Cliff Wachtel's  Instablog

NB THIS IS AN ABRIDGED VERSION-THOSE SEEKING FULL DETAILS SHOULD REFER TO THE FULL LENGTH VERSION

Stocks: Prior Day: Asia, Europe, US down, this morning Asia down, Europe up

- FX: Lower equities, ST bias to safety currencies [JPY, USD, CHF in order of safety
appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite
appeal], S&P 500 showing signs of stalling at 1100 for possible pullback

- Main events today:, Friday: JPY: BoJ Press Conference, CAD: BoC Gov. speaks, EUR: ECB Bank Pres. Trichet speaks, CHF: SNB Pres. Roth speaks

- Big Theme: Stocks, Risk Appetite Taking a Break or Reversing?-See Conclusions below for trading opportunities. TRADERS SHOULD HAVE TRADING PLANS READY FOR MOVES IN EITHER DIRECTION, still unclear if markets have fully digested the US jobs data, and news this week is light, suggesting trading with ranges

STOCKS

US: A 3rd day of light but negative news combined with the ever-present weight of an extended rally (which needs steady support of good news to hold or increase gains) lead to a third day of losses in all major markets. Unlike Wednesday, these were more serious declines of typically over 1%. Does this growing string of losses suggest a still resilient market undergoing normal consolidation or is this the beginning of a long anticipated deeper pullback with a bearish double or triple top chart pattern forming with ominous doji stars? Per our analysis of the S&P (see below) we are still long with the trend but very cautious about new long positions. Look at S&P daily, compare 3 most recent candles to those of 9/15-9/21, 8/23-8/28. Similar indecisive candles followed by some "long reds." Those long risk assets should consider-strongly- placing or tightening stop loss orders on open long positions

Asia: Asia stock markets mostly retreated Friday following a glum session on Wall Street as evidence of a weak economic recovery continued to pile up. Chinese bank shares fell on a report that Beijing may increase reserve requirements, N225 has first 4-week losing streak this year

Europe: Financial bookmakers expected leading European benchmark stock indexes to rise on Friday, bouncing back after the previous session's sharp drop, as firmer commodity prices help boost resource-related shares. Full Article

ASIA- DOWN	N225I -1.32%	HS -0.86%			SSEC +0.53%	FTSTI -0.72%		AORD +0.17 %
EUROPE DOWN	FTSE -1.39%	DAX -1.48%			CAC -0.1.77%
US- DOWN	S&P -1.34%		DJIA -0.90%		NASDAQ -1.66%
THIS MORNING	N225I -0.54%			HS -0.83%	SSEC -0.37%	FTSTI -0.72%		AORD -1.28 %
	FTSE +0.61%			DAX +0.58%	CAC +0.59%

Oil: Following global stocks down Thursday and early Friday. Oil prices hovering below $78 a barrel Friday in Asia as traders watch a volatile U.S. dollar and mixed economic data. Benchmark crude for December delivery was up 41 cents to $77.87 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract, which expires later on Friday, gave up $2.12 to settle at $77.46 on Thursday. Most analysts believe weak demand/supply picture will keep crude in mid $70-$82 range.

Gold: Gold eased on Friday as the dollar's rise prompted investors to book profits after prices hit record highs above $1,150 earlier in the week, but bullion's appeal as an alternative asset kept support firm. At current market levels, gold was set for a weekly gain of about 2 percent, for a third straight week of rises. Recent central bank purchases may have changed perceptions, that there is more demand.

CURRENCIES: After falling Wednesday on dovish Fed comments, bias to the USD and other safety currencies as stocks retreat, dollar, yen hold strength amid weak risk appetite. The dollar and yen kept their broad strength on Friday as investors continued to sell higher-yielding currencies and took profits from gains made in the past few months in risky assets.The dollar has been shifting on changing perceptions of the U.S. economy. The latest data came from the Conference Board's index of U.S. leading economic indicators which rose to its highest since September 2007, but fell short of Wall Street's expectations.Fresh data showing a record one in seven U.S. mortgages were in foreclosure or at least one payment was past due in the third quarter also added to investors worry that the housing market's recovery will be tepid at best.

USD: Mixed in early Friday trade, down against EUR, JPY, CAD, CHF, up against GBP, AUD, NZD

EUR: - The euro fell to $1.4912 from $1.4922 late Friday in New York. NB: Kathy Lien points out in a recent article that the EUR has tended to gain on the USD in December over the past 10 years

JPY - Gaining against all majors in early trade on stock market pullbacks the dollar slipped to 88.88 yen from 88.98.

GBP – continuing to gain against the EUR, and drop against the USD.

AUD: Falling for the third straight day as stocks and other risk assets pull back. NB: Kathy Lien points out in a recent article that the AUD has tended to gain on the USD in December over the past 10 years

NZD: Falling with stocks and other risk assets for the third straight day. NB: Kathy Lien points out in a recent article that the NZD has tended to gain on the USD in December over the past 10 years

CAD: Losing ground to most others as oil and stocks, its 2 prime drivers, both still falling

CHF: narrow range trading vs. both USD and EUR

CONCLUSIONS: S&P 500 falls modestly, but the small down move revives questions about the rally and whether a bearish double or triple top is forming. See Trading Opportunities section below. Traders should consider going with the current trend but be ready for pullbacks. See below for specific opportunities with the S&P 500, CRUDE, GOLD, EURUSD, NZDUSD, and AUDUSD.

