September 2009

Dow Looking To Test 10,000

The Dow has broken above the November 4th high of 9,654 which and is now threatening the 50.0% Fibo of 14,402-6,667. A break above there should lead to a test of 10,000 where we could see the psychological level slow momentum.

The S&P broke above resistance at 1,052- the 50.0% Fibo of 14,402-6,667 leaving upside potential to 1,144-50.0% Fibo of 1,079-812.

The NASDAQ after clearing resistance at 2,009 the 31.8% Fibo extension of 2,861- 1,265, has only psychological resistance at 2,200 before a test of 2,250-61.8% Fibo.

Daily Commodities Fundamentals: Commodities Gain as US Dollar Continues to Suffer

North American Commodity Update, Last Updated 9/16/2009 4:50 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Trades Higher on Inventories and Dollar Weakness

Crude Oil (WTI)   $72.41                               +$1.48        +2.09%
Crude oil started the session lower while rebounding as the US market opened to close near the highs of the day. The move seen in the past two days comes amid support seen on Monday at $68 per barrel. Significant drivers of the commodity included a considerable slide in the greenback against major crosses, along with gains in equity markets in US, Europe and Asia. Ultimately, oil has remained in a tight range between $68 and $75 since early August and it is clear that fundamental force has not driven gains in recent days. Optimism has swept through equity markets across the globe, while crude has hardly moved in response. The weekly release of Department of Energy inventory data showed stockpiles of oil fell at a much faster pace than expected, while gasoline supply increased, a worrying sign for demand following the summer driving season. Also of concern, distillate inventory rose 1.4% to remain at the highest levels since 1983. Should this level remain high, it may challenge potential price-increasing demand in the winter.

Commodities – Metals

Metals Rally as Dollar Sees Further Weakness

Gold                   $1018.50                           +$12.20                              +1.21%
Gold saw a strong move as European markets opened, rallying to as high as $1023.30 before pulling back to just under $1020. Dollar weakness largely played a factor as the dollar index began to cave at near the same time. There remains considerable cases from both sides as to the future direction for gold, as economic improvement may increase demand as well as inflation hype, while near-term weakness in equities and the possibility for a rebound in the greenback could send gold sharply lower. Ultimately, the recent moves have largely been a reflection of currency activity, and the dollar remains the key force to watch to determine where gold heads.

Silver                 $17.42                   +$0.42                               +2.47%
Silver prices closed sharply higher by more than two percent as the metal strengthened from dollar weakness and rallies in equity markets. Having more industrial use than gold, the commodity stands to benefit more so than gold from economic recovery. A recent break above a resistance level at $16.25 has led the metal to now rally an additional seven percent. While there may indeed be fundamental drivers for the move, the sheer fact that silver has rallied nearly $4 per ounce off an early August low suggests overbought conditions. Near-term expectations will have the commodity follow on movements in equities, which may be due for a correction. Also, any potential support and lift in the US dollar could send the metal retracing quickly.

-Written by Roman Kadinsky, CFDTrading Research
Questions/Comments about this article? Send them to Rkadinsky@fxcm.com

European Stocks Extend Gains on Commodities and Fundamental Data

Europe Session Key Developments

•    Dollar Weakness Propels Commodities
•    Indicator Releases In-line with Expectations

European Markets closed near the highest levels of the day as optimism soared in all sectors with financial stocks and Raw material producers gaining the most. Weaker dollar helped to lift commodity prices while economic stability and potential rebound in housing may avert some of the expected loan losses. Indicators on the session came inline with expectations as UK job losses rose nearly 25,000 as the unemployment rate increased to the highest since 1995. Other indicators released included CPI data for the Euro-Zone and US which, for the most part, met expectations. Overall, stocks may need to report strong results in the third quarter to justify the valuations placed following the rally. Cracks remain ever-present as job losses continue to climb, threatening safer loans and leading to further write-offs in credit cards. Also of concern was a grim comment yesterday by Bank of England’s Mervyn King. The Governor expressed concern over rising unemployment, not expected to peak until “the middle of next year” while also added that conditions will “remain uncomfortable for a long time.”

