July 19, 2011
Looking for Clues on Gold and Crude Oil Morning Prep
Sorry for the title of the email..our trade room is closed today. Re-opening Monday @ 745am
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Highlights from earlier today…
– Few Signs of progress in US debt talks and the markets are sluggish because of this
– ECB’s Trichet: He is confident that worst-case debt scenarios in both Europe and US can be avoided
– Greece Fin Min Venizelos: A debt agreement is possible at Thursday’s summit…wishful thinking? Maybe….maybe-not.
– EU Officials were examining three broad options on Greece bailout and securing private sector role. All eyes continue to be on Europe debt.
– German ‘ZEW’ Consumer Sentiment Survey comes in with mixed results, leaving traders looking for more in the short term.
– Key corporate earnings from numerous US financial institutions out today and the rest of the week.
European shares rallied after their steady decline at the beginning of the week after solid corporate earnings. IBM which reported last night, surpassing expectations, sustained US rally which also lifted European technology stocks. Traders are awaiting major banks such as Goldman Sachs and Bank of America that report in the US morning.
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Speakers today…
Speakers today…
– There was vague speculation that the EU finance ministers might hold a teleconference for tomorrow to forge a deal on Greece with the leaders still meeting Thursday to close it.
– EU Officials were examining three broad options on Greece bailout and securing private sector role.
The first option would involve Greek debt buyback and credit enhancements for private sector (would likely cause selective default).
The second Option: was based upon France proposal but would not offer credit enhancements to private sector and no debt buyback. This plan would also involve lowering of interest rates and lengthening the maturities on Greek EFSF loans.
The third Option would involve tax on financial sector, lower rates and longer maturities but not offer any bond buyback. The article noted that the first option likely to have the greatest impact on the Greek debt burden depending on the size of the haircut. The article noted that the third option did not see default or selective default as likely
– ECB Nowotny reiterated the view that a default would have serious consequences but did note that some Selective default proposals would not have negative consequences. ECB was not tied to decisions by rating agencies but there were limitations to collateral that the ECB could accept. The responsibility on bond acceptance was the ECB’s decision
– Former ECB member Otmar Issing stated that a “massive haircut” for Greece’s debt was unavoidable
– IEA Chief Tanaka commented that there has been no decision yet whether to continue with release of strategic oil inventories. He noted that the IEA was seeing how long Saudi Arabia maintained its production increase
– ZEW Economists: Debt problems from some EMU States is hurting sentiment; Eyeing US fiscal situation with rising concern. The ZEW did note that investors did not see the US debt negotiations as too problematic but later answers to its survey were more pessimistic than earlier answers
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Headlines In the Papers…
– The financial press stated contagion concerns have started to affect the corporate bond market. Amid the debt concerns in Europe, there were no issuances in EUR and GBP last week for the first time since the collapse of Lehman Brothers in 2008. The Markit ITraxx Europe index, which measures default risk related to blue-chip European companies, rose to over a one-year high. The activity in the corporate bond market could remain low until September.
– Approximately $10 billion worth of European IPOs was shelved in first half according to the Financial Times. The increase in IPO inactivity is mainly due to market volatility and investor dissatisfaction. Bankers put the IPO cancellation figures even higher, as many companies let go of plans following early discussions with investors. Though there is a major backlog of companies wanting to list in Europe, bankers worry that the weakness in IPO activity will continue in the second half.
– Signs are beginning to show that Portuguese Prime Minister Coelho is becoming less patient with EU officials as noted by Telegraph business editor Ambrose Evans-Pritchard. Though recent comments made by the prime minister said he wanted Portugal to take part in an ambitious European project, he would not stand by and wait for Europe to govern the country. During the ERM crisis of 1992, markets were very alert to changes in political body language. The Prime Minister also warns of additional austerity following discovery of €2 billion budget hole in the public accounts left by the former Socialists.
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Currencies & Bonds this morning…
Currencies & Bonds this morning…
– The session was marked by rising risk appetite with optimism growing over a possible debt agreement at Thursday’s summit.
