Month: August 2011

The agency Statistics New Zealand published this morning a series of reports on retail sales and PPI. All figures seem to point to moderate bullishness and heavy momentum heading into the early part of the third quarter.

Nominal and core retail sales data suggests that a solid uptick in consumer confidence has gripped New Zealand, with nominal sales rising 0.9% and the core data showing a 1.0% uptick. The sales data speaks to the sentiment of heightened optimism in the South Pacific. The bullish rise in PPI this month also supports the notion of moderate growth in New Zealand.

Read more forex trading news on our forex blog.

Aug. 25 (Bloomberg) — Tomoko Fujii, senior foreign-exchange strategist at Bank of America Merrill Lynch in Tokyo, talks about the outlook for the Japanese yen. Fujii speaks with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

After reaching an all-time high well above $1,900 earlier this week, gold is now about $180 lower, just two days later.

We have been saying more than once that we should expect these kind of volatile moves in a parabolic end phase. The difficulty of parabolic moves, is to guess when it pops, and to get a chair before the music stops playing, because WHEN it pops (it always does at some point), the move down is very violent, like we have seen over the last 2 days.

As we can see in the chart below, Price tagged the 20 days Exponential Moving Average (20EMA) yesterday, and held at the close. Next support would be the 20 days Simple Moving Average around $1,740, followed by the 50EMA at $1,662 and about $1,585, which is the lower bollinger band, the 100EMA and the April/May high.

The RSI should now hold above 50, in order to remain bullish.
The MACD will most likely make a negative cross, but that doesn’t necessarily mean that the uptrend is over.

Chart courtesy stockcharts.com

If Price would hold around current levels (AT CLOSE), we might see the uptrend resume pretty soon, and then this move down was probably a move to shake out the weak hands, as sentiment was too bullish a couple of days ago, as can be seen in the following chart (courtesy sentimentrader.com):

After two days of panic selling, we can expect sentiment to be headed in the other direction now.

The fact that bothers me, is the lack of participation of the mining stocks in the recent rally.
We have been saying this in several articles on our website, i.e:
* Back to the Future: Gold, JPY, DAX, Paulson, Crash?!?
* HUI:GOLD vs Bank Of America

One can argue that Gold mining stocks are severely undervalued (I agree, based on lower oil prices, and record high gold prices), but technical indicators don’t look all that positive…

The Negative Divergence between the price of the HUI index and the RSI is also confirmed by a lower top for the MACD.
The HUI index seems to be forming a Head & Shoulders pattern.
The last two times price pierced the upper bollinger band, it failed to hold these levels, and that meant the start of a severe correction.
Will this time be any different?

Chart courtesy stockcharts.com

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By Kris Sayce

Is it time to get excited about the stock market yet?

This morning the U.S. S&P 500 gained 3.4%. The CNBC presenters were beside themselves with excitement.

What excited them even more was the 3% drop in the gold price… to USD$1,835. That’s a fall of nearly $100 since earlier this week. And maybe it’ll fall further…

Or maybe it won’t.

But, let’s calm down and reflect before you jump in and buy so-called bargain stocks. Because before you buy you’ve got to understand why the market is behaving this way.

Well, let me show you…

Cop a look at this chart. It’s the three-month chart of the U.S. S&P 500:

Click here to enlarge

The key period is the past two weeks. The period of extreme volatility gives away what’s really happening.

It’s all based on what one guy with a beard may or may not say at a speech in Jackson Hole, Wyoming later this week…

In fact, it’s not even about what he’ll say… it’s just as much about how the market interprets what he says.

And unless he explicitly says, “There will/won’t be more money printing“, market players will have to draw their own conclusions.

In other words, you should expect more of what you’ve recently seen – lots of ups and downs.

The way we see it, the market isn’t normal. It’s become a Dr. Jekyll and Mr. Hyde market. Or should that be a Dr. Bernanke and Mr. Market market?

To explain what we mean, let me show you another chart.