FTSE 100                      5,124.13                   +82.00               +1.63%
Stocks in Britain closed considerably higher as Financials and Basic Materials rallied more than three percent each. Gains proved across the board as less than 10% of stocks closed lower while all sectors advanced. Tullow oil saw the biggest jump at 9.2% following comments on its offshore exploration near Ghana that may yield fields of approximately six billion barrels of oil. Miners also moved sharply higher as metal prices increased; Eurasian natural gained more than 6% while Fresnillo advanced nearly 5%. Financials ultimately led index point advances as HSBC rose 4.4% while Barclays climbed 3% as the bank unloaded some of its risk on toxic loans.

CAC 40                     3,813.79                   +61.58                 +1.64%
French equities rose the most of the five majors as the financial sector rallied four percent while only three of the forty stocks closed lower. Societe Generale and BNP Paribas saw gains of more than five percent each. The move came amid general strength in the sector across Europe and firm specific news from BNP Paribas. The bank reported that loan loss provisions for 2009 will be between 7 and 8 billion, considerably lower than the 8.8 billion consensus of seven economists polled by Bloomberg.

DAX                         5,700.26                    +71.28             +1.27%
German stocks closed higher by the smallest gain of the five major indices tracked as three sectors fell along with a quarter of the 30 firms on the benchmark index. Financials and Consumer Goods carried the day with more than two percent gains for the sectors. Adidas continued to rise sharply by more than six percent as Morgan Stanley rated the stock “overweight” while Deutsche Bank increased its price target for the firm to €40 from €27. Other considerable moves included a 4.71% rise in Commerzbank and a index point leading 3.49% gain in Deutsche Bank.

IBEX 35                     11,746.90                   +153.60                +1.32%
Stocks in Spain advanced more than one percent as all sectors climbed while winners outpaced losers by a margin of 4-to-1. Consumer Services rose the most at 4.43% while gains in financial stocks lifted the index. Construction firm Ferrovial led with a gain of more than nine percent followed by a six percent move in infrastructure firm Cintra. The two companies are in the process of conducting a merger and said they will seek shareholder approval in late October. Leaders on the day, meanwhile, included Banco Santander and Telefonica, although both traded higher by less than two percent.

FTSEMIB                        23,465.49                    +357.36                  +1.55%
Italian equities rose more than one percent as major firms led to further upside in the FTSE MIB. Investment bank Mediobanca climbed more than four percent while Italy’s second-largest bank, Intesa SanPaolo, advanced two percent on news the company plans to sell long-term hybrid bonds. Automaker Fiat rallied more than two percent, despite news from Chrysler that autosales in September are currently down 19%. Ultimately the index has seen a considerable jump since early July and now trades at the highest level since October 2008. However, valuations remain high and Elliot wave patterns may indicate a temporary top will form soon.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com

Dollar Remains Pressured – Pound Patterns Warn of Reversal

Euro / US Dollar

Longer term – “The EURUSD should continue to work higher and push through the December 2008 high in order to complete the entire rally from the October 2008 low.  1.4850 (100% extension of 1.2327-1.4850) is a potential target.  The line extended from the March and June highs is also a potential target – that line is at 1.5160 this week and increases about 60 pips a week.  Barring a drop below the support line drawn off of the April, August, and September lows, the trend is up to the mentioned levels.”  RSI is above 70 for the first time since early June as price threatens the December 2008 high.  Until there is some sign of a top, whether from a price or bar/candle pattern, the trend is considered up.  Coming under 1.4450 (and staying below there) would be a warning that top is in place.

British Pound / US Dollar

On the daily, a potential head and shoulders top is evident (although the pattern can not be confirmed until price breaks below the neckline – which is near 1.6200).  Bolstering the bearish bias is the shorter term head and shoulders top (which comprises what may be the larger right shoulder), which is confirmed.  Bears are favored against 1.6665 although a pullback could test the underside of the neckline near 1.6600.

Australian Dollar / US Dollar

The AUDUSD continues to work higher towards the 78.6% of the decline from .9856-.6007, which is .9032.  This level intersects with a potential resistance line on September 24.