Trading Opportunities: Near term has favored risk currencies, shorting safe-haven assets. Today's news is quiet, indeed, the week is fairly quiet, suggesting range trading. Given that markets remain very high despite mixed earnings and negative US jobs reports, vulnerable to a pullback: 1. be prepared to play a pullback in risk assets and get ready to sell stock indexes, commodities, and risk currencies, buying USD, JPY. 2. Trade the near term horizontal trading ranges that should hold until major news causes a change in risk appetite. 3. Those continuing to take long positions in risk assets should consider tight sell stops, though gold and crude may be approaching new breakouts. Crude oil breaches key $74 resistance, implying more upside unless stocks pull back on earnings disappointments. Always use sell stop orders.

S&P 500: Fell below our Bollinger Band buy zone Thursday in its biggest daily drop in a month. Resistance holding at $1110, where there is a convergence of both the upper Bollinger Band and a bearish doji candlestick from Nov. 18th, surrounded by equally indecisive spinning top candlesticks. Also of concern, the price level is currently in the middle of its rising channel, and the $1100 support level was also breached. Thus we believe traders should be wary of opening new positions on this index and on all other assets until we get a decisive move above or below 1100. Volume was below average on this decline, suggesting calm profit taking & no signs of panic that the rally is over

S&P 500 Daily Chart

01 Nov 20

GOLD: Despite sinking stocks and other risk assets, gold continues to move more independently of movements in equities and has held steady near its all time highs, based on speculation (or a new fundamental outlook of greater demand?) that other central banks and other large buyers may do the same. The Mauritius purchase of two tons yesterday of the 200 remaining bullion available from the IMF reinforced this belief. After hitting new all-time highs yesterday, pulling back as the $1140 level is providing some resistance over the past 2 days. Long term trend remains bullish as long as the stocks keep rising and the dollar keeps falling, though given the steep slope of gold's rise over the past 3 weeks of almost 10%, some kind of pullback is likely, though the rise has been so hard and fast that no price levels have established as likely support resistance before 1060. Likely near term pullback points to use as shorting targets or for opening new long positions, per Fibonacci retracements, are shown on the chart below.

Gold Daily Chart

02 Nov 20

It is difficult to predict the extent or duration of such a sentiment driven move into new territory. Inflation is not be seen as a threat, but continuing USD downtrend encourages large USD holders to diversify into gold, especially as long as interest rates remain low and thus reduce the opportunity cost of holding gold. Famed NYU Economics Professor Nuriel Roubini, credited for calling the current crisis years ago, believes the run in gold is an unsustainable bubble, while famed commodity trader Jim Rodgers holds gold is going much higher. The score thus far: Rodgers 1, Roubini 0.

Crude Oil: Since mid October its been drifting down into the middle of its 5 week trading range of $76.50-$82 range. Unlike stocks, crude never made much of a recovery from that October pullback. The historical range of the oil/gold price ratio is between 12:1 and 15:1. With gold at $1100 that suggested oil should be between $91 (if 12:1), and $73 (if 15:1,) which would imply oil should be at $73. With gold having moved up within 5 sessions to around $1145 this now suggests oil as high as $95.41 (12:1 ratio) and no less than $76.40 (15:1). Thus while crude remains range bound, if gold can continue breaking to new highs, as many expect it to do, then crude could follow it sharply higher over time, especially if other risk assets can avoid a sharp correction or there is evidence of continued strong demand from China and other developing economies. If stocks continue to drop, oil is likely to follow and provide a shorting opportunity with support levels at around $76(at which both price and Fibonacci support converge), then $73 (at which price, Fibonacci, and the 50 day MA meet, then $70 (at which both Fibonacci and price support exist).

WTI Crude Oil Daily Chart

03 Nov 20

EURUSD: Still sitting in the middle of its 8 week horizontal trading range. Up trend is still firmly in place, though 1.500 resistance holding for now. We expect the 1.500-1.4500 range to hold for the near term barring any changes in fundamentals. Both Bernanke & Trichet tried earlier to talk up the USD, but no one will take this talk seriously until one or more fundamental shifts occur, as we discussed in out last weekly outlook regarding the USD. Most importantly, there will need to be enough improvement in certain fundamentals in the US economy that will allow the US to start exiting QE and raising short term interest rates. The pair could be a good short play if the S&P 500 starts to pull back. In that case, note the Fibonacci retracement and major price support levels as targets for short plays, particularly the 1.4750 and then 1.4568 levels

EURUSD DAILY CHART

04 Nov 19

NZDUSD: New Shorting Opportunity? On Nov. 9th we noted this was a good long play if stocks continued to rise because it was still low enough within its recent trading range to allow for likely gains if the S&P 500 broke over 1100 for a new run higher. The pair did rise with stocks, but has now pulled back with them. As noted in our Weekly Outlook, this pair will be one of the best shorting plays when stocks do drop back to retest support, because the pair has risen in tandem with the AUDUSD but the NZD lacks the strong underlying economic fundamentals of the AUD and is thus a better shorting candidate.

NB: See a daily chart of the AUDUSD, and note the similarity. Those seeking to trade this pair could apply the above mentioned indicators and comments.

NZDUSD Daily Chart

04 Nov 20

GBPUSD: On Nov. 9th, we wrote: "One of the strongest currencies last week against the USD and EUR as it gained on less than expected expansion of QE, but nearing the top of its trading range since mid July and at the top of its Bollinger Band Range and recent high of $1.700. Could be a good short trade if markets pull back."

GBP/USD Daily Chart. 05 Nov 09

Indeed it was-look what happened since then.