This one is the five-day comparison of the S&P 500 index (blue line) and the SPDR Gold Trust [NYSE: GLD] (red line) exchange traded fund:

Click here to enlarge

By the way, for the first time ever, earlier this week the market capitalisation of the SPDR Gold Trust ETF exceeded the market cap of the SPDR S&P 500 ETF [NYSE: SPY].

We guess that means more folks are buying gold.

Anyway, what drove the gold price up over the past week? That’s right, the prospect of U.S. Federal Reserve chairman, Dr. Ben S. Bernanke playing clickity-click with his keyboard to create a few hundred billion new dollars.

What drove stock prices down? That’s right, fear of the U.S. economy going into recession and the Fed needing to print more money.

Roll forward a few days…

What drove the gold price down last night? The prospect that Dr. Ben S. Bernanke would clickity-click on his keyboard to create a few hundred billion new dollars…

[Reader’s voice: hang on a minute, you just said that was the reason for gold going up!]

Don’t panic, we’re about to explain.

The reason gold went down last night and stock prices went up was because all the lovely new money could stop the U.S. economy going into recession. And that’s good for stock prices.

If you think this makes no sense… that surely printing more money is printing more money… then you’re right. But nothing makes sense in financial markets anymore.

In reality nothing will stop the U.S. going into recession. And odds are it already is in recession.

The market is just to-ing and fro-ing between looking at the glass half full and looking at it half empty… where in reality it’s the same glass with the same contents… nothing has changed one day to the next.

Today the market forgets the reason to buy gold is to protect against central bank money-printing. All it sees is money-printing causing stocks to go up…

So investors dump gold and buy stocks.

What will they do tomorrow?

Who knows?

They’ll probably buy more stocks and sell more gold… but then again, perhaps they’ll do the opposite.

What we do know is this: market and economic fundamentals are playing absolutely no part in the current market action. None whatsoever.

The only influence on the market is one man: Dr. Bernanke.

We’re prepared to say that no one person in the history of financial markets has had as much influence on markets as Dr. Bernanke.

This is surely why it’s no coincidence that markets have been almost as volatile as they’ve ever been.

We’re sure you’ll get the temptation to dive in to pick up a bargain here or there. But we’d say resist… for now. This is a market for big risk-takers (traders and small-cap punters). It’s not a market for conservative investors.

For you, if you’re a long-term investor… someone who’s thinking about saving for retirement our advice is to sit back with a bucket of popcorn and just watch the market to-and-fro.

Cheers.
Kris

PS. If you’re not a conservative long-term investor and you fancy a punt on the markets, then believe me, there’s plenty to punt on. But make no mistake, rapid price moves can play havoc with your nerves… and havoc with stock prices. If you can’t face seeing a stock price rise 20% after falling 15% the day before then steer clear. But if you want the potential to pick up big returns from small-priced stocks then why not check out some of my recent research. Click here for more details…

Money Morning Article: The Strange Case of Dr. Bernanke and Mr. Market

The price action from yesterday’s early New York trading session was particularly dramatic when gold prices collapsed. The 5.6% drop in the price of the NYMEX gold futures contract sends a signal from the commodities market that additional stress is apparent the financial markets.

Since the beginning of July the price of gold has accelerated rapidly, rising from $1,500 to over $1,900 as of Tuesday morning. However, that all changed following the announcement that the Shanghai Gold Exchange would raise the margin requirements for gold forward contracts for the second time this month. This led to a decline to $1,823, a price below Monday’s closing price. Technical analysts would note this as an outside day down candlestick, a powerful reversal signal. Wednesday’s price action followed with a continuation of the move lower and the selling was intensified as the price dipped to a low of $1,741. Most of these losses came in the opening minutes of the New York trading session. As of Thursday morning the price of spot gold is testing the $1,700 level.

I will not dive into the argument if the price of gold is fairly valued or currently an asset bubble, but as FT Alphaville pointed out the GLD gold trust overtook the SPY (S&P 500) as the largest ETF by market value. Market positioning was also stretched to say the least with the CFTC Commitment of Traders report showed in early August the number of net long gold futures and options contracts in managed money reached 250,000.