New Zealand Dollar / US Dollar

A NZDUSD objective is .7250.  This is where the rally from .6193 would be equal to 61.8% of the .4890-.6601 rally.  MACD is an interesting development.  The indicator itself appears to be forming a head and shoulders (divergence) – which warns of a reversal in the weeks ahead.  Above .6961 keeps the NZDUSD uptrend strong.

US Dollar / Japanese Yen

Keep the long term outlook in perspective – “a 4th triangle ended in 2007 above 124.00 therefore the decline from that level is viewed as a 5th wave that will not be considered complete until price drops to an all-time low (below the 1995 low near 80).”  At this point, former support in the 91.73/94 zone is potential resistance.

US Dollar / Canadian Dollar

Barring a break above the resistance line, the USDCAD is vulnerable to a drop towards 1.0330 – which has been both support and resistance over the last several years.  This level is also the 61.8% extension of the 1.3068-1.0782 decline (from 1.1730).

US Dollar / Swiss Franc

“The print below 1.0367 (December 2008 low) satisfies the minimum requirement for wave v of C.”  An objective is 1.0037 (100% extension).  Trading above channel resistance would indicate with a high probability that a low is in place.

Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses on Monday (Euro and Yen crosses), and Intraday Forex Trading Strategy as market action dictates.  He is also the author of Sentiment in the Forex Market.  Follow his intraday market commentary at DailyFX Forex Stream.  Contact Jamie at jsaettele@dailyfx.com

Asian Stocks Advance on Higher Commodity Prices, Growth Optimism

Asia Session Key Developments

• Westpac Leading Index Rises for Second Month
• Gold Jumps to $1020/oz, Oil Climbs Back to $70/bbl

Stocks in Asia/Pacific traded higher on Wednesday as investors held an improved outlook for global growth following the enhanced retail sales report from the US, and speculation for a marked economic recovery may continue to drive global equities higher as market sentiment improves. At the same time, gold spiked to an intraday high of $1020 an ounce during the Asian trade following the weakness in the U.S. dollar, with oil climbing back to $70/bbl, and the rise in commodity prices may continue to drive the stock markets higher as the outlook for future growth improves. Meanwhile, the Westpac leading indicator for Australia rose 1.1% in July following the rise global equities paired with the rebound in building approvals, and the data encourages an improved outlook for the $1T economy as the Reserve Bank of Australia projects economic activity to expand going into the following year.

Nikkei 225                            10,270.77

Stocks in Japan pushed higher on Wednesday subsequent to the rally on Wall Street, with the Nikkei gaining 53.15 points (0.52%) to close at 10,270.77 as 6 of the 10 components advanced on the day. Technology rose 1.98% to lead the rally, with oil & gas and basic materials rising 1.63% and 1.41%, respectively on the back of higher commodity prices. Shares of Mitsui Chemicals gained 7.50% after the firm raised its outlook for the 3^rd quarter and predict earnings to range from $0.22 and $0.28 per diluted share, with Canon Inc surging 4.23% after Nomura Securities recommended purchasing the stock on its alliance with Hewlett-Packard. In addition, Okuma Corp rose 4.19% as Credit Suisse raised the rating on the machinery industry to “overweight,” while Mitsubishi UFJ Financial slumped 1.5% after Shizuka Kamei, the incoming financial services minister, discussed the possibility of extending loan repayments for small businesses by nearly three-years.

Hang Seng                         21,402.92

The Hong Kong equities market was higher on Wednesday for the first time in three days, fueled by optimism following the bigger than expected rise in U.S. retail sales. The Hang Seng ended the day higher at 21,402.92, up 536.55 points (2.57%), with all nine components advancing. Basic material and consumer goods lead the rally, with the components rising 4.19% and 3.10%, respectively.  Hong Kong exporters all benefited from the better than expected U.S. data, with shares of Li & Fung Ltd, the largest supplier of toys and clothing to Wal-Mart Stores Inc, surging 3.10% on the day, while PetroChina advanced 2.90% on the back of higher crude prices.

