2 August
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02 Today's EarlyBird Report – 2 August
Market Drivers
Dow Jones Index -0.09% 12,132
US Dollar Index +0.76% 7430
US August Gold (Globex) 1620
WTI Oil (Globex) 95.21
Copper (Globex) 440
US BHP -0.91% 90.72
Base Metals: Negative
AUDUSD 1.0972
EURUSD 1.4250
SPI 4394
ASX200 4497
US News
U.S. stocks fell but finished above session lows, as weak manufacturing data and worries of potential downgrades to the U.S. credit rating overpowered investor relief over the weekend's debt-ceiling deal.
Commodities
US Gold Futures 1620
Until Gold can find support on top of subgroup1 1630 we can’t trade it long, this is the line in the sand. That’s not to say it won’t go up, but we have to be in trader mode not analyst mode.
Oil WTI (Globex Futures) 95.21
Oil and US/UK Indices are working in much the same structures as Oil is following stock. The structure is 5-3-5 (waves) down which can be an abc correction or Impulse (fives waves) unfinished. I mentioned last week that we would be moving into this space and would not be able to give certainty on the structure at this point, this is the same for the Indices. I will explain this in the video. One of the annoying aspects is that it may take two more sessions to work out, simply because, there will be a bounce off the current low and we won’t know until we are past that point. This is a place where we trade much smaller positions sizes or, not at all!
That said the sharp move down in Oil has the personality of a 'bear market wave three' rather than a 'wave C of a correction', hence the bearish bias. The 95 as support or resistance can help, however any longs would need the support at 9650 where the supply starts (sellers) and roughly the 61.8% of the last trend down. The Base Metals are also in a a short term selloff.
Base Metals
US Spot Prices (24HR in l/b)
US Copper: Last: 4.38=
US Nickel: Last: 10.76-
US Zinc: Last: 1.10-
US Aluminium Last: 1.16+
Copper (Globex Futures) 440
The small pattern over the last few sessions at 440 appears to be corrective, so expect a move down to 430.
Forex
US Dollar Futures (c) DXY 74.44
If the price develops support on SG2 of 74 (7472) then we have to look to the upside, the line in the sand for a trend to the upside for the US would be finding support on 75 and this can come around from the US Pollies agreeing on the debt plan, the price will be in wild swings today and tonight, but while the Euro stays above 140 and the Dollar under 75 the Euro would remain positive in the bigger picture with the Dollar in negative trend, if the Dollar finds support on the 75 and the Euro under 140 then the bias changes. The current moves are a reflection of the pollies agreeing. Any trading should use smaller trading ranges and less capital.
EURUSD 1.4250
TradingLevels: The price is under 144 resistance but above 140 support
Trade Strategy: That leaves trading shorter trading ranges until we have a clear trend. Use the sublevels between each minor level. An agreement tomorrow is likely to push the Euro down. The current rally is likely to retest the old trendline around the 14330 but the supply starts at 14272
AUDUSD 1.0972
TradingLevels: The RBA announcement on the Rate today, its normal for the market to run up then get sold off, however the spanner in the works is the US thing and that is still in the works for another day, however a lot of this move up is a move to a safer currency, so while the US raise the debt ceiling we will see the price vibrate across 110
Elliott Wave: A larger abc wave two pullback across mTL1 / 1.10
Trade Strategy: There seems to be a larger abc correction across 110 and that may be completed now. However don’t go long unless 110 is the support. Treat the current move up to 110 as a corrective rally that will fail, this will keep you on your toes and treat the risk more seriously. The short term game is played out in SG2 10972, the current move up to the 10972 is in three waves, if it turns in turn five waves then we have a positive outlook and support back upon 110 is likely. For the down side if the 10972 becomes the resistance you need to look at the down side and the other is the Midpoint 10950 if this becomes the retested resistance look to add to the down side. The Copper market is being sold off this has a 80% relationship with the AUD and we are expecting a move back to 430
2:30pm AUD Cash Rate 4.75% 4.75%
2:30pm AUD RBA Rate Statement
Indices
Dow Jones Futures CFD 12,135
TradingLevels: Apart from the deadline US Aug 2 tomorrow the wave count should see a bounce off these current low, because of the wave structure This low for the Dow is also a daily trendline support.
Ok, getting back to the story of last week, we figured we would see a move down to complete the large Wave E of the Triangle, or the Triangle pattern can also be the markets rolling over the same pattern as the 2007 high, we are where we are and that is a place where we can expect a rally because of the wave structure, the Aug2 decision is likely to fit this picture (however anything can happen so we don’t over trade), fitting this picture is fine, however it is from this move up that we can work out if the larger picture is a Triangle or the markets rolling over, however this move up that we are expecting will take time to unfold and for us to work out whats what.
Elliott Wave: completed Wave E of the Triangle on 12000 support?
Trade Strategy: Nil
S&P500 CFDs 1,283
TradingLevels: Looking for support and a reversal at 1272
Trade Strategy: Wait, we simply need to get past the AUG2 announcement.
