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Thursday 28 April 2011

Fed vs US Dollar

The Fed's not a guardian of the US Dollar that inspires much confidence, but even by the Fed's low standards, the mad rush to escape USD that followed the FOMC meeting and statement yesterday was one to remember, and was somewhat reminiscent of watching a crowd trying to escape from a burning theater. There were big spikes in equities, precious metals and in currencies not controlled by the Fed, and there's more coming I'm sure.

EURUSD  has risen about 180 pips from when I was writing yesterday and is well on the way to the next target, which is the upper channel trendline currently at 1.506. I'm expecting the current rise to test the 2009 high at 1.5144, but that can't happen for about three weeks within the current channel:
 AUDUSD moved up strongly too and the next rising channel target there is currently in the 1.115 area:
On ES the upper trendline of the rising wedge I posted yesterday was broken but an alternative rising wedge upper trendline was established at the high, so there are still two alternate resistance trendlines in play. The support trendline is unambiguous and support is at 1347.5 at the time of writing. A break down from that trendline will signal a retracement, though that retracement may well be modest and just test the big IHS neckline in the 1336-8 area. The rising wedge upper trendline is currently at 1357.5 and the rising channel upper trendline is currently at 1371.5:
Precious metals did very well and palladium, which I'm currently long on from 752 yesterday, had a very nice day. I did a writeup on the long setup on palladium yesterday at SharePlanner and you can see that here. Elsewhere though there are some odd aspects to this move up on equities. Bonds are divergently strong and copper is divergently weak. I've been having a careful look at the copper chart this morning, and after breaking down from the broadening ascending wedge from the June 2010 low, copper has now clearly formed a triangle. We need another upside hit to tell us whether this triangle is ascending or symmetrical, but I'm leaning towards a symmetrical triangle. On a break of the lower trendline I'd expect to see support at 408 tested, and if that breaks the obvious target would be the support level at 365. On the longer term charts there is a strong rising support trendline in the 365 area, and that both strengthens 365 as a target and makes it unlikely that copper would go lower. That doesn't fit that well with a strong equities move up here, but this wave up from July is in the final months and you'd expect some divergences here. Here's the setup on the copper daily chart:
I posted a chart showing the potential double-top on oil yesterday morning and that looks even stronger this morning. If CL can't break up through 113.5 then I'd be looking for a move back to gap support in the 95-6 area:
I don't usually post charts on soft commodities but a couple of them, notably cotton and sugar have been falling hard in recent weeks. I'm not getting much from the cotton chart but there's a very nice setup on sugar with decent possibilities both long and short. I've written the setup up on the daily chart:
I'm leaning long on equities and forex today, but 'll switch to short on equities on a break of the ES support trendline.

I've started to do a post or two a day at SharePlanner on individual stock and commodity charts. Ryan Mallory's invited me to do some of these writeups there and it works well for me as I can (shamelessly) select from a picked group of stocks there that have not been selected primarily on the basis of trendline setups and then write up and trade the ones that I like best. I'm planning to do more individual stock plays in future and this is a good way for me to build a large library of these. You can see my posts there in the featured bloggers section or at my blog. I'll be doing my more general market posts here every morning as normal.

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