World of InterMarket Analysis and Trading
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Infinte QE by FOMC allowed risk markets to race. But we dont trade on news but on clear cut levels and inflexion points. Our effort has always been to catch trends very early and let them run with stops at breakeven. Nothing has changed. This form of trading is now automated for subs so they can focus on doing research and analysis instead of waiting for emails on new trades. For information on this new product: Trade copier
Todays charts and analysis is provided below and as usual we focus on the main charts to setup our trades. Sunday post will be far more detailed and include everything that we are pondering upon. Last week post read: Shackles broken clearly laying down the mega rally that was about to happen on risk markets.
Summary: FOMC has again done what it knows. They are going to print and print and print. There was no point guessing what they were going to do but clearly bond market had shown the way last week as it broke every possible support out there. There were reported over USD 10 bn moving out of fixed income into risk assets a day before FOMC. It was not a coincidence. Insiders know and the best place to know what they are doing to is look at the cross linked markets and argue with yourself and other traders on possible trades. That is what C3X live trade room does.
Important Links at Capital3x
The Indicator links are provided here:
1. Falconfx EUR/USD
2. Falconfx EUR/JPY
3. Falconfx USD/CAD
4. Gladiator ES
Mark
Capital3x has released its much used and one of the first Intermarket Indicators on retail trading known as Falconfx and Gladiator
We are going to take a look at a few weekly charts and setups before we start trading today. Its important not to miss the forest for the trees and hence the locus standi on key trends.
But before we go ahead to our regular charts, I want to paint you the Falconfx and Gladiator indicators status quo. They have done superbly over the last week. Take a look.
The FalconEJ has been short since 105.5.
The FalconEU is short since 1.3120. The current price is 1.2980.
The Gladiator has been short since 1397 which was reinforced at 1380 again. The current price is at 1347.
The weekly ES SPX Emini futures is in trouble in a small measure but it could fight back. But given the setups on ZT, FGBS and currencies below, am inclined once to the bearish side targeting 1335.
The daily ES SPX Emini futures saw one of the biggest red candles of 2012. The 100 SMA and 100 WMA come in the zone of 1330 to 1340 and hence could be realistic target the break of which could really question the long term picture on ES.
You need to be a member with us to read on….. Subs have access to all the market analysis (Copper,BDI, Gold, US treasury, EU bond markets) and FX setups which also feature our FX portfolio.
Mark
We are opening this update to open access. We once a month open a few updates for open access.
Markets never make it easy for you. What may seem right to you is what is seeming right to hundreds and thousands others in the markets and that is precisely why markets do not do what you want it to do.
Now I can assure you people after having seen a uptrend of the kind seen in 2012 will naturally think about the gaping downside to 1320. In fact it is logical and human to think about it. It is also the right trade. But markets will keep plucking away at your margin for longer than you can stay alive specially if you are $40k $50k type accounts. We need to be absolutely mighty sure of our stops. They have to move to break even at the first opportunity. You cannot let the big boys take money off you. You have to have extremely low tolerance for losses. Perfection is not an option but a necessity.
I have rarely seen a flow of this magnitude into bond markets. It may not be wrong to call the bond trend to be the only true parabolic move. Even the Gold move to 1900 did not seem as big a parabola or as sustained as the bond uptrend.
Not only are bond markets rising at this pace but they are rising along with equity markets. That is what excess cash in the system can do. We have seen this sort of divergence in January when finally equity markets in a rarity won that battle as bond markets relented in February as Bunds and UST10 sold off. It also allowed yen pairs to rise over 500 pips.
Come April and we seem to be in a similar scenario where bonds continue to breakout while equity markets seem stable above key levels (1366 weekly support, 1357 volume hole and 1375 holding daily and hourly support). The Key resistance now lie at 1391 and 1422.