S&P/ASX/200 Index           4,650.40

The ASX rose 110.10 points (2.42%) to end at 4,650.40 on Wednesday, led by a 3.65% rally in telecommunications. Shares of Lynas Corporation, a rare earths miner, rose18.80% with Newcrest Mining adding 4.45% on the day as gold prices spiked to a high of $1020/oz, while Macquarie Media Group advanced 10.06% following Taiwan Mobile Co’s agreement to buy the cable television operator, Kbro Co, from Carlyle group. At the same time, Telstra Corp rallied 4.18% after Communications Minister Stephen Conroy said the firm may get a stake in a government internet network project, while Woodside Petroleum gained 4.78% as oil prices climbed back to $70/bbl.

Notable Asian Session Event Risk / Economic Releases

Daily Commodities Fundamentals: Oil and Metals Surge Higher on Dollar Weakness

North American Commodity Update, Last Updated 9/15/2009 5:45 PM EST (GMT = EDT +4:00)

Commodities – Energy

Crude Trades Higher on Dollar Weakness, Economic Recovery

Crude Oil (WTI)   $70.93                               +$2.07        +3.01%
Crude oil took off in today’s afternoon trading session, climbing from under $69 to its intraday high of over $71 before settling into close.  Crude traders cheered better-than-expected retail sales numbers in the U.S. as well as Fed Reserve Chairman Ben Bernanke’s comments that the worst recession since the Great Depression has likely ended.  Retail sales increased 2.7 percent in August, soundly beating expectations for a 1.9 percent increase as well as last month’s drop in sales that was revised to 0.2 percent.  Further pushing up oil prices was continued weakness in the U.S. dollar and an announcement from OPEC that raised its demand forecast for the end of 2009 and 2010.  OPEC estimates that demand will contract 1.8 percent this year to 84 million barrels a day, and then rise in 2010 by 0.6 percent.

From a technical standpoint, Barclays analysts foresee further upward price pressure as crude futures for October delivery formed a “hammer” yesterday and approached its 100-day moving average.  These are bullish signals and oil prices may have consolidated to the mature end of an ascending triangle, so oil may be prepared for a positive breakthrough.  From a fundamental standpoint, continued signs of economic recovery as well as a DOE report tomorrow that forecasts a drop in U.S. crude-oil supplies could push oil prices higher.

Commodities – Metals

Metals Show Strength as Investors Hedge Against Dollar Weakness, Inflation

Gold                   $1005.30                           +$5.10                              +0.51%
Gold prices spiked from the late morning to afternoon trading sessions as the metal has found a home above the psychological $1000 plateau.  Prices breached $1010 for the second time in three days, the only times that the metal has reached this price level all year.  Investors fled dollar-driven instruments today, retreating from the currency as well as U.S. Bonds in favor of commodities and equities.  It appears that some inflation fears are finally settling in, and investors want to ensure quality returns on their dollar-denominated investments.  Inflation fears may have been stoked by the Labor Department report today that showed wholesale prices rose 1.7 percent in August, much higher than the 0.8 percent rise that was expected.   In the week ending September 8^th, net-long positions in gold jumped 22 percent to 224,676 contracts, the biggest such increase this year.

Silver                 $16.978                   +$0.377                               +2.27%
Silver rocketed higher on the day finishing up over 2 percent, and has now gained over 50 percent this year.  Dollar weakness spurred the demand for metals as an inflation hedge for investors.  Strong economic data out of the U.S. also boosted silver, which outpaced gold today as silver is more widely used for industrial purposes.

Written by James Russell, CFDTrading Research
Questions/Comments about this article? Send them to JRussell@fxcm.com

Dollar Putting Up Fight Ahead of Euro 1.4700

Euro / US Dollar

Longer term – “The EURUSD should continue to work higher and push through the December 2008 high in order to complete the entire rally from the October 2008 low.  1.4850 (100% extension of 1.2327-1.4850) is a potential target.  The line extended from the March and June highs is also a potential target – that line is at 1.5100 this week and increases about 60 pips a week.  Barring a drop below the support line drawn off of the April, August, and September lows, the trend is up to the mentioned levels.”  Coming under 1.4410 (and staying below there) would be a warning that top is in place.

British Pound / US Dollar

The GBPUSD may be working higher to form the right shoulder of a head and shoulders top.  The left shoulder’s price extreme was 1.6750 – and has been reached today.  Potential resistance is also just above 1.69 (parallel extension of potential neckline from top of potential right shoulder.  Short term resistance is 1.6530/50.

