Technical Trader Closing Brief

October Decline Continues

We had another down-session today following up on yesterday’s moderate losses, although a bit heavier today. The indices had moderately negative futures, and they gapped down at the opening, made lower lows, took out yesterday’s lows, but managed to snap back sharply to nominally take out yesterday’s session highs on the NDX but failed to do so on the S&P 500. Then they rolled over and sold off steadily and fairly sharply at mid-day to late in the afternoon when they managed to snap back and come back off the lows.

But net on the day the Dow was down 79 1/4, the S&P 500 a little bit more than 5, and the Nasdaq 100 nearly 13. The Philadelphia Semiconductor Index (SOXX) was the culprit today, dropping nearly 11 points, or more than 2 percent.

Technicals were negative on advance-declines by 5 to 3 on New York and 3 to 2 on Nasdaq. Up/down volume was about 3 to 2 negative on New York on lighter volume of just over 1.2 billion. Nasdaq volume was nearly 1.9 billion, with about a 12 to 7 negative ratio.

TheTechTrader.com board was narrowly mixed, except for a few point-plus gainers and losers. On the plus side, China Natural Resources (CHNR) exploded again and was up more than 20 points at one point today and traded near 49, before backing off 10 points and closing up 11.40 on the day on 8 3/4 million.

That was a Chart of the Day of ours just two days ago at 13.90.

e-Future Information Technology (EFUT) , also in the Chinese sector, jumped 12,60 on 11 million shares and closed at 31.60.

Recently added portfolio position FuelTek (FTEK) had a stellar day on rumors of a big contract for their product in China. The stock jumped 2.46 on 1 3/4 millin shares, heavy volume for the stock. That is today’s Chart of the Day at http://www.thetechtrader.com/info/charts/

Portfolio position Auxilium Pharmaceuticals (AUXL) had an excellent, up 1.04 to a new multi-year high.

Eschelon Corp. (ELON), another portfolio position, was up 44 cents. And UEPS, also in our portfolio, was up 69 cents. Recently added ZVUE gained 26, or almost 10%, to close at 3.

On the downside, JA Solar (JASO) gave back 3.66, portfolio position Cree Inc. (CREE) got hammered on a downgrade, down 3.75, and China Medical Technologies (CMED) fell 3.28.

Aluminum Corp. of China (ACH) fell 4.34, Ascent Solar (ASTI) down 1.42, Excel Maritime (EXM) down 3.51, along with Home Inns & Hotels (HMIN) 1.34. VMware (VMW) also lost 4.17.

Stepping back and reviewing the hourly chart patterns, the Nasdaq 100 moved below its 40 DMA on the hourly charts for the first time in several weeks, although the S&P 500 did not confirm and is still holding above support around the 1536-37 zone. We’ll see how it goes tomorrow, but we could be beginning the expected early October pullback that could lead to some deeper levels.

Dollar Steady To Firm In Asian Trading

European Morning Update

Asia has seen a fairly quiet session with just a couple of releases from Australia. Building Approvals provided a shocker with a -1.7% MoM decline in August, a way stronger decline than consensus forecasts of -0.5%. Private sector house approvals actually saw an increase of +0.9% MoM. Once again the construction sector is seeing a lack of interest by Australians in upgrading their homes and preferring to use available income for more recreational purposes while the labor market remains tight and jobs plentiful.

The Performance of Service Index in Australia saw a rise of 4.8 points in September to bring the headline index to 56.4. A strong services sector provided a strong boost. Notably, input prices dipped by 10 points to 63.5 and employment rose by 5.7 points to 56.9. To complete the overall positive report the new orders index rose a healthy 8.7 points to 58.8. Good numbers indeed and while the RBA has resisted hiking interest rates this month the pressure still seems very much on the upside and it can only be a matter of time before the next hike.

