and precious metal prices lift, as they have since mid-June 2010 and in particular since Bernanke gave his QE2 speech at the Fed-sponsored gathering in Wyoming in August. Then starting in November the People’s Bank of China began a series of policy moves to thwart the rise in inflation the authorities fear in that country, and that helped strengthen the Dollar for a month or two, which has taken the steam out of rising equity, commodity and precious metals prices. But now the Dollar is falling again, sending the Euro higher.
As I see it, all capital markets have succumbed to the pressures of the currency trade. At the end of the day, it’s one currency dropping after another against gold. Along the way there are and will be periods of profit taking, not only in gold, but in all markets, but as time marches on unless the G-20 governments are able to get their debts and deficit spending under control and the banks are able to realign their holdings of debt with the economic value of assets that brought about (and support) that debt, gold will continue to lift in price.
So far this morning, the equity markets Europe continue to sell off.
The US Dollar appears ready to drop to a 52-week low. Should that happen, gold will again be the principal safe-haven trade.
Goldman Sachs (GS), which did beat earnings forecasts despite what some headlines state, is down to $166.00 in pre-market trading. That’s a considerable sell-off over two days from $175.00, which had been a high since April.
EBAY, however, is looking good so far this morning.
Have a good day.
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||53.61 (1.84%)||Components, Chart, More|
||21.21 (0.80%)||Components, Chart, More|
||17.11 (0.43%)||Components, Chart, More|
||55.01 (0.78%)||Components, Chart, More|
||2.96 (0.83%)||Components, Chart, More|
|^OSEAX||OSE All Share||477.60
||6.29 (1.30%)||Components, Chart, More|
|^SMSI||Madrid General||N/A||0.00 (0.00%)||Chart, More|
||4.62 (1.25%)||Components, Chart, More|
||74.34 (1.13%)||Chart, More|
||86.86 (1.45%)||Components, Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara on Trends & Cycles
Vad’s Catch of the Day
After making a few nice trades on a short side we switched to longs. This particular trade is a classic pullback entry. After making a high at $53.50, X pulled back, formed a bottom at $52.90, bounced, retreated and danced a little around $53, creating a low-risk long entry, Notice also a small Inverted Head and Shoulder formed here – I am not a big fan of this formation, but if it appears in addition to other signals, why not use it as supplementary. The profit target was placed near the previous high, considering that lunch time is not very favorable for new highs. X did break higher in a few minutes though.
Kaimu’s Sound Money
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report
Good evening. Patrick here.
The S&P bounced off minor support this morning at 1274, spending the remainder of the session bouncing around in a narrow range and closing slightly lower on the day (S&P-0.13%). Fairly predictable behavior given the large decline yesterday – Bulls and Bears battling it out in several different skirmishes, the outcome still to be decided, both sides having legitimate chances to win the war.
Sectors under pressure today included cloud computing (FFIV-21.34%, CRM-6.42%, VMW-3.82%), crude oil (USO-2.52%), precious metals (SLV-4.42%: GLD-1.82%), and fertilizer stocks (MON-2.14%,POT-2.98%, AGU-3.85%, MOS-4.57%).
The Russell 2000 (IWM-1.03%) recently has badly lagged the S&P a conspicuous change in behavior; the small cap index had led the advance rising 36.7% off the July low versus 24.6% for the S&P, but that out-performance has ceased, at least temporarily, signaling traders are leery of adding more risk to their portfolios.
Both the Russell and the Transports (TRAN-0.95%) have broken beneath uptrend lines off the summer lows, further reason to be skeptical the markets are ready for take off after only two days of weakness.
Bulls need to defend S&P 1260 while the Bears are in trouble over 1300. Risk management is the priority of the day – even trading a back-tested system with positive expectancy can result in losses if you don’t know when to hold them, and you don’t know where to fold them.
Have a great evening.