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Tuesday, December 10, 2013
KRUGER INSIGHTS TUESDAY, DECEMBER 10, 2013
Joel Kruger
Entering Tricky Waters - Although USD/JPY remains very well bid and will probably break to fresh yearly highs (beyond the 103.70 May peak) over the coming sessions, I would still recommend proceeding with caution at current levels. Medium and longer-term, I remain aggressively bullish this major pair, but short-term, I still would not rule out the possibility for a sharp pullback to test previous triangle resistance now turned support in the 99.00-100.00 area. With this in mind, I would consider taking a shot at fading a move towards 104.00 in the hours ahead, but can't offer a specific recommendation just yet. If we do in fact stall out and reverse in the short-term, this would also set up a pretty double top on the daily chart exposing a retest of the already mentioned previous resistance in the 99.00-100.00 region. While I do not believe the Yen to be a safe haven currency by any means, at the same time, the Yen still has the ability to find bids in risk off market environments. Given the expected capitulation in risk assets at any moment, this would support the idea that the Yen could once again find some bids (ie USD/JPY lower), at least in the short-term.
No Better Time Than The Present - Elsewhere, continue to keep an eye on EUR/CHF. Another drop that takes us into the 1.2100's should really get the SNB sweating and open the door to a lot of questions about the effectiveness (or lack thereof) of intervention as a longer-term stability measure. These questions will extend well beyond Switzerland and could very well manipulate sentiment towards other central banks, namely the Fed. I would also recommend watching EUR/USD today. I highlighted the 1.3720 fib resistance and the possibility that this level could be slightly exceeded. This has all played out now, and if we are going to reverse lower, it will need to happen today. Otherwise, the market is likely to break to fresh yearly highs beyond the October peak at 1.3835. Look for a break back below 1.3695 today to alleviate topside pressure and confirm exhaustion. Finally, I will be looking for an opportunity to take a third shot at selling the S&P. I was unsuccessful in two attempts over the past six months, but still believe strongly that a major corrective pullback looms. I will either sell on a rally to 1820 or on a break back below 1805. I will be looking for a correction of 10% at a minimum.
Entering Tricky Waters - Although USD/JPY remains very well bid and will probably break to fresh yearly highs (beyond the 103.70 May peak) over the coming sessions, I would still recommend proceeding with caution at current levels. Medium and longer-term, I remain aggressively bullish this major pair, but short-term, I still would not rule out the possibility for a sharp pullback to test previous triangle resistance now turned support in the 99.00-100.00 area. With this in mind, I would consider taking a shot at fading a move towards 104.00 in the hours ahead, but can't offer a specific recommendation just yet. If we do in fact stall out and reverse in the short-term, this would also set up a pretty double top on the daily chart exposing a retest of the already mentioned previous resistance in the 99.00-100.00 region. While I do not believe the Yen to be a safe haven currency by any means, at the same time, the Yen still has the ability to find bids in risk off market environments. Given the expected capitulation in risk assets at any moment, this would support the idea that the Yen could once again find some bids (ie USD/JPY lower), at least in the short-term.
No Better Time Than The Present - Elsewhere, continue to keep an eye on EUR/CHF. Another drop that takes us into the 1.2100's should really get the SNB sweating and open the door to a lot of questions about the effectiveness (or lack thereof) of intervention as a longer-term stability measure. These questions will extend well beyond Switzerland and could very well manipulate sentiment towards other central banks, namely the Fed. I would also recommend watching EUR/USD today. I highlighted the 1.3720 fib resistance and the possibility that this level could be slightly exceeded. This has all played out now, and if we are going to reverse lower, it will need to happen today. Otherwise, the market is likely to break to fresh yearly highs beyond the October peak at 1.3835. Look for a break back below 1.3695 today to alleviate topside pressure and confirm exhaustion. Finally, I will be looking for an opportunity to take a third shot at selling the S&P. I was unsuccessful in two attempts over the past six months, but still believe strongly that a major corrective pullback looms. I will either sell on a rally to 1820 or on a break back below 1805. I will be looking for a correction of 10% at a minimum.
