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European Forex Professional Weekly 2009-11-19

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Nov 19, 2009.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUROPEAN FOREX PROFESSIONAL WEEKLY
    Analysis and Signals
    November 19, 2009


    Fundamentals

    The current week was just a continuation of the previous one. My assumptions concerning doubtful growth euphoria looks like they have found confirmations gradually. First, economic numbers have been trending softer during the week – most data was below expectations. Retail sales ex. auto 0.2% vs 0.4% expected; Core PPI -0.6% vs. 0.2%; Industrial Production 0.1% vs. 0.2%. Just CPI was a bit higher, but it was distorted by the Cash for clunkers program. The real estate sector also anemic – Housing starts and permits also declined. Surplus to this was Non-farm Payrolls of last week (-190K). That is what I expected – the recovery is loosing momentum.
    Besides, during the current week we’ve receive an official confirmation of our thoughts during Bernanke, Fisher and Kohn's testimony – it has been said that rates can stay low even until 2012. That is what we’ve spoken of in previous research.
    We see additional confirmation from the markets – gold buying, low US Treasuries yields that had tightened significantly during the month (for example 2-year Note yield is 0.77% currently. Feb 2009 low was 0.6%). I’ve spoken about the equity market in the previous week - investors judge the current situation too optimistically. Now there are some signs of possible reversion in stock markets that have appeared. I do not know how deep it could be, but we can not exclude the possibility of a deep retracement. Th Banking Index (BKX) shows divergence with the S&P500 and does not confirm that it grows. As a rule, the banking sector is a predictor of the equity market because banks are more sensitive to rate policy and faster to react to changes in it. Also worth noting is that the equity index is just near the strong resistance level that is in agreement with the target of ABC’s move (look at chart of S&P500 below) and 0.618 Fib resistance. So, I think that 1140-1160 of S&P 500 is a level when we have to be extra careful. And circumstances are turn so, that now is a very possible moment to see risk aversion movement. How will it influence the USD? Just look at our “Basic macroeconomic issues” below points 3 and 6.
    What else can we tell… A very interesting moment now is with US debt ceiling. The last extension was in February to 12.1 trillion. USD. But during the current month, the Treasury should issue an additional ~120 billion USD and the deficit should reach 12.132, excluding Bonds that should be matured. So, if Congress will not approve an extension, yields will become even lower and we can see the lowest levels. From the other side if they extend the 12.1 debt ceiling - rates should rise. It can add volatility to currency market.

    Result: Macro data and Fed’s authorities confirm our thoughts about growth perspectives. Absence of inflation, anemic IP, labor market, retail sales and slowing in real estate sphere enlarge the possibility of W-shape of recovery. Stocks are at a breakeven point – the great resistance is near, we see interindex divergence. We see gold buying and demand on Treasuries that push yields lower. Taking into consideration Year End and tighting all together I expect retracement on the equity market and possible bearish trend on EUR/USD even before the year's end. We should expect reassessment of the current situation by investors.

    BKX Index Weekly
    [​IMG]

    S&P 500 Index Weekly
    [​IMG]

    Basic macroeconomic issues:

    1. Investors basically pay attention only to the nearest perspective. Since FED rate tightening is too blurring, we should not to expect meaningful USD strengthening until next year (or till first signs of a rate hike possibility);
    2. USD will become stronger when investors see these signs, so the expectations concerning EUR/USD rates parity will change;
    3. We can expect growth in the USD, if the possibility of second leg of recession will grow, and if investors will have large borrowing positions in USD;
    4. EU economic recovery will have a time lag about 1-2 quarters compared to the US recovering;
    5. When EU rate hike expectations will appear, the dollar will turn to weakeness;
    6. We can see temporary USD strengthening from time to time due some technical movements (risk aversion, stocks buying etc) until the first signs of a rate hike possibility appear.
    7. The primary US economic data that will be under scrutiny are personal credit, spending, wages and employment, inflation. This is a final segment in the chain, and it’s very important.

    Technical

    Monthly (EURO FX all sessions CME futures)

    Not much changes… The market is still near COP level, we see it appreciation now. Trends remain bullish, no overbought level still.
    Current oscillator number allows us estimate EUR/USD overbought level for November - 1.5474 area. If the market will reach it in November, then we can expect consolidation or even retracement. The market will feel a pressure in this area.

    [​IMG]

    Weekly (EURO FX all sessions CME futures)

    Its look like the trend turns bearish on the weekly chart. But we have to wait some time still, because the angle of crossing is a bit flat. If situation will develop on down side, we should be able to estimate possible levels of retracement. But for now it is early a bit.

    [​IMG]

    Daily (EURO FX all sessions CME futures)

    The daily trends turn bearish and that increases a probability of a downward move (remember that the weekly trend also has turned bearish). The levels for a down move are the same. Two of them are very strong. COP=1.4777 coincides with 0.382 Fib support and OP=1.4610 with coincidence of Fib support levels. We do not see any oversold yet, so there is nothing to block possible move to 1.4780. Just want you to pay attention that we are trying to break 25x5 SMA support for now. XOP=1.4339 is also near the support level. If we will see that a weekly down trend begins to fast all of daily targets are possible to reach…

    [​IMG]

    Hourly(EURO FX all sessions CME futures)

    The hourly trend is bearish. The market already has reached an OP of ABC move. Taking into account that the daily trend is bearish also, I think that we will reach XOP=1.4783 that is in agreement with 0.618 Fib support level. Besides, if market will reach it, we will see a solid oversold. That’s why I think that we will have an upper retracement then. Also note, that this level is very close to daily COP=1.4777. There are some others LPO’s (Logic Profit objectives) exist, but I didn’t point to them, otherwise the picture will be too difficult to analyze. Here they are:
    XOP=1.4876; OP=1.4861 and XOP=1.4820.