GBP/USD Daily chart 06 Nov 20

OTHER HEADLINES

From AP:

Japan warns that deflation can drag on recovery- AP

Taiwan firm uses recycled paper in shoemaking- AP

S. Korean minister nixes new US trade negotiations- AP

To lower interest rates, Citi customers must spend- AP

Dell's profit, stock drop on weak quarterly report- AP

Oil hovers below $78 as traders eye US dollar- AP

House moves to protect doctors from Medicare cuts- AP

Dollar gains as homeowners, job-seekers struggle- AP

Weak jobless claims, future economic activity data- AP

(Seekingalpha.com)

Why the Stock Market Should Crash

The Global Oil Scam: 50 Times Bigger than Madoff

Meredith Whitney: 'I Haven't Been This Bearish in a Year'

Gold Still Cheap Despite Soaring Past $1,150/oz.

Will Gold ETFs' Record Run Last?

What Good is Expensive Gold?

Faber: Gold Currently a Better Buy than at $300/oz.

DISCLOSURE AND DISCLAIMER: OPINIONS EXPRESSED ARE NOT NECESSARILY THOSE OF AVAFX, AUTHOR HAS NO POSITIONS IN ABOVE INSTRUMENTS.

 

More »

If stocks start to make their long anticipated retest of support, all kinds of opportunities arise from this very extended rally. Here's just one.

Check out this daily chart for gold.

Question: What's missing from this picture?

Gold Daily Chart- Chart Courtesy of AVA FX (11 Nov 19)

Answer: Nearby support.

Significance – Big Juicy Shorting Opportunity IF Stocks Pull BackBackground

Gold has been on a tear, up almost 10% in less than 3 weeks.

Reasons include:

· A continuing decline in the US dollar

· Rising optimism about the recovery igniting inflation concerns

However, these factors have been present for most of 2009. What really got the party started?

India.

The Central Bank of India bought 200 tons of bullion from the International Monetary Fund. The IMF thought they were getting a great deal, selling their bullion at the "height" of the market in order to raise cash to help struggling nations.

However, the market disagreed, and saw this central bank purchase as a sign of more such transactions to come, as exporting nations holding depreciating dollars seek to diversify. So far, the markets have been correct. On November 18th, Mauritius bought 2 more tons from the IMF, as gold's wild ride higher has potential buyer afraid of missing the run. Self fulfilling prophecy?

The Harder They Come…Explanation of Relevant Support

Gold generally follows stocks. If stocks continue to pull back, so should gold. Because gold has risen so far so fast, there are no significant points of support until about 1020, where prices took a brief stop at that level around November 11th, and where the first Fibonacci retracement level forms.

Fibonacci retracements are a common support/resistance indicator used in technical analysis, and are typically drawn from a nearby swing point, as shown above and marked by the 100% label from late October. After that, we don't see another convergence of both price and Fibonacci support until about 1070-1060.

The Potential

Gold is currently around $1134, allowing for a very juicy drop of $60+ dollars or over 5% (if stocks even make a modest pullback, as a wave of late-coming "long gold" traders need to sell gold to limit losses. Per recent COT (Commitment of Traders) reports, speculators have remained overwhelmingly long gold, creating potential for a nasty correction (again, IF stocks pull back).

Traders using typically available 100:1 leverage from online commodity brokers can take a major chunk of that potentially 500% profit, assuming they trade intelligently, manage risk and are adequately capitalized to avoid a premature margin call (the 100:1 leverage can cut quickly against those insufficiently capitalized and trained to manage this risk).

Other Juicy Shorts

Any asset that has seen a long steady rally over the past months fueled by lots of hot short term money is also ripe to deliver returns of note. The currency markets (or ETFs that track currencies) are full of these, given the still extreme oversold levels of the US dollar, which is involved in well over 70% of major currency pair trading. Extended pairs, and their ETFs, include:

CURRENCY ETF THAT TRACKS THE BASE CURRENCY (ONE ON THE LEFT)

NZD/USD BNZ

EUR/USD FXE

AUD/USD FXA

Disclosure: Author has no positions in the above instruments

If stocks start to make their long anticipated retest of support, all kinds of opportunities arise from this very extended rally. Here's just one.

Check out this daily chart for gold.

Question: What's missing from this picture?

Gold Daily Chart- Chart Courtesy of AVA FX (11 Nov 19)

Answer: Nearby support.

Significance – Big Juicy Shorting Opportunity IF Stocks Pull BackBackground

Gold has been on a tear, up almost 10% in less than 3 weeks.

Reasons include:

· A continuing decline in the US dollar

· Rising optimism about the recovery igniting inflation concerns

However, these factors have been present for most of 2009. What really got the party started?

India.

The Central Bank of India bought 200 tons of bullion from the International Monetary Fund. The IMF thought they were getting a great deal, selling their bullion at the "height" of the market in order to raise cash to help struggling nations.

However, the market disagreed, and saw this central bank purchase as a sign of more such transactions to come, as exporting nations holding depreciating dollars seek to diversify. So far, the markets have been correct. On November 18th, Mauritius bought 2 more tons from the IMF, as gold's wild ride higher has potential buyer afraid of missing the run. Self fulfilling prophecy?

The Harder They Come…Explanation of Relevant Support

Gold generally follows stocks. If stocks continue to pull back, so should gold. Because gold has risen so far so fast, there are no significant points of support until about 1020, where prices took a brief stop at that level around November 11th, and where the first Fibonacci retracement level forms.