Sunday, December 8, 2013
KRUGER INSIGHTS MONDAY, DECEMBER 09, 2013
Joel Kruger
Who Cares About A Fed Taper Anyway? - What a day this past Friday! I am simply amazed. If you would have told me the result of the monthly US employment report ahead of the release, it would have done nothing to help. The idea that a solid NFP print and drop in the unemployment rate would put pressure on the equity markets on a solidification of Fed taper prospects, is completely foreign at this point, and has gone out the window. It is rather scary in my view. Now there are no longer any bears out there, and everyone is certain the stock market will only continue higher. It seems market participants either feel this latest bout of healthy data out of the US will still do nothing to accelerate a Fed taper, or market participants just don't care about a Fed taper and believe the impact of such a move will be insignificant. So now it is all about stronger, healthier data out of the US, and perpetual free money. Personally, I continue to find deep discomfort in the fact that we have seen such a disconnect between the real economy and financial markets.
Last Man Standing - Although the real economy is recovering, this recovery has been nothing like the boom seen in the financial markets. I still contend this rally in stock markets will soon fizzle out in spectacular fashion as the move is entirely artificial and has been supported on nothing more than Fed incentive. I also believe this capitulation and liquidation is stocks will happen sooner than later and am not in the camp that has defected to the bullish side. Now everyone is talking about S&P 1850, 1900, and 2000, while the risk for a break back below even 1775 is considered to be remote. Technically, the performance in the stock market has been most unhealthy and the inability to undergo any form of a legitimate corrective retreat should be more than disconcerting. Finally this past week we got some legitimate signs that the Fed should start to reverse, with solid GDP and employment data, and yet, market participants no longer want to recognize this data should discourage additional investment in risk assets.
A Light In The Darkness - Fortunately, currency markets have been telling a different story and I believe are proceeding with the necessary caution required. Look no further than the EUR/CHF cross rate, which I have highlighted many times in recent weeks. The drop to fresh multi-day lows in this market is telling a different story and shows that the currency market is more worried about the impact of a Fed taper and the implication for risk assets. While the Fed intervention is the most well known intervention out there right now, we should not forget about the SNB intervention at 1.2000 EUR/CHF. If this level is threatened over the coming days, it will likely trigger a credibility crisis for the SNB, which in turn could very realistically extend to a credibility crisis for any central bank that has chosen to use intervention as a strategy to artificially support the economy. If 1.2000 is broken, it will remind investors that no intervention can ultimately last forever, and at the end of the day, whether you push off for one year or 5 years, eventually, nature will take its normal course. The time has come for the global economy to once again stand on its own two feet. The process may be painful, but we desperately need to get back on the path to normal recovery.
Last Man Standing - Although the real economy is recovering, this recovery has been nothing like the boom seen in the financial markets. I still contend this rally in stock markets will soon fizzle out in spectacular fashion as the move is entirely artificial and has been supported on nothing more than Fed incentive. I also believe this capitulation and liquidation is stocks will happen sooner than later and am not in the camp that has defected to the bullish side. Now everyone is talking about S&P 1850, 1900, and 2000, while the risk for a break back below even 1775 is considered to be remote. Technically, the performance in the stock market has been most unhealthy and the inability to undergo any form of a legitimate corrective retreat should be more than disconcerting. Finally this past week we got some legitimate signs that the Fed should start to reverse, with solid GDP and employment data, and yet, market participants no longer want to recognize this data should discourage additional investment in risk assets.
A Light In The Darkness - Fortunately, currency markets have been telling a different story and I believe are proceeding with the necessary caution required. Look no further than the EUR/CHF cross rate, which I have highlighted many times in recent weeks. The drop to fresh multi-day lows in this market is telling a different story and shows that the currency market is more worried about the impact of a Fed taper and the implication for risk assets. While the Fed intervention is the most well known intervention out there right now, we should not forget about the SNB intervention at 1.2000 EUR/CHF. If this level is threatened over the coming days, it will likely trigger a credibility crisis for the SNB, which in turn could very realistically extend to a credibility crisis for any central bank that has chosen to use intervention as a strategy to artificially support the economy. If 1.2000 is broken, it will remind investors that no intervention can ultimately last forever, and at the end of the day, whether you push off for one year or 5 years, eventually, nature will take its normal course. The time has come for the global economy to once again stand on its own two feet. The process may be painful, but we desperately need to get back on the path to normal recovery.
Friday, December 6, 2013
KRUGER INSIGHTS FRIDAY, DECEMBER 06, 2013
Joel Kruger
Fade The Break - So yesterday, I talked about a potential breakout in EUR/USD. In the analysis I highlighted the fact that the risk for any extended gains in the event of an upside break would be limited, with the market seen well offered into the 1.3650-1.3720 area. At the moment, there is scope for gains towards 1.3720 in the session ahead, however once this 78.6% fib retrace off of the October to November high-low move is tested (and slightly exceeded), I would be on the lookout for another bearish reversal. So the recommendation for today would be to sell an overshoot of that 78.6% fib at 1.3740, with a stop-loss above the yearly high at 1.3840. I would then leave the objective open, and look for a medium-term reversal back down towards 1.3100 over the coming weeks.
Also Of Interest - Other markets worth watching right now include, USD/JPY, EUR/CHF, AUD/NZD, GOLD and US equities. USD/JPY has been showing signs of exhaustion following the recent medium-term triangle break, and could still see additional declines towards 99.00 before bullish continuation. EUR/CHF has broken down to fresh multi-day lows and looks like it may want to test some critical support at 1.2215 which guards against the more significant 1.2000 barrier. AUD/NZD is interesting because the daily, weekly and monthly charts all look overextended, and with the market recently testing the psychological 1.1000 handle, the timing could finally be right for the start to a major trend reversal. The daily chart is showing signs of a bounce, but at this point, nothing is conclusive.
Away From FX - GOLD is hovering over its multi-month low from late June at $1180, and I would expect to see another sharp drop in the sessions ahead that challenges this level. I like the idea of buying GOLD on a dip to a fresh multi-month low, but right now we need to wait for that to happen first. Finally, US equities are once again possibly hinting of a bearish reversal, but nothing can be taken too seriously just yet and the price action is really only a tease at the moment. I am watching the S&P and would like to see a break and daily close below $1770 to encourage these reversal prospects. Friday's monthly US employment report is the key risk for the day, and the outcome could certainly do a good job of influencing the direction of all of the markets cited above. My bias is positioned to the short risk side, and it will be interesting to see how things play out. The confluence of risk reversal warnings across multiple asset classes has been supporting my view, but we still need to get better confirmation which has yet to occur.
Fade The Break - So yesterday, I talked about a potential breakout in EUR/USD. In the analysis I highlighted the fact that the risk for any extended gains in the event of an upside break would be limited, with the market seen well offered into the 1.3650-1.3720 area. At the moment, there is scope for gains towards 1.3720 in the session ahead, however once this 78.6% fib retrace off of the October to November high-low move is tested (and slightly exceeded), I would be on the lookout for another bearish reversal. So the recommendation for today would be to sell an overshoot of that 78.6% fib at 1.3740, with a stop-loss above the yearly high at 1.3840. I would then leave the objective open, and look for a medium-term reversal back down towards 1.3100 over the coming weeks.
Also Of Interest - Other markets worth watching right now include, USD/JPY, EUR/CHF, AUD/NZD, GOLD and US equities. USD/JPY has been showing signs of exhaustion following the recent medium-term triangle break, and could still see additional declines towards 99.00 before bullish continuation. EUR/CHF has broken down to fresh multi-day lows and looks like it may want to test some critical support at 1.2215 which guards against the more significant 1.2000 barrier. AUD/NZD is interesting because the daily, weekly and monthly charts all look overextended, and with the market recently testing the psychological 1.1000 handle, the timing could finally be right for the start to a major trend reversal. The daily chart is showing signs of a bounce, but at this point, nothing is conclusive.
Away From FX - GOLD is hovering over its multi-month low from late June at $1180, and I would expect to see another sharp drop in the sessions ahead that challenges this level. I like the idea of buying GOLD on a dip to a fresh multi-month low, but right now we need to wait for that to happen first. Finally, US equities are once again possibly hinting of a bearish reversal, but nothing can be taken too seriously just yet and the price action is really only a tease at the moment. I am watching the S&P and would like to see a break and daily close below $1770 to encourage these reversal prospects. Friday's monthly US employment report is the key risk for the day, and the outcome could certainly do a good job of influencing the direction of all of the markets cited above. My bias is positioned to the short risk side, and it will be interesting to see how things play out. The confluence of risk reversal warnings across multiple asset classes has been supporting my view, but we still need to get better confirmation which has yet to occur.
Wednesday, December 4, 2013
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