    [​IMG]

    Trade EUR/USD possibilities (1):

    Monthly, Weekly:

    Fundamentals are still not in favor of the USD. In the long-term, an up move should continue. But for nearest 1-2 months we can see a technical retracement if investors reassess the current economic situation and begin to run to quality. The weekly trend turned bearish technically, but not much time has passed after that moment, and I want to wait a bit to see if there is a continuation of this turning.

    Daily:

    The daily trend is bearish. The nearest target is COP =1.4777. If the weekly bearish trend is confirmed, then moving to OP=1.4610 very probable. Besides, this scenario coincides with fundamental thoughts.

    Hourly:

    For now the market reached OP=1.4840. We have no oversold yet, we can see some not deep retracement higher, but then, I think the down move will continue to 1.4770-1.4780 area – there is strong hourly support (agreement XOP=1.4783 and Fib support) and daily COP and agreement. We definitely will see upper retracement from there. Besides, in 1.4820-1.4800 area there should be a great amount of stop orders. If they will be touched by market makers, the market surely will reach 1.4770 just because of orders fills. And I think that the market should break 1.4800, because daily trends are bearish and there is no oversold yet.



    (1) “Trade possibilities” are not detailed trade signals with specific entries and exits. They are expectations about possible moves of the market during the week based on market analysis.

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    General Notice: Information has been obtained from sources believed to be reliable, but the author does not warrant its completeness or accuracy. Opinions and estimates constitute author’s judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipients of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein.
     
  2. tadinda

    tadinda Private, 1st Class

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    Great analysis once again Sive,

    Once again I shall study during the weekend to learn some more. So I may have some more questions for you.

    THanks once again.

    ERnest
     
  3. Sentinel

    Sentinel Sergeant

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    DiNapoli Analysis

    Dear Sive,

    Realizing that most of your analysis depends on OPs, XOPs, COPs; last week I searched in detail what these terms mean and came into the book by Joe Dinapoli : "The Practical Application of Fibonacci Analysis to Investment Markets". I spent last week reading it and enjoyed a lot. What I want to ask to you is : Could you please evaluate the success rate of these techniques? I am planning to trade with them and as far as I see you are a strong follower of Dinapoli Levels and you may share your experience with us.

    Thanks a lot...
     
  4. tadinda

    tadinda Private, 1st Class

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    Hello Sentinel,

    I am sorry to jump in and appear to be rude but Ibelieve your question is quite superflous. For two reasons I can think of.

    1. The man works for a bank in this field. Cannot imagine any bank, which I consider to be thiefs with a licence, to keep in employ anybody who is not producing for them.
    2. There is an archive of his pasy weekly reports which anybody can go tyhrough and check personally if they are worth the "paper" they are written on.

    Once again am sorry to butt in but personally I would prefer to see posted here which will help us to understand the thinking and methods behind the analysis. Rather then questions regarding the integrity of thye system. Whic as I have said can be verified individually and personally.

    IN any event welcome on board what I consider this to be a gravy train of solid information, education and eventually profits.

    Regards
    Ernest
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Well, it depends not only from technic or methods. There is a personality that is also very important.
    For me this method is the best. At least you should try. If it will be not suitable for you - you can switch to another one - classic analysis, Elliot's Waves, Fractals etc....

    About successing and the whole way of decision making.

    As you can see my demo account is in surplus but quite volatile. FOREX has its own particular qualities and I have to accomodate my trading style to it, I need some time(it can be said that i'm learning also, in some sense...). Besides, my primary ocupation is intermarket analysis and investing, I do not focus on FOREX only and I'm not a pure speculative trader. My basis is a fundamental analysis, because I hold positions long term. For example, on last year (2008) I've made on Forex only one deal and hold position for 6 months.
    That' why some time I have not enough time to dedicate to my demo account.

    About technical analysis.
    It's very usefull in short-term and for me DiNapoli method is the best. But every market has its own qualities and behavior, rules, so be ready for some time you've spent for accomodation even if you are a successfull trader on other market.

    Hope it helps
    Sive.
     
  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hello Ernest,
    well, I'm ready to answer on your questions if you do not understand something in analysis, including the fundamental one. We can also discuss the current situation from time to time but in the learning style. This conversation should not lead to "what price to buy or when to close" talks. FPA gives enough good signals that based on different approaches to trading.

    Sive
     
  7. tadinda

    tadinda Private, 1st Class

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    Fully agree Sive,

    There is sufficient information in my view in your analysis which will enable us all to make our own decisions.
    Furthermore, the attention and detail with which you have provided when answering my own questions was simply perfect.

    Please keep it up.

    Regards
    Ernest
     
  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    current market

    Hi everybody,
    look at the current situation (see attached file)
    Market has reached an OP, that I've mentioned in research, then it has retraced to 0.618 Fib and started move to new OP=1.4786 that is almost coincide with previous XOP=1.4783
    We just need to touch stops below 1.48 to reach 1.4770-1.4780
     

    Attached Files:

  9. Sentinel

    Sentinel Sergeant

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    Thanks Sive

    Thanks Sive.. I got my answers..
     
  10. asdfg

    asdfg Private

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    Wave tops

    Hi Sive, I'm newbie. I know a bit about forex, but your comments are extremely useful, because they give a whole picture of market. Thanks!
    I got some question as newbie. For example, I got some Elliot Wave number 2 and going to 3. I'm using Fibonacci expansion (OP or XOP?) and RSI/Stoch.Oscillatior locate top of wave 3. But some times it is not enough: top of 3 appears in other place . How can I recognize that selected top is wave 3 but not one of tops(for ex. 3 or 5) of subwaves? Thanks
     

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