Fibonacci retracements are a common support/resistance indicator used in technical analysis, and are typically drawn from a nearby swing point, as shown above and marked by the 100% label from late October. After that, we don't see another convergence of both price and Fibonacci support until about 1070-1060.

The Potential

Gold is currently around $1134, allowing for a very juicy drop of $60+ dollars or over 5% (if stocks even make a modest pullback, as a wave of late-coming "long gold" traders need to sell gold to limit losses. Per recent COT (Commitment of Traders) reports, speculators have remained overwhelmingly long gold, creating potential for a nasty correction (again, IF stocks pull back).

Traders using typically available 100:1 leverage from online commodity brokers can take a major chunk of that potentially 500% profit, assuming they trade intelligently, manage risk and are adequately capitalized to avoid a premature margin call (the 100:1 leverage can cut quickly against those insufficiently capitalized and trained to manage this risk).

Other Juicy Shorts

Any asset that has seen a long steady rally over the past months fueled by lots of hot short term money is also ripe to deliver returns of note. The currency markets (or ETFs that track currencies) are full of these, given the still extreme oversold levels of the US dollar, which is involved in well over 70% of major currency pair trading. Extended pairs, and their ETFs, include:

CURRENCY ETF THAT TRACKS THE BASE CURRENCY (ONE ON THE LEFT)

NZD/USD BNZ

EUR/USD FXE

AUD/USD FXA

Disclosure: Author has no positions in the above instruments

SUMMARY

- Stocks: Prior Day: Asia, Europe, US down, this morning Asia, Europe down

- FX: Lower equities, ST bias to safety currencies [JPY, USD, CHF in order of safety
appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite
appeal], S&P 500 showing signs of stalling at 1100 for possible pullback

- Main events today: GBP: Retail Sales m/m, USD: Unemployment, Friday: JPY: BoJ Press Conference, CAD: BoC Gov. speaks, EUR: ECB Bank Pres. Trichet speaks, CHF: SNB Pres. Roth speaks

- Big Theme: Stocks, Risk Appetite Taking a Break or Reversing?-See Conclusions below for trading opportunities. TRADERS SHOULD HAVE TRADING PLANS READY FOR MOVES IN EITHER DIRECTION, still unclear if markets have fully digested the US jobs data, and news this week is light, suggesting trading with ranges

STOCKS

US: A 2nd day of light but negative news combined with the ever-present weight of an extended rally (which needs steady support of good news to hold or increase gains) lead to a second day of losses in all major markets. These were mostly modest. Are these small losses suggest a still resilient market undergoing normal consolidation or is this the beginning of a long anticipated deeper pullback with a bearish double or triple top chart pattern forming with ominous doji stars? Per our analysis of the S&P (see below) we are still long with the trend but very cautious about new long positions. Look at S&P daily, compare 3 most recent candles to those of 9/15-9/21, 8/23-8/28.

Despite weakness in the U.S. dollar, stocks spent nearly the entire session mired in weakness. Losses remained contained, however.

Participants showed indifference to renewed selling against the greenback, which took the Dollar Index back toward the 52-week lows that it set earlier this week. It settled with a 0.4% loss.

Though the dollar spent the entire session in the red, the broader market struggled to shake free from its own spell of weakness. Large-cap tech issues were among the primary laggards; that caused the Nasdaq to trail the other headline indices.

Financials helped lead the broader market on a late charge back toward the neutral line, though. The sector had outperformed for the entire session and was able to finish with a 0.9% gain. Its strength was rooted in banking issues. As such, the KBW Banking Index advanced 1.4%.

Zimmer Holdings (ZMH 58.03, +1.28) helped the health care sector put together a solid 0.4% gain. Shares of the medical equipment and supplies company were upgraded by analysts at UBS.

Several consumer staples stocks ripped higher late in the session amid news from Daily Telegraph that Reckitt Benckiser is close to announcing a cross-border transaction that is suspected to involve a consumer staples play. The consumer staples sector settled flat, though.

The latest dose of economic data indicated that consumer prices for October increased 0.3%, which is a bit stronger than the 0.2% increase that had been widely expected. Core prices increased 0.2%, which is also bit stronger than the 0.1% monthly increase that had been widely forecast.

Housing starts for October came in at an annualized rate of 529,000, which is below the rate of 600,000 that had been widely expected. Meanwhile, building permits came in at an annualized rate of 552,000, which is a slower pace than the annualized rate of 580,000 that economists, on average, had forecast.

Advancing Sectors: Financials (+0.9%), Health Care (+0.4%), Telecom (+0.2%)

Declining Sectors: Tech (-0.5%), Utilities (-0.5%), Industrials (-0.4%), Energy (-0.3%), Consumer Discretionary (-0.3%), Materials (-0.1%)

Unchanged: Consumer StaplesDJ30 -11.11 NASDAQ -10.64 NQ100 -0.6% R2K -0.4% SP400 -0.5% SP500 -0.52 NASDAQ Adv/Vol/Dec 1045/2.00 bln/1629 NYSE Adv/Vol/Dec 1381/1.06 bln/1640

Asia: Asian stock markets turned in a mixed performance Thursday as signs of weakness in the U.S. economy aggravated worries about the strength of the global recovery. It was the second day of middling trade in Asia and followed modest losses on Wall Street. Oil and gold prices were little changed, while the dollar fell against the yen and rose against the euro.