Australian Dollar / US Dollar

The next AUDUSD objective is .9032 (78.6% of .9856-.6005).  Similar to the EURUSD, a support line (channel support in this case) defines the trend (that line is near .84 now).  Coming beneath there would suggest that a top is in.

New Zealand Dollar / US Dollar

A NZDUSD objective is .7250.  This is where the rally from .6193 would be equal to 61.8% of the .4890-.6601 rally.  Again, channel support defines the trend and a short term support zone is .6900/30.  MACD is an interesting development.  The indicator itself appears to be forming a head and shoulders (divergence) – which warns of a reversal in the weeks ahead.  Above .6902 keeps the NZDUSD uptrend strong.

US Dollar / Japanese Yen

Keep the long term outlook in perspective – “a 4th triangle ended in 2007 above 124.00 therefore the decline from that level is viewed as a 5th wave that will not be considered complete until price drops to an all-time low (below the 1995 low near 80).  The rally earlier this year met former support and rolled over – which increases confidence in the bearish bias.”  At this point, former supports at 91.73 and 93.41 are potential resistance going forward.

US Dollar / Canadian Dollar

Barring a break above the resistance line, the USDCAD is vulnerable to a drop towards 1.0330 – which has been both support and resistance over the last several years.  This level is also the 61.8% of .9055-1.3068.  Given the level of pessimism with regards to the US dollar – it is important to present the bullish count in which the rally from 1.0631 and decline from 1.1130 composes the first 2 waves of a bull move (either a 3 wave or 5 wave advance).  Keep this in mind.

US Dollar / Swiss Franc

As mentioned last week, “the print below 1.0367 (December 2008 low) meets the minimum requirements for wave v of C.”  An objective is 1.0037 (100% extension).  Trading above channel resistance would indicate with a high probability that a low is in place.

Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses on Monday (Euro and Yen crosses), and Intraday Forex Trading Strategy as market action dictates.  He is also the author of Sentiment in the Forex Market.  Follow his intraday market commentary at DailyFX Forex Stream.  Contact Jamie at jsaettele@dailyfx.com

Stocks in Asia/Pacific Mixed, People’s Bank of China Says Yuan ‘Not Qualified’ as Reserve Currency

Asia Session Key Developments

• RBA Minutes Highlight Tight Lending for Businesses
• PBoC’s Says the Yuan is ‘Not Qualified’ as International Reserve Currency

The Asian stock markets ended the day mixed with the Nikkei and ASX tipping higher on the day, while the Hang Seng retreated as market participants remained skeptical of the recent rally. Meanwhile, the Reserve Bank of Australia’s meeting minutes said that the central bank will look to raise the benchmark interest rate in due time, and went onto say that the economy remains more resilient that the central bank had initially expected.  At the same time, policy makers stated credit lending for businesses remained ‘very weak,’ with the board pledging to avoid tightening monetary policy “prematurely” as the outlook for global growth remains uncertain. As a result, the RBA is likely to maintain its current policy going into the following year in order to support a sustainable recovery, and investors are likely to scale back long-term expectations for higher interest rate in Australia as the central bank attempts to balance the risks for growth and inflation. Meanwhile, the People’s Bank of China’s Assistant Governor Guo Qingping said the Yuan is ‘not qualified’ to be an international reserve currency, and said that the markets will ultimately decide the flexibility of its currency.

Nikkei 225                            10,217.62

Stocks in Japan halted the two-day decline, with the Nikkei gaining 15.56 (0.15%) on Tuesday to close at 10,217.62 as 6 of the 11 components pushed higher on the day. Healthcare rose 0.91% to lead the advance, with utilities and technology rising 0.85% and 0.64%, respectively. Shares of Daikin Industries, a Japanese air-conditioner maker, gained 5.02%  after the firm announced it developed and tested an air purifier against the H1N1 virus, with Shionogi & Co, a Japanese drug-maker,  ascending 4.76%  as its experimental medication against AIDS were shown to have early effects on the disease. At the same time, Japan Airlines Corp tumbled for a second consecutive day, shedding 3.41%, amid increased speculation Delta Airlines and American Airlines may take a stake in the airline.