Overall price action saw a tightening of the periphery spread in most cases, higher equity prices, weaker CHF, JPY and USD against other European pairs. The EUR/USD steadily moved higher in the session and tested above the 1.42 handle following the mixed reading out of the German ZEW and periphery auctions results.
– The European session took notice of a weaker CHF currency with several factors cited as the catalyst. There was optimism that a debt deal could be reached at Thursday’s EU Summit for Greece. Dealers also cited that some M&A flows also helping to weaken the CHF (some cite the recent acquisition of Arch Chemical [ARJ] by Lonza [LONN.SZ]. The financial press also noted the the number of acquisitions by Swiss companies had approached the record highs, which were set in 2006-2007.
Lastly the CHF was weighed by news of a potential tax amnesty for German citizens with money in Swiss banks after reports that Swiss banks could pay as much as €10B to the German Treasury due to agreement on tax evasion. EUR/CHF was higher by over 100 pips from its Asian opening levels to test above 1.1650.
– The Spanish bill auctions saw significantly higher financing costs due to the recent spike up in periphery yields on contagion risks in recent weeks. However, the yield on the 13-week Greek paper declined by 4 basis points compared to its prior auction.
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Looking ahead at the news today…
Looking ahead at the news today…
Looking at the news this morning we see early morning news from the US and Canada (think crude oil) so look for early morning volume, and since this is a slow week in the middle of the month we will expect to see an early stall/slowdown in volume before 11am est today. As always, I will wait around to see how the markets close in Europe at 1130am est today, but staying very selective with what im trading at that time.
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Looking ahead at the charts today…
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Looking ahead at the charts today…
The US Dollar Index trades in the middle of its range this morning on our 89-Range charts. This give me a very easy clue to the rest of my day this morning when I see the price sitting on the BMT line, which we know from experience will be a tough area to trade around.
Looking closer at the 13-range chart, which is better-suited for a day trader, we see a much more specific story from the US Dollar. The short term is most important when im day trading with the dollar, and you can see two distinct things…bear channel and a potential sideways trading range. Remember to use the dollar correlation today when watching this faster timeframe.
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| US Dollar Index 89Range |
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| US Dollar Index 13Range |
Crude Oil Futures give us plenty to work with this morning on our 89range charts 09-11 Contract rollover). We see three distinct clues today.
First this price wedge in yellow trend lines has been around for months, always coming back into play when we get up around the big round number of 100.00. Second we see the medium term bull price wedge coming off recent lows, and third we have a short term sideways range developing around the 96.00 level above and below.
Sideways ranges would be the biggest clue at this time, so look to sell the highs (97.68, 98.30, 98.90, 99.22) and buy the lows (94.70, 94.52, 93.55) of these ranges until we pick up on market personality this morning. Remember to stay away from entering the market at the BMT 95.99.
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| Crude Oil 89Range |
Gold Futures pushed to new all-time highs earlier this week and this morning we have three things to consider. First you can see there appears to be 2 distinct ranges on this 89range chart. You can see the previous all-time highs were 1578.1 down to 1463.0 and then this week we have a new range above this one from 1576.2 up to the NEW all-time highs of 1610.8. You can assume traders will be watching the transitional area of 1575.00 as the line in the sand between stable higher highs, and tumbling back down into the range below 1578.1. This means we need to beware trying to aggressively buy or sell the lows of the range around 1576.2 because EVERYONE will be watching at that area.
The big thing on gold is trying to play around the all-time highs. Remember, when EVERYONE watches a specific price level there is less opportunity and the markets get very impulsive (sloppy) as the emotions kick in high gear for traders and investors. My goal on gold will be to sell the all time highs of 10.8 however we know this may be tough to find a ‘safe entry so use caution and be selective. At the lows of this range we already discussed the sloppy price action at the lows (transitional area) so again be selective and wait for the YOUR TRADE at those lows.
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| Gold 89Range |
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