The difference between Jan 2012 and April 2012 seem to be the increasing cracks in the relationship between Bundesbank and ECB. German inflation is rising and there is no way that Bundesbank will now allow ECB to conduct another wayward LTRO to help out Italy and Spain. With the option of LTRO gone, ECB will be relying on its SMP program to directly buy the bonds off the market and during auction. This has always been special situation for ECB and they hate to do it which is why they came up with the idea of LTRO. So with bunds rising in April, markets are now hanging by a thin thread and hope that FED will oblige with their own version of QE which seem increasingly unlikely. The downside looks creamy on risk assets.
So for premium subs here we go with some charts and analysis.
Copper has broken down. This is the first sign if you are a fundamental intermarket analyst. The red metal is saying that there is downside here to the risk rally of 2012. The trade should be to short Copper with a stop at 3.77 and a target of 3.5 and extended target of 3.3.
The ratio of the high yield assets to US treasury prices have fallen below 200 ma for over a week now and has not crossed back up again. The Oscillators and stochastics are sliding down given the intense selling pressure. This has also been witnessed other assets including NYSE ratio of declining to advancing volumes.
Wheat futures roared back over 1% even equity markets sliding. A one day charge back does not really change the strong downtrend started in the first week of April but it still needs to be noted given it was the largest green candle in April. CRB index did not keep pace with wheat futures and hence could be more a local issue.
CRB index futures have been in a strong downtrend since March. SPX diverged away from CRB for March but has faded its divergence in April and is now slowly falling in line with imposing downtrend of CRB. If the CRB downtrend is to super imposed on SPX then SPX downside is increasingly looking below 1300. It may look impossible standing at 1375 though but remember markets surprise at its ends. Much of March divergence has been led by tech stocks but fizzle is now disappearing. One must note that overarching weight age on markets is for commodity stocks and hence CRB index downtrend will ultimately impose itself.
The line in sand where we placed our stop was 1376. You can see why? The hourly Mid line and the horizontal resistance coincide at 1377. The upper BB now comes in at 1387 on the hourly which could be a worthy target for another violent move. On the daily though, the resistance still seem to be 1391.
On the Bond markets
The Italian BTP futures fell below the crucial 100 mark, a level last seen in Jan 2012. A sustained break will target 96 which also mean EU fall will not limit at 1.2950 but 1.26.
Sensing the apparent loss of confidence in Italian bonds, Bunds are at all time highs.
Schatz is still bullish but for unknown reasons has not yet broken out above 110.5. Something that cannot go up will fall. So watch out.
Forex setups
EJ seems to be leading the arrogance for Euro as it pummels the shorts. The target for the bear move seem to be 107.8 and then 108.1 zone which also caps the 50 dma.
The case with AJ is simpler. The 50 DMA comes in at 85.4 zone. That is also the upper BB line sloping for a meeting with the 50 MA. AJ is bouncing off the 100 MA line and hence should add weight for a rally to 85.5. The stochastic are bullish while vortex has crossed over.
The USDCAD which had so much expectation riding on it when it broke the 1.005 barrier but only by a pip before a flood pushed it down below .9900 when BOC maintained rates and even was hawkish. A day later BOC released its minutes which were anything by dovish. In fact the whole premise of CAD GDP was pinned at $104 per barrel by BOC. It was strange to see the Canadian central bank to use such bullish figure for Oil to base its GDP estimates. Ever since the minutes have been released, CAD has been weak.
It is friday and may not be bad idea to scale out of positions and chill out a bit.
Mark
Capital3x
The detailed list of calls for the week ended March 16 is provided.
As usual we continue with trend with yen pairs. As the saying goes, “make hay while the sun shines”. We have been playing the 82.75 level in USDYEN and 88 level in AUDJPY and 108.75 barriers levels. Each of these levels have been taken down with resulting moves in each of these pairs resulting in over 200 pips. Each of these have been led by C3X internal proprietary fx indicator.
For the weekended March 16 2012, C3X portfolio has scored +641 pips in profit taking the total pips for the month of March to 1404 pips over a total of 68 trading calls.