Europe: LONDON, Nov 5 (Reuters) - European shares dragged down at the open by US and Asian markets, lackluster data

GLOBAL   MARKETS Yesterday
ASIA- DOWN	N225I -0.-55%	HS -0.32 %			SSEC +0.62	FTSTI -0.72%		AORD +0.17 %
EUROPE DOWN/FLAT	FTSE -0.07%	DAX +0.6%			CAC -0.02%
US- DOWN	S&P -0.05%		DJIA -0.11%		NASDAQ -0.48%
THIS MORNING
ASIA DOWN/MIXED
N225I -1.32%	HS -0.86%			SSEC +0.53%	FTSTI -0.72%	AORD +0.17 %
EUROPE: OPEN DOWN
FTSE -0.20%	DAX -0.12%			CAC -0.34%

Oil: Wednesday: Oil prices oscillated. Bullish inventory data drove oil prices up more than 1% in midmorning trade, but it then rolled over in mid-afternoon trade. Crude managed to rebound and close up 0.5% at $79.52 per barrel. The US Energy information Administration (EIA) reported a drop of -0.9M bbl inventories vs. a forecasted increase of 0.8M.Thursday morning GMT oil remains above $79/bbl amid mixed signals about the strength of the global recovery

Prices were underpinned by U.S. data showing lower crude inventories last week and auto club AAA reporting that more drivers are expected on America's highways over the upcoming Thanksgiving weekend, suggesting that consumers are more confident in the economy.

Gains, however, were offset by poor economic news stemming from an unexpected drop in U.S. home construction and disappointing forecasts from technology companies.

"The resistance to oil sustaining above the $80 level is very strong. There are signs of economic recovery but so far, the signals have been mixed and the sustainability of the recovery is uncertain," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Barclays expects oil prices to average $76 a barrel in the fourth quarter and $85 next year.

Gold: Though the dollar's drop did little for stocks, it helped prop up precious metals prices. Gold futures hit another new all-time high of $1153.40 per ounce, but settled fractionally higher at $1141.20 per ounce. "The fundamental outlook for gold remains favorable. We expect a renewed test of the $1,100 mark for gold prices this week," Credit Suisse said in a research report.

CURRENCIES: After falling Wednesday on dovish Fed comments, in early Thursday GMT clear bias to safety currencies as stocks retreat, USD gains against all majors except for the JPY

USD: Wednesday: The US dollar fell against the euro and Swiss franc on Wednesday amidst indications that inflation remains within the Federal Reserve’s comfort level, housing conditions deteriorated, and amidst dovish comments from a central bank official. Gaining against all except the JPY early Thursday

EUR: - Yesterday failed in an attempt to regain most of its losses, Thursday continuing its downtrend this week against the USD Thursday morning

JPY - Gaining against all majors in early Thursday trade on stock market pullbacks

GBP – The MPC also discussed a reduction in the remuneration rate for bank reserves to spur lending, but agreed that now was not the time to implement the step but a tool in the future. Sterling initially fell on the back of the news but subsequently rebounded as many details were viewed as positive for the economy while not destabilizing for the pound. The Bank of England are clearly keeping all options open but the vast majority of members did not see the need for a drastic easing in conditions despite the Q3 GDP decline. Overall the MPC is still dovish but our economists believe the November expansion marked the end of the QE programme, especially if the economy recovers as we expect. The MPC may choose could do a little more in Feb but the purchases will target private sector assets rather than gilts. M4 data ahead may also influence the MPC as any signs of sustainable broad money growth would diminish the need for further QE.

AUD: Falling for the third straight day as stocks and other risk assets pull back.

NZD: Falling with stocks and other risk assets for the third straight day

CAD: Losing ground to most others as oil and stocks, its 2 prime drivers, both stall out Wednesday and Thursday morning.

The headline annual inflation rate climbed back into positive territory for the first time in five months, rising to 0.1% y/y from -0.9% in September, while core price inflation rose to 1.8% y/y from 1.5% a month earlier. The inflation figures will not likely affect the BoC's decision to leave the official rate as is until the end of Q2 2010. We maintain our 1m USDCAD forecast of 1.05. BoC Governor Carney speaks at 2250 GMT on Nov. 19.

CHF: narrow range trading vs. both USD and EUR

CONCLUSIONS: S&P 500 falls modestly, but the small down move revives questions about the rally and whether a bearish double or triple top is forming. See Trading Opportunities section below. Traders should consider going with the current trend but be ready for pullbacks. See below for specific opportunities with the S&P 500, CRUDE, GOLD, EURUSD, NZDUSD, and AUDUSD.

Trading Opportunities: Near term has favored risk currencies, shorting safe-haven assets. Today's news is quiet, indeed, the week is fairly quiet, suggesting range trading. Given that markets remain very high despite mixed earnings and negative US jobs reports, vulnerable to a pullback: 1. be prepared to play a pullback in risk assets and get ready to sell stock indexes, commodities, and risk currencies, buying USD, JPY. 2. Trade the near term horizontal trading ranges that should hold until major news causes a change in risk appetite. 3. Those continuing to take long positions in risk assets should consider tight sell stops, though gold and crude may be approaching new breakouts. Crude oil breaches key $74 resistance, implying more upside unless stocks pull back on earnings disappointments. Always use sell stop orders.

S&P 500: While in a long established uptrend and still in our buy zone (top 2 Bollinger Bands), there may be resistance at 1110 where there is a convergence of both the upper Bollinger Band and a bearish doji candlestick from Nov. 18th, surrounded by equally indecisive spinning top candlesticks. Also of concern, the price level is currently in the middle of its rising channel, and the current $1100 level is itself a price resistance level. Thus we believe traders should be wary of opening new positions on this index and on all other assets until we get a decisive move above or below 1100.