Hang Seng                         20,866.37

The Hang Seng closed lower at 20,866.37, declining 65.83 points (0.31%) on concerns that the market rally remains overdone. The market opened later than normal and traded for only half the session today following the typhoon warnings during the early morning.  Eight of nine components were down, led by technology and industrial, each declining 1.89%and 1.79%, respectively. Shares of HSBC Holding rose 1.4% after the bank increased its first sale of Samurai bonds, while PetroChina slumped 0.3% after a magazine article stated that its joint-venture with China Ocean Shipping had ‘billions of Yuan’ in losses.

S&P/ASX/200 Index           4,540.36

The ASX rose 9.20 points (0.20%) to end at 4,540.30 on Tuesday, led by a 0.78% increase in basic materials. Shares of Harvey Norman Holdings, Australia’s biggest electronics retailer, climbed 6.36% to an 18-month high amid speculation that the central bank with leave the benchmark interest rates unchanged going forward, with Transfield Services Limited rising 4.90% after announcing plans to explore the Mideast for public transportation opportunities. In addition, Dexus Property Group rose 4.6% as the company was upgraded from “neutral” to “buy” by UBS, while Telstra Corp shed 4.3% after Communications Minister Stephen Conroy said the nation’s largest phone company should be slip to promote competition for the industry.

Notable Asian Session Event Risk / Economic Releases

Japanese Stocks Test Their Month-Long Range

Nikkei 225

Short-Term Technical Outlook

The Japanese Nikkei 225 extended its pull back from Friday with its biggest one-day drop since the plunge on August 9th. Short-term momentum has been significant; but follow through is a major burden considering the stability support at 10,170 has established. Not only has this level acted as a pivot (previous resistance in June and July, and support ever since then); but now we have the floor in the rising trend channel beginning with the March reversal as well as the 20-day moving average to fortify this general region. A short-term bounce is the more probable outcome; but a bearish break would garner the greater level of volatility in a plunge towards 9,000.

S&P/ASX 200

Short-Term Technical Outlook

Australian shares continue to rise from their March reversal; but progress has certainly slowed – especially in the steep trend beginning in July. Monday’s sharp retracement (the most volatility we have seen in a few weeks) has turned former resistance founded in the long-term 38.2 percent Fib retracement into new support. There is also a notable trendline that can be established through the lows of the past three months; but it has far less relevance from a technical perspective. Watch for any breaks of 4,520 to develop a short-term drop; but the market will struggle for follow through given such dense congestion on the way down.

Hang Seng

Short-Term Technical Outlook

The long-term 50 percent Fibonacci retracement of the 2007-2008 bear wave has proven itself to be a significant hurdle for the Hang Seng Index. While the past two weeks’ upswing has pushed set new highs for the six-month bull wave; the market has not overwhelmed the aforementioned technical level just yet. Should this hold as a double top, it would mark a barrier. However, to truly find their footing, bears would need to produce a lower swing low (a drop below 19,425) to knock this market off its trend.

Written by: John Kicklighter, Strategist for CFDTrading.com
Questions? Comments? You can email them to John at jkicklighter@cfdtrading.com.

Crude Oil Tests and Holds Key Support

Crude oil has fallen sharply on the day, testing its 50-day SMA and getting closer to long-standing trendline support. Potential price floors include the approximate trendline level at 68, while previous congestion near 67.50 likewise offers support. A break lower eyes extension towards August spike-lows near 65, while a hold of support keeps the commodity in its 12-month long ascending wedge formation. Resistance in said case would be eyed near 75.

Gold prices have thus far held important psychologically significant support at the 1000 mark, but price has been unable to break above yearly highs near 1015. Continued failure at said level would keep the commodity price in its long-term ascending triangle formation—leaving a return to trendline support near 950 as the more likely outcome. Closer price floors can be found at the psychologically significant 1000 mark.

Silver has hit extremely overbought territory on its run to fresh 12-month highs, and continued rejection of 17.000 would make further short-term corrections likely. Said level represents congestion from 2008 and has thus far provided a formidable price ceiling. Given daily RSI well-above overbought levels, corrections are likely. Near-term support is at recent congestion of 16.50, while the psychologically significant 16.00 mark could likewise provide a price floor.

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