Thursday, October 29, 2009

GLOBAL OUTLOOK 10/28 CHEAT SHEET:MARKETS RETREAT AGAIN, AWAIT US GDP

SUMMARY –NB SEE WEEKLY OUTLOOK FOR MORE ON ALL OF THE BELOW INSTRUMENTS


- Stocks: Wednesday: Asia, Europe, US down Thursday morning Asia, Europe down

- FX: Lower equities, bias to safety currencies [JPY, USD, CHF in order of safety appeal] in favor of risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite appeal], USD gains against most majors(down against Yen, & GBP(?!))

- Main events today: USD: Advanced Q3 GDP, unemployment w/w, earnings: Thursday 10/28 Aetna (AET), Colgate-Palmolive (CL), France Telecom (FTE), Hertz Global (HTZ), Hitachi (HIT), MetLife MET), Moody’s Corp. (MCO), Motorola (MOT), Proctor & Gamble (PG), Taiwan Semiconductor (TSM), Waste Management (WM)

- Big Theme: FEAR, but risk assets attempting small rally early Thursday. Excessive valuations, oversold USD, uncertainty ahead of US Q3 GDP Thursday all combine to drive risk assets down, JPY, USD, CHF up (in that order) SEE: WHY CORRECTION COULD BECOME A COLLAPSE in the FULL VERSION'S for other underlying market weaknesses.

STOCKS

US: The S&P 500 fell for the 4th time in 5 days, closed below its 50-day moving average for the first time since mid-July as sellers moved en masse as fears that stocks are overvalued were fed by a much worse than expected existing home sales data and doubts that today's advance third quarter GDP reading will meet expectations of 3.3% annualized growth. For example, Goldman Sachs forecasts an annualized Q3 rate of 2.7%. Like GS, most do anticipate that the Q3 GDP will indeed show positive growth and signal an end to the worst decline since the Great Depression, one that has seen 4 straight quarters of contraction.Stocks were mired in weakness for virtually the entire session as buyers stepped to the sidelines despite another batch of generally better-than-expected earnings. Stiff selling in overseas trade certainly didn't help the case for bulls, nor did disappointing new home sales SEE DAILY 4 MORE ON HOUSING, MARKET WEAKNESSES

Asia: Asian stock markets fell for a third day Thursday after a Wall Street sell-off on signs of weakness in the U.S. housing market triggered fears about the health of the global recovery. Tokyo, Hong Kong, Shanghai and Seoul all lost about 2 percent or more Adding to investor nervousness was Norway's decision Wednesday to raise interest-prompted worries governments might be withdrawing stimulus measures before private sector activity has fully recovered, he said.

Europe: Oct. 28 (Bloomberg) -- European stock-indexes hit 3 week low fell and Asian shares declined as SAP AG cut its software sales forecast and Canon Inc. posted a seventh straight quarterly profit drop. U.S. futures were little changed.



GLOBAL

MARKETS Monday

ASIA- DOWN N225I -1.35% HS -1.84 % SSEC +0.33% FTSTI -1.38% AORD -1.42 %

EUROPE DOWN FTSE -2.32% DAX –2.46% CAC -2.14%

US- DOWN S&P -1.95% DJIA -1.21% NASDAQ -2.67%

THIS MORNING

ASIA DOWN

N225I -1.83% HS -2.28 % SSEC -2.34% FTSTI -0.59% AORD -2.39 %

EUROPE: DOWN

FTSE -0.26% DAX -0.37% CAC -0.14%

COMMODITIES: With the dollar gaining ground for the fifth straight session, the CRB Commodity Index fell 2.0% in its worst single-session loss in one month. Both metals prices and energy prices weighed heavily on the CRB. Unwinding of long trades accelerating



Oil: prices slid to near $77 a barrel in Asia as an unexpected jump in U.S. gasoline supplies cast doubt on the strength of a recovery

Gold: In US trade Wednesday, Gold prices settled pit trade 0.5% lower at $1030.50 per ounce, net speculation long positions remained close to all-time high level. It's likely for the correction to take place for some more time and gold may need to correct further to 1026 to remove the positioning risk.

CURRENCIES: Strong bias to safety currencies with falling stocks and weak new US home sales dent risk appetite. Heavy short positioning unwinding on the USD at the expense of the commodity fx and EUR. in the face of falling stocks and risk appetite, raising the USD's safe-haven appeal. Most USD and Yen crosses lost ground against them in more of a short squeeze sparked by the stock pullback than any shift in underlying fundamentals. Traders said short-term speculators had been pocketing gains, with hedge funds said to be booking profits ahead of their business year-end in November, and as the recent rebound in both the yen and the dollar saw bets on their weakness unwound.

USD: while the dollar index <.DXY> rose to its highest in two weeks, pulling further off a 14-month trough hit last week. Gaining against all majors except the JPY and surprisingly, the GBP.

EUR- The euro rose to $1.4717 from $1.4714 in early Thursday trade, but remains near a 2 week low against the USD

JPY - the dollar yen to 90.29 yen from 90.64 yen, as falling stocks and yen purchases by Japanese exporters lent support to the JPY.

GBP – Surprisingly continues to recover vs. the EUR and USD in the past 3 sessions and into Thursday in what appears to be a reaction bounce after last week's big drop on poor Q3 GDP fed by a EURGBP selloff and willingness to wait for a clearer picture of QE policy.



AUD: Down The Australian dollar fell almost 2 percent against the U.S. dollar on Wednesday, clocking up its biggest one-day fall in

nearly two months.