Interestingly enough the dramatic drop in the price of gold occurred only days before what could be considered the most important event in financial markets this year, Ben Bernanke’s Jackson Hole speech. The price action may be sending a signal that the financial markets expect further volatility to come in the near term.

Read more forex trading news on our forex blog.

Aug. 24 (Bloomberg) — Eugene Munster, analyst at Piper Jaffray Cos., Scott Galloway, professor at New York University, Alan Deutschman, a professor at the University of Nevada, Reno, and Om Malik, founder of the technology blog GigaOM, talk about Steve Jobs’s resignation as chief executive officer of Apple Inc. They speak with Emily Chang and Cory Johnson on Bloomberg Television’s special coverage on “Bloomberg West.” (Source: Bloomberg)

By ForexYard

The Japanese yen (JPY) was pushed back yesterday, as the Bank of Japan (BOJ) unveiled a new fund of approximately $100 billion in order to curb the rising strength of the island currency. With Wednesday’s move by the BOJ, the future of the yen’s strength is as yet undetermined, but will likely adopt a bearish overture in the next few days.

Economic News

USD – USD Moderately Lower as EUR Bounces

The US dollar (USD) was seen trading moderately lower at yesterday’s close after a day of mixed news from the global economy. Weak gains seen on the USD this week was offset yesterday after the stock rebounds led to minor returns of portfolio diversification. So far, this action has pushed investors back into the value of the euro (EUR), sapping safe-haven appeal from the greenback for the time being, though isn’t expected to last much longer.

Economic news over the last few weeks has pushed traders into a position of market pessimism, but trading yesterday behaved less so than many analysts had anticipated. Little news has emerged which put a dent in the amount of pessimism surrounding the forex market, traders are now eyeing the remainder of August news to determine what the third quarter may bring.

With a relatively light news day expected from the US today, traders will want to be on watch for volatility in the USD/CHF pair today with several reports from Switzerland expected in the early morning hours. Following yesterday’s better-than-expected durable goods orders figures; today’s data should help generate some volatility as investors assess unemployment. As the trend persists, any added negativity in today’s news will likely spark heavier aversion from risk. Where the CHF stands in this fight could be the deciding factor in how much the USD gains.

CHF – Swiss Franc Trading Higher as USD Dips

The Swiss franc (CHF) was seen trading with largely bullish results yesterday as traders shifted portfolios on recent outlook from the euro zone. Traders took cue from the SNB announcement over a week back and made a heavy push into the Swissie in the past week’s trading sessions. With no other news of bank interventions in Europe in sight, the CHF looks to be on the rise.

The largely bearish reports out of Europe yesterday have appeared to confirm many fears felt by traders who were anticipating a string of pessimism. Debt concerns remain a priority in the euro zone’s periphery, and the uncertainty in Europe is generating significant bearish shifts as European leaders struggle to contain the spreading crisis. Such moves are acting solely as a fuel to the fire lit beneath the CHF, assisting its meteoric rise.

On tap today, traders will witness the release of a less significant string of news out of the United States, with several moderate reports out of Switzerland and Great Britain. Many analysts are now looking to Germany to shore up much of the euro zone’s economic strength, with added responsibility falling to one of the few nations which has experienced very little economic distress until just recently. Should today’s reports show additional weakness in the US, or Switzerland, there is a good chance traders will purchase more francs.

JPY – BOJ’s $100 Billion Fund Stunts JPY Growth

The Japanese yen (JPY) was pushed back yesterday, as the Bank of Japan (BOJ) unveiled a new fund of approximately $100 billion in order to curb the rising strength of the island currency. Piling atop recent reports on Japan’s shrinking household spending figures, the publication of Japanese trade data has shown a decline in exports consistent with an overly strengthened yen. Despite a meeting between French and German ministers over economic cooperation last week, the Pacific nations appear to be rushing ahead with their bullish endeavors, contrary to market outlook among the European nations.