S&P 500 Daily Chart

08 Nov 19

GOLD: Until yesterday, gold appears to be moving largely independent of movements in equities, moving instead purely on speculation (or a new fundamental outlook of greater demand?) that other central banks and other large buyers may do the same. The Mauritius purchase of two tons yesterday of the 200 remaining bullion available from the IMF reinforced this belief. After hitting new all-time highs yesterday, pulling back as the $1140 level is providing some resistance over the past 2 days. Long term trend remains bullish as long as the stocks keep rising and the dollar keeps falling, though given the steep slope of gold's rise over the past 3 weeks of almost 10%, some kind of pullback is likely, though the rise has been so hard and fast that no price levels have established as likely support resistance before 1060. Likely near term pullback points to use as shorting targets or for opening new long positions, per Fibonacci retracements, are shown on the chart below.

Gold Daily Chart

01 Nov 19

It is difficult to predict the extent or duration of such a sentiment driven move into new territory. Inflation is not be seen as a threat, but continuing USD downtrend encourages large USD holders to diversify into gold, especially as long as interest rates remain low and thus reduce the opportunity cost of holding gold. Famed NYU Economics Professor Nuriel Roubini, credited for calling the current crisis years ago, believes the run in gold is an unsustainable bubble, while famed commodity trader Jim Rodgers holds gold is going much higher. So far, Rodgers 1, Roubini 0.

Crude Oil: Following gold, stocks higher towards the upper end of its 5 week trading range of $76.50-$82 range. The historical range of the oil/gold price ratio is between 12:1 and 15:1. With gold at $1100 that suggested oil should be between $91 (if 12:1), and $73 (if 15:1,) which would imply oil should be at $73. With gold having moved up within 5 sessions to around $1145 this now suggests oil as high as $95.41 (12:1 ratio) and no less than $76.40 (15:1). Thus while crude remains range bound, if gold can continue breaking to new highs, as many expect it to do, then crude could follow it sharply higher over time, especially if other risk assets can avoid a sharp correction (which they are doing nicely, as shown by the S&P 500 breaching resistance at $1100) or there is evidence of continued strong demand from China and other developing economies.

WTI Crude Oil Daily Chart

02 Nov 19

EURUSD: Still sitting in the middle of its 8 week horizontal trading range. Up trend is still firmly in place, though 1.500 resistance holding for now. We expect the 1.500-1.4500 range to hold for the near term barring any changes in fundamentals. Both Bernanke & Trichet try to talk up the USD, but no one will take this talk seriously until one or more fundamental shifts occur, as we discussed in out last weekly outlook regarding the USD. Most importantly, there will need to be enough improvement in certain fundamentals in the US economy that will allow the US to start exiting QE and raising short term interest rates. The pair could be a good short play if the S&P 500 starts to pull back. In that case, note the Fibonacci retracement and major price support levels as targets for short plays, particularly the 1.4750 and then 1.4568 levels

EURUSD DAILY CHART

04 Nov 19

NZDUSD: New Shorting Opportunity? On Nov. 9th we noted this was a good long play if stocks continued to rise because it was still low enough within its recent trading range to allow for likely gains if the S&P 500 broke over 1100 for a new run higher. The pair did rise with stocks, but has now pulled back with them. As noted in our Weekly Outlook, this pair will be one of the best shorting plays when stocks do drop back to retest support, because the pair has risen in tandem with the AUDUSD but the NZD lacks the strong underlying economic fundamentals of the AUD and is thus a better shorting candidate.

NB: See a daily chart of the AUDUSD, and note the similarity. Those seeking to trade this pair could apply the above mentioned indicators and comments.

NZDUSD Daily Chart

07 Nov 19

GBPUSD: On Nov. 9th, we wrote: "One of the strongest currencies last week against the USD and EUR as it gained on less than expected expansion of QE, but nearing the top of its trading range since mid July and at the top of its Bollinger Band Range and recent high of $1.700. Could be a good short trade if markets pull back." They haven't, but the pair has range traded since and is currently up a bit from its 1.6772 level to around 1.6820

GBP/USD Daily Chart.

05 Nov 09

OTHER HEADLINES

One last hurrah-Reuters

Risky assets such as equities and emerging markets may have scope for another rally before the year is out as policymakers renew pledges to keep economic boosters in place. Full Article

(Seekingalpha.com)

Why the Stock Market Should Crash

The Global Oil Scam: 50 Times Bigger than Madoff

Meredith Whitney: 'I Haven't Been This Bearish in a Year'

Gold Still Cheap Despite Soaring Past $1,150/oz.

Will Gold ETFs' Record Run Last?

What Good is Expensive Gold?

Faber: Gold Currently a Better Buy than at $300/oz.

DISCLOSURE AND DISCLAIMER: OPINIONS EXPRESSED ARE NOT NECESSARILY THOSE OF AVAFX, AUTHOR HAS NO POSITIONS IN ABOVE INSTRUMENTS.

NB: THIS IS A QUICK-SKIM VERSION: THOSE SEEKING FULL DETAILS SHOULD REFER TO THE FULL LENGTH VERSION

Stocks: Prior Day: Asia, Europe, US down, this morning Asia, Europe down

- FX: Lower equities, ST bias to safety currencies [JPY, USD, CHF in order of safety
appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite
appeal], S&P 500 showing signs of stalling at 1100 for possible pullback

- Main events today: GBP: Retail Sales m/m, USD: Unemployment, Friday: JPY: BoJ Press Conference, CAD: BoC Gov. speaks, EUR: ECB Bank Pres. Trichet speaks, CHF: SNB Pres. Roth speaks

- Big Theme: Stocks, Risk Appetite Taking a Break or Reversing?-See Conclusions below for trading opportunities. TRADERS SHOULD HAVE TRADING PLANS READY FOR MOVES IN EITHER DIRECTION, still unclear if markets have fully digested the US jobs data, and news this week is light, suggesting trading with ranges

STOCKS

US: A 2nd day of light but negative news combined with the ever-present weight of an extended rally (which needs steady support of good news to hold or increase gains) lead to a second day of losses in all major markets. These were mostly modest. Are these small losses suggest a still resilient market undergoing normal consolidation or is this the beginning of a long anticipated deeper pullback with a bearish double or triple top chart pattern forming with ominous doji stars? Per our analysis of the S&P (see below) we are still long with the trend but very cautious about new long positions. Look at S&P daily, compare 3 most recent candles to those of 9/15-9/21, 8/23-8/28.

Asia: Asian stock markets turned in a mixed performance Thursday as signs of weakness in the U.S. economy aggravated worries about the strength of the global recovery. It was the second day of middling trade in Asia and followed modest losses on Wall Street. Oil and gold prices were little changed, while the dollar fell against the yen and rose against the euro.

Europe: LONDON, Nov 5 (Reuters) - European shares dragged down at the open by US and Asian markets, lackluster data

ASIA- DOWN	N225I -0.-55%	HS -0.32 %			SSEC +0.62	FTSTI -0.72%		AORD +0.17 %
EUROPE DOWN/FLAT	FTSE -0.07%	DAX +0.6%			CAC -0.02%
US- DOWN	S&P -0.05%		DJIA -0.11%		NASDAQ -0.48%
THIS MORNING	N225I -1.32%			HS -0.86%	SSEC +0.53%	FTSTI -0.72%		AORD +0.17 %
	FTSE -0.20%			DAX -0.12%	CAC -0.34%

Oil: Wed:prices oscillated. Bullish inventory data drove oil prices up more than 1% in midmorning trade, but it then rolled over in mid-afternoon trade. Crude managed to rebound and close up 0.5% at $79.52 per barrel. The US reported a drop of -0.9M bbl inventories vs. a forecasted increase of 0.8M.Thursday morning GMT oil remains above $79 "The resistance to oil sustaining above the $80 level is very strong. There are signs of economic recovery but so far, the signals have been mixed and the sustainability of the recovery is uncertain," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.Barclays expects oil prices to average $76 a barrel in the fourth quarter and $85 next year.

Gold: Though the dollar's drop did little for stocks, it helped prop up precious metals prices. Gold futures hit another new all-time high of $1153.40 per ounce, but settled fractionally higher at $1141.20 per ounce. "The fundamental outlook for gold remains favorable. We expect a renewed test of the $1,100 mark for gold prices this week," Credit Suisse said in a research report.

CURRENCIES: After falling Wednesday on dovish Fed comments, in early Thursday GMT clear bias to safety currencies as stocks retreat, USD gains against all majors except for the JPY

USD: Wednesday: The US dollar fell against the euro and Swiss franc on Wednesday amidst indications that inflation remains within the Federal Reserve’s comfort level, housing conditions deteriorated, and amidst dovish comments from a central bank official. Gaining against all except the JPY early Thursday

EUR: - Yesterday failed in an attempt to regain most of its losses, Thursday continuing its downtrend this week against the USD Thursday morning

JPY - Gaining against all majors in early Thursday trade on stock market pullbacks

GBP –Overall the MPC is still dovish but our economists believe the November expansion marked the end of the QE programme, especially if the economy recovers as we expect. The MPC may choose could do a little more in Feb but the purchases will target private sector assets rather than gilts. M4 data ahead may also influence the MPC as any signs of sustainable broad money growth would diminish the need for further QE.

AUD: Falling for the third straight day as stocks and other risk assets pull back.

NZD: Falling with stocks and other risk assets for the third straight day

CAD: Losing ground to most others as oil and stocks, its 2 prime drivers, both stall out Wednesday and Thursday morning.

CHF: narrow range trading vs. both USD and EUR

CONCLUSIONS: S&P 500 falls modestly, but the small down move revives questions about the rally and whether a bearish double or triple top is forming. See Trading Opportunities section below. Traders should consider going with the current trend but be ready for pullbacks. See below for specific opportunities with the S&P 500, CRUDE, GOLD, EURUSD, NZDUSD, and AUDUSD.

Trading Opportunities: Near term has favored risk currencies, shorting safe-haven assets. Today's news is quiet, indeed, the week is fairly quiet, suggesting range trading. Given that markets remain very high despite mixed earnings and negative US jobs reports, vulnerable to a pullback: 1. be prepared to play a pullback in risk assets and get ready to sell stock indexes, commodities, and risk currencies, buying USD, JPY. 2. Trade the near term horizontal trading ranges that should hold until major news causes a change in risk appetite. 3. Those continuing to take long positions in risk assets should consider tight sell stops, though gold and crude may be approaching new breakouts. Crude oil breaches key $74 resistance, implying more upside unless stocks pull back on earnings disappointments. Always use sell stop orders. SEE FULL DAILY ANALYSIS FOR DETAILS & CHARTS OF TRADE OPPORTUNITIES

S&P 500: While in a long established uptrend and still in our buy zone (top 2 Bollinger Bands), there may be resistance at 1110 where there is a convergence of both the upper Bollinger Band and a bearish doji candlestick from Nov. 18th, surrounded by equally indecisive spinning top candlesticks. Also of concern, the price level is currently in the middle of its rising channel, and the current $1100 level is itself a price resistance level. Thus we believe traders should be wary of opening new positions on this index and on all other assets until we get a decisive move above or below 1100.

S&P 500 Daily Chart

08 Nov 19

GOLD: Until yesterday, gold appears to be moving largely independent of movements in equities, moving instead purely on speculation (or a new fundamental outlook of greater demand?) that other central banks and other large buyers may do the same. The Mauritius purchase of two tons yesterday of the 200 remaining bullion available from the IMF reinforced this belief. After hitting new all-time highs yesterday, pulling back as the $1140 level is providing some resistance over the past 2 days. Long term trend remains bullish as long as the stocks keep rising and the dollar keeps falling, though given the steep slope of gold's rise over the past 3 weeks of almost 10%, some kind of pullback is likely, though the rise has been so hard and fast that no price levels have established as likely support resistance before 1060. Likely near term pullback points to use as shorting targets or for opening new long positions, per Fibonacci retracements, are shown on the chart below.

Gold Daily Chart

01 Nov 19

It is difficult to predict the extent or duration of such a sentiment driven move into new territory. Inflation is not be seen as a threat, but continuing USD downtrend encourages large USD holders to diversify into gold, especially as long as interest rates remain low and thus reduce the opportunity cost of holding gold. Famed NYU Economics Professor Nuriel Roubini, credited for calling the current crisis years ago, believes the run in gold is an unsustainable bubble, while famed commodity trader Jim Rodgers holds gold is going much higher. So far, Rodgers 1, Roubini 0.

Crude Oil: Following gold, stocks higher towards the upper end of its 5 week trading range of $76.50-$82 range. The historical range of the oil/gold price ratio is between 12:1 and 15:1. With gold at $1100 that suggested oil should be between $91 (if 12:1), and $73 (if 15:1,) which would imply oil should be at $73. With gold having moved up within 5 sessions to around $1145 this now suggests oil as high as $95.41 (12:1 ratio) and no less than $76.40 (15:1). Thus while crude remains range bound, if gold can continue breaking to new highs, as many expect it to do, then crude could follow it sharply higher over time, especially if other risk assets can avoid a sharp correction (which they are doing nicely, as shown by the S&P 500 breaching resistance at $1100) or there is evidence of continued strong demand from China and other developing economies.

WTI Crude Oil Daily Chart

02 Nov 19

EURUSD: Still sitting in the middle of its 8 week horizontal trading range. Up trend is still firmly in place, though 1.500 resistance holding for now. We expect the 1.500-1.4500 range to hold for the near term barring any changes in fundamentals. Both Bernanke & Trichet try to talk up the USD, but no one will take this talk seriously until one or more fundamental shifts occur, as we discussed in out last weekly outlook regarding the USD. Most importantly, there will need to be enough improvement in certain fundamentals in the US economy that will allow the US to start exiting QE and raising short term interest rates. The pair could be a good short play if the S&P 500 starts to pull back. In that case, note the Fibonacci retracement and major price support levels as targets for short plays, particularly the 1.4750 and then 1.4568 levels

EURUSD DAILY CHART

04 Nov 19

NZDUSD: New Shorting Opportunity? On Nov. 9th we noted this was a good long play if stocks continued to rise because it was still low enough within its recent trading range to allow for likely gains if the S&P 500 broke over 1100 for a new run higher. The pair did rise with stocks, but has now pulled back with them. As noted in our Weekly Outlook, this pair will be one of the best shorting plays when stocks do drop back to retest support, because the pair has risen in tandem with the AUDUSD but the NZD lacks the strong underlying economic fundamentals of the AUD and is thus a better shorting candidate.

NB: See a daily chart of the AUDUSD, and note the similarity. Those seeking to trade this pair could apply the above mentioned indicators and comments.

NZDUSD Daily Chart

07 Nov 19

GBPUSD: On Nov. 9th, we wrote: "One of the strongest currencies last week against the USD and EUR as it gained on less than expected expansion of QE, but nearing the top of its trading range since mid July and at the top of its Bollinger Band Range and recent high of $1.700. Could be a good short trade if markets pull back." They haven't, but the pair has range traded since and is currently up a bit from its 1.6772 level to around 1.6820

GBP/USD Daily Chart.

05 Nov 09

OTHER HEADLINES

One last hurrah-Reuters

Risky assets such as equities and emerging markets may have scope for another rally before the year is out as policymakers renew pledges to keep economic boosters in place. Full Article

(Seekingalpha.com)

Why the Stock Market Should Crash

The Global Oil Scam: 50 Times Bigger than Madoff

Meredith Whitney: 'I Haven't Been This Bearish in a Year'

Gold Still Cheap Despite Soaring Past $1,150/oz.

Will Gold ETFs' Record Run Last?

What Good is Expensive Gold?

Faber: Gold Currently a Better Buy than at $300/oz.

DISCLOSURE AND DISCLAIMER: OPINIONS EXPRESSED ARE NOT NECESSARILY THOSE OF AVAFX, AUTHOR HAS NO POSITIONS IN ABOVE INSTRUMENTS.