For this week alone, 34 trading calls were executed, with 23 of them hitting their mark and 11 were stopped. The winning pips per each call stood at +37 pips while the average trade lost us 17 pips. Trades have become shorter but with a much higher success ratio. The risk reward ratio was maintained at 1:2. The weighted success ratio hit a record 92%.
We will be back next week. This has been extraordinarily good week. We do not suggest that this record will continue next week but as discussed in the trade room, C3X has been over the past few weeks trading their proprietary fx indicator of which a lot more you will be seeing. As usual the present subscribers will be given the best deals on the indicator.
Best weekend.
C3X
In continuation of the earlier posts today, we analyse the bonds and dollar index charts here.
Bonds continue to move very close to 140 levels which is …
All commentaries on the charts.
As usual bonds are giving us reversal signals, sometimes a bit too early. It is also being validated by the AUD/JPY in the charts here. Click here. Also further setups were shared here. Bond and FX setups
The Economic Sentiment Indicator for the euro zone climbed in January for the first time in ten months, from a revised 92.8 to 93.4. This is another sign pointing to an end to the recession in spring. But this applies only to the euro zone economy as a whole. The economies of the peripheral countries will continue to face a contraction.
But the ESI’s first rise since February 2011 turned out smaller than expected (consensus: 93.8). Business confidence in the service sector improved markedly (-0.6, up from -2.6), whilst sentiment in industry remained flat (-7.2).
Following the purchasing managers’ indices, the ESI, too, has stopped its nosedive. This confirms our expectation that the recession in the euro zone will end in spring. But this applies only to the euro zone economy as a whole. It is too early to sound the all-clear for the periphery. The strict austerity measures in these countries continue to impose a heavy burden on the economy.
The ESI still indicates a sharp recession for Greece and Portugal (chart). In Italy, too, the trend is still down. Even if the euro zone economy stops contracting in spring, we are not reckoning with an upturn later in the year. We still expect GDP to contract in 2012. The basis for assumed contraction in EU economy is in case a flare of the debt crisis happens in 2012, then GDP faces major downside risks. The poker game about the second aid package for Greece still continues. If the country receives no fresh money, it will be insolvent by 20 March at the latest, when the Greek finance minister has to repay a bond with a volume of €14bn. Fear of contagion spreading to other euro zone countries is still running high. The risk premium for Portuguese government bonds has surged to new all-time highs. Nor can the other peripheral countries feel safe. Against the backdrop of the recession, many of them will fail to reach their deficit targets also in 2012. Investors will remain mistrustful.
The European Union said on Monday it would issue a new 10-year benchmark bond this week to fund lending to Portugal.
“The first transaction by the EU/EFSM will be a benchmark bond with 10 years maturity due in September 2021,” the European Union said in a statement. “The bond is expected to be launched during the course of this week.”
The funds will be raised via the European Financial Stabilisation Mechanism, which is underwritten by the EU budget. EFSM issuance is being coordinated with the European Financial Stability Facility (EFSF) to ensure smooth market operations.
The EU said the EFSF, a 440 billion euro fund that has so far been used to bail out Ireland and Portugal, would not launch any long-term bonds until euro zone member states have approved changes to the fund, which is expected by mid-October.
Together, the EU/EFSM and EFSF are expected to raise a further 10-13 billion euros in funds for Ireland and Portugal this year, with the EFSM conducting one benchmark transaction and the EFSF the remainder, the statement said.
The EFSM and EFSF are both rated triple-A by all three major ratings agencies
A quick comparison of yields across geogrpahies:
US 10 Y: 1.94%
UK 10 Y: 2.15%
Japan 10 Y: 1%
There fore EU bonds 10 y yield is anywhere close US,UK levels, we know that we have found the first solution to the whole raging EU debt problem.
Myfbook link
Feb2013 myfbook link