Japan’s economy has been much worse in its performance than it was expected to be just one month ago. Investors have been piling into the JPY en masse as its strength as a store of value gained appeal. As housing slumps, and as monetary adjustments take place in China and New Zealand, the Japanese and Swiss economies now finds themselves gaining the most from the blows coming down on Europe. With Wednesday’s move by the BOJ, the future of the yen’s strength is as yet undetermined, but will likely adopt a bearish overture in the next few days.

Crude Oil – Crude Prices Hold above $86 a Barrel

Crude Oil prices held mildly higher Wednesday as traders began to anticipate a US dollar (USD) downturn on speculation of another round of quantitative easing in the US. Data releases out of Europe and the US last week are also driving many investors into and out of safe-haven assets sporadically as market direction became less certain. The recent intervention by the Bank of Japan (BOJ) also upset market forecasters as the status of traditional safe-havens came under scrutiny.

The impact has been a rise in oil values from under $85 a barrel last week to a current price near $86.50 a barrel. An expected jump in dollar values due to this week’s risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains not materializing Wednesday, sentiment appears to have the price of crude oil holding steady, with gradual gains priced in. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by week’s end; direction is unclear.

Technical News

EUR/USD

The push to 1.4500 found willing offers and the falling resistance line from the May high has kept the pair trading in a relatively defined 500 pip range since late-July. This scenario could change this week as the pair encroaches on the bottom of a triangle pattern that runs underneath the July and August lows at 1.4190. A move below this trading range is favored as both daily and monthly stochastics are declining. A break here could test the rising trend line from May 2010 and may have long term technical ramifications. To the upside last week’s high of 1.4515 will serve as initial resistance followed by 1.4700.

GBP/USD

Following a failure to move below its 200-day moving average Cable has underwent an impressive run to the 1.66 level. However, three failed attempts to close above the 1.6540 level points to sterling weakness. The pair also looks to be oversold as daily, weekly, and monthly stochastics are all turning lower. An initial move lower could run into support at the 20-day moving average at 1.6370 followed by the August 11th low at 1.6110. A deeper move could test the July low at 1.5780. Should the momentum continue to the upside initial resistance is found at 1.6580 with the most likely target at the April high of 1.6750.

USD/JPY

Last week the pair briefly moved below the March low and the 76 yen level but the dollar was quickly bid and the daily candlestick formed a doji. While often a sign of an impending reversal a doji by itself is not enough to change the technical picture. Bias remains to the downside and a close below 76 would signal further declines in the pair. A lack of support on the long term charts makes it problematic to forecast a target but the big round number of 70 yen stands out. Should the doji pattern hold and a reversal ensue; the pair will encounter plenty of selling opportunities with the most likely of entry points found at 78.50, 79.50, and 80.20.

USD/CHF

A rebound in the pair made it as high as 0.8015, just above the 50% retracement level from the May to August move. This move looks like it may have more room to run as weekly and monthly stochastics are rolling higher. Additional resistance comes in at the falling trend line from the February high at 0.8150. A break here would target the 61% Fibonacci retracement at 0.8220. However, traders should remember the long term trend is to the downside and support is found at 0.7800 followed by 0.7550.

The Wild Card

Gold

As quick as the price of gold goes up the price tumbles even faster. Yesterday gold prices fell 5.6% with heavy volume seen in the futures market. Gold prices have continued to fall this morning. Forex traders should note the initial support for spot gold rests at $1,723 followed by $1,670. To the upside resistance is located at this week’s high near $1,912.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

The Bank of Namibia maintained its benchmark interest rate, the repurchase rate, unchanged at 6.00%.  Bank of Namibia Governor Ipumbu Shiimi said: “despite the eased inflationary pressure there is a need to ensure sustained growth in the domestic economy.  Raising the rate at this point could choke off growth,” and added that the Bank “still sees good growth prospects domestically, but this cannot happen in isolation from developments in the world economy,”.

Aug. 24 (Bloomberg) — Hans Humes, president of Greylock Capital Management, discusses the European sovereign debt crisis and its impact on investment strategy. Humes speaks on Bloomberg Television’s “InBusiness With Margaret Brennan.” (Source: Bloomberg)