FTSE 100 Futures 5782
TradingLevels: The price is working with mTL8 5,800 therefore for trading purposes we should bring in the sublevel either side SG1 and SG2 below. The SG2 below 5780 I 5772 I 5765 are the trigger for shorting, especially the 5772 as retested resistance. and above the SG1 5810 I 5820 I 5830, if the 5830 now becomes support then consider being long.
Elliott Wave: Best to track the SP500 wave count.
Trade Strategy: Being on the right side of 5800 is the basic premise
SPI Futures 4394
TradingLevels: Expecting a move down making new lows the 4350 seems about right
Elliott Wave: The move up yesterday was wave four and the move down now wave five, this wave five has five smaller waves and the move from the 4400 down to 4350 would be the fifth of the five waves
Trade Strategy: while the price is under 4400 look for short trade set ups, but trade short ranges as we are expecting a reversal in the US indices
Summary
There are two aspect that are unknown, first is the wave counts on the Indices and Currencies, and second is the outcome of the US political debt outcome, which is creating sharp moves in the markets. We did understand last week that we would be moving into this unknown space and so would stand aside and/or trade small position sizes with shorter trading ranges.
For the wave counts on the Indices we simply need them to play out, they still need more time. That is, the current moves down were expected and now we need to see a retracement in three waves up (abc correctional rally) or a low put in place and see and Impulse wave up (five waves). We have been waiting for this outcome from last week and it is something that we just have to go through.
That said from this point we can assume a few things, one is that we are seeing the base metals and oil move lower. We will treat the base metals as corrective wave four but the oil appears to be more bearish in the nature of its move. The base metals will affect the AUD and Australian stocks.
Quote for Traders
"In the end, I always believe my eyes rather than anything else." - Warren Buffett
Today's Financial Events
Time Currency Detail Forecast Previous
8:45am NZD Labor Cost Index q/q 0.5% 0.4%
9:50am JPY Monetary Base y/y 18.1% 17.0%
11:30am AUD Building Approvals m/m 3.2% -7.9%
11:30am AUD HPI q/q -0.9% -1.7%
11:30am JPY Average Cash Earnings y/y 0.4% 1.0%
2:30pm AUD Cash Rate 4.75% 4.75%
2:30pm AUD RBA Rate Statement
4:30pm AUD Commodity Prices y/y 28.2%
2nd-5th GBP Halifax HPI m/m 0.1% 1.2%
5:15pm CHF Retail Sales y/y 1.6% -4.1%
5:30pm CHF SVME PMI 52.5 53.4
6:30pm GBP Construction PMI 53.3 53.6
7:00pm EUR PPI m/m 0.1% -0.2%
10:30pm USD Core PCE Price Index m/m 0.2% 0.3%
10:30pm USD Personal Spending m/m 0.2% 0.0%
10:30pm USD Personal Income m/m 0.3% 0.3%
All Day USD Total Vehicle Sales 11.9M 11.5M
NOTES:
1. Dividends & Reporting for your stock should be checked before trading
2. Prices may change as this report is written while markets are closing/trading
3. Always think things out for yourself, we are only here to bounce ideas around.
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03 International Commodities: Oil – bearish?
OIL 1 Hour Chart
Tuesday, 2 August 2011 at 1:50:00AM AEST
Oil prices already broke through the wave (i)/ (a) support so wave (ii)/ (b) correction has complete with three sub-waves at 98.50. Third leg lower is now udnerway, which seems to be a wave three of an impulsive structure, and the reason is a broken support line of a trading channel, which we know is usually a very strong evidence of a wave three situation. A daily close somewhere below 94 will support that outlook.
OIL 4 Hour Chart
Monday, 1 August 2011 at 5:22:00PM AEST – wave C top in place?
Oil fell sharply lower in the past week from 100.60 region, where wave C of 2) may have found a top. In fact, a decline from that high looks quite impulsive, so we really need consider a further weakness on oil prices, but after a wave (ii) pull-back, which seems to be unfolding.
Gains back above 100.60 will put alternate count in play.
OIL Daily Chart
31 July 2011 – pull-back complete near 100.50!?
Even if we are not so sure into the bearish outlook on oil prices, this one however is still very possible. Notice that a recent recovery from 89.55 DID NOT trade above 103.32 critical region, which means that bearish outlook with one-two, one-two scenario remains valid. In fact, prices moved lower quite sharply at the end of the week, which appears to be a new set-up for lower levels on oil, even if just temporary.
But based on the current price action we can say that critical region is now around 100.50; so as long this one holds we are bearish.
OIL Weekly Chart
23 April 2011 – Oil at huge technical resistance; reversal expected
Oil extended its gains in recent months after the commodity broke out of the contracting triangle, which now appears to be a wave X, part of a corrective wave B) rally. Notice, that prices are still trading below the upper channel resistance line with wave Y equal to wave W at 113 region, and as long this is the case, we belie oil will reverse significantly in 2011. After all, only an impulsive fall will confirm that scenario, so we need to remain patient.
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