NZD: Down 3%, biggest decline since 2/09 faced downward market pressure after a promise to hold rates low for longer than the previously expected first quarter in 2010.

CAD: dropping w/ oil & stocks, rallying early Thursday w/ other risk assets

CHF: gaining slightly against the EUR and USD in early Wednesday trade after struggling for the past 2 days

NOK: Norges Bank (CB of Norway) becomes first EZ central bank to raise interest rates, doing so by 25 basis points in line w/ expectations. Norges Bank expects to raise rates to around 2.75% by the end of 2010, though others expect they could go as high as 4%.



CONCLUSIONS: New Trading Ideas: If stocks steady or falling, then continue to watch for USD rallies against the EUR and commodity currencies, also the GBP/USD for more pullbacks on a sustained break below 1.6300. Crude oil is dropping, no strong support level until about $74 (see daily chart below for details). We favor going short on crude because it has broken below $78 (fibonaccci 23.6% retracement which has held as support for the past week) as long as stocks continue to drop. Look to trade at either extreme long or short depending on stocks. NB If continued pullback in stocks, expect other risk assets and currencies to follow, with biggest move from the most oversold (USD) and overbought (crude, gold, commodity currencies, stocks, in that order). NB risk assets rising as of this writing. SEE DAILY FOR MORE ON CRUDE, EURUSD W/ CHARTS



Trading Opportunities: Near term favors higher yielding and commodity currencies, but that could change fast if equities pull back, no trend continues forever. Thus: 1. be prepared to play a pullback in risk assets and get ready to sell stock indexes, commodities, and risk currencies, buying USD, JPY. 2. Trade the near term horizontal trading ranges that should hold until major news causes a change in risk appetite. 3. Those continuing to take long positions in risk assets should consider tight sell stops, though gold and crude may be approaching new breakouts. Crude oil may be beginning pullback Always use sell stop orders.







Crude Oil

Made its first major move down Friday as it followed stocks lower, after it breached new annual highs around $82. Given the fast recent rise, no strong price support before around the $74 level, though at $77.81 there is a 23.6% Fibonacci retracement level that has held for the past week, and at about $75.50 there is a convergence of a 38.2% Fibonacci retracement and and a 1 standard deviation Bollinger Band. See chart.





Daily Chart Crude Oil Oct 29- No strong support until around $74,( but have minor support at $77.81 already broken, then at $75.51) where we get a convergence of an established support/resistance price level, Bollinger Band, and 50% Fibonacci retracement. Until then, nothing but air. However, oil is likely to continue following stocks, so if stocks can hold steady, oil may well do likewise, though it does tend to be more volatile and exaggerate equity market moves, so oil could make some further declines on its own.



02 oct 29



FX TRADE OF THE DAY (from fx360.com)

EUR/USD: Currency in Play for Next 24 Hours






EUR/USD will be the currency pair in play for Thursday. On its way from the Euro-zone include the German Unemployment at 4:55 am ET or 8:55 GMT and Consumer and Economic Confidence at 6:00 am ET or 10:00 GMT. The US, on the other hand, will be releasing Gross Domestic Product and Personal Consumption for 8:30 am ET or 12:30 GMT.



EUR/USD suffered a sharp fall today which kept the pair deeply within the Bollinger band range trading zone. The euro will encounter two major levels of support if the selloff continues to gain momentum. The first will be at the psychological level of 1.4600 followed by 1.4500, a low from earlier this month. Resistance stands at 1.4843 or the high from September 23 rd . If support is breached, the uptrend in EUR/USD may be invalidated in turn for a more severe correction. However, at this point, the trend is still intact.









03 oct 29













OTHER HEADLINES



World Series Starts Tonight, Yankees go for 27th World Series, Victory to Lift Wall Street Sentiment



(Bloomberg)

India Begins Exit From Monetary Stimulus With Order to Buy Government Debt



SAP Cuts Full-Year Sales Forecast as Customers Reduce Spending on Software



•European Stock-Index Futures Retreat; Asian Shares Decline on Canon Profit



•Nomura Resumes Dividend Payouts After Quarterly Net Profit Beats Estimates



•BG Group Third-Quarter Profit Declines 44% on Lower Gas Demand, LNG Prices



•Deutsche Bank Said Near Deal to Buy Wealth Manager Sal. Oppenheim Holding

(Seekingalpha.com)



How to Play the Gold / Silver Ratio

Sugar ETN Continues Its Wild Ride

Official Release

August Housing Numbers Across Various Indices Don't Yet Show Genuine Recovery

Parsing the S&P/Case-Shiller August 2009 Housing Report

Trying to Gauge Where Oil Is HeadedUnderstanding Energy: Professional Money Management and Peak Oil



by Gregor Macdonald

World Series of Crude Oil: Winner Decides Winter Gasoline Prices



by Bob van der Valk

World Recovery Is in the Hands of OPEC



by Andrew Butter

Crude Oil and Gold: Not Worth Worrying Overby Sold At The Top

August Case-Shiller Housing Numbers



by Bespoke Investment Group



(AP)

Barrage of earnings, economic data to drive market- AP

Beating the Street is an easy feat for companies- AP

Earnings reports to give picture of job market- AP





DISCLOSURE AND DISCLAIMER: OPINIONS EXPRESSED ARE NOT NECESSARILY THOSE OF AVAFX, AUTHOR HAS POSITIONS IN ABOVE INSTRUMENTS.

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