The following economic releases are due today:

U.S. August Factory Orders - 2.4%
U.S. September Initial Jobless Claims (29th) 310K
U.S. September Continuing Claims (22nd) 2550K

The ECB is due to announce its rate decision
The BOE is due to announce its rate decision

The Dollar had another strong day and the depth of this is beginning to concern. The base at 1.4082 Euro I can accept within a structure that could still see a rally back up to 1.4353-1.4424 but the uncertainty I have now is from the Swissie which clipped just above 1.1800. It hasn’t been by much but the implications of such a deep recovery do seem to suggest additional gains. As for the Pound, well that too has breached levels that appear to favor the downside too…

Another factor is the momentum picture which still seems quite negative for the Euro and the Pound while still bullish in the Swissie.

So it seems I have to review a little. There is no change to the 2-3 month view of Dollar losses but it seems most likely that the shorter term could seem some range trading that could last for 2-3 weeks. Now, what needs to be kept in mind is the time line of a final Dollar low around the turn of the year. Clearly we need to plan for a sufficient consolidation but then if this ends by the end of October it will leave 2 months for the final decline. This may work but I wouldn’t really want the current correction to end before the end of October.

Just in case the overnight levels do actually hold to generate Dollar losses, I’d be slightly more comfortable but this now needs to be proven.

Dollar-Yen has made the gains expected and does look quite constructive for a possible direct rally to 120.25 and above. The big barrier sitting between this rally and a further pullback and consolidation is the 117.12-20 resistance. While this holds there is still some risk of a pullback. However, right now, with the Dollar looking to make gains against the Europeans the upside against the Yen still looks more probable.

Major Market Mover: Rates on ICE…

Good bank’s day to you dear reader, on the line today is key target rates decisions to be declared by both economic champions as the European continent walks the red carpet; and as we have be costumed the United Kingdom takes the stand to then be followed by the 13 coalition with both expected to gracefully hold their peace and rest rates steady on ice…

Excusing the BoE today yet the start to me has to be with the ‘SUPER STAR’ nation the record high setting euro. What is the ECB to say today after their cherished baby hit a new record high this week’s start after confidently breaching well above the Bank’s fearful 1.40 dollar level. Are the tables at a turn now that is the question addressed to the eminent transparent ECB lead by Mr. Trichet who is now under the spot light and the independence the Central Bank acquires and that he’s known to stand firm for is at jeopardy, is credit woes and a skyrocketing euro about to tarnish bright horizons to the Euro Zone and scatter analysts long lasting dream of 1.50 dollar euro???!!!

The euro’s leap was supported by robust growth in the euro area that after a long time rising exceeded that recorded in the home of the Federal currency, the American counterpart. Nevertheless this year’s quarter two and despite subprime and credit shortage woes the US’s 3.8% growth did exceed that substantially modest 2.5% in the euro nation. As growth starts to draw signs of slowing in the euro nation the euro like wise might be giving up the upside dream if current US conditions come to halt and the dollar will stop the slide as growth picks up supported by the implemented cut.

Signs of slowing are evident in the Euro region as the currency’s upside rally is all strong and in no time crippling exports the essence of European growth and the backbone to their heart, Germany as we say their factory orders drop massively in July and that is still long before the euro hit the 1.40. Manufacturing and services are still expanding as the PMI showed stabilizing above the marginal 50, nevertheless recording the slowest pace in 18 months for manufacturing and for services the lowest reading since August 2005 was recorded in September, significantly down from the 58.0 recorded in August.

On the other hand a streak of light is still seen in sales in the Euro Zone below estimate they are, true yet still showing that steady record low unemployment and transparent vigilant policy by the ECB is still maintaining the spending margin in the economy, as confidence is sliding down after the turmoil yet remains on the upper end at this stage and are still promising. That in role and after the turmoil season postponed a signaled hike for two months after today inflationary pressures are now a predicament to a vigilant hawkish ECB as they hit 2.1% above target. The ECB is at a stall as growth slows and credit losses though built on Federal ground, but the European counterpart is taking the hit after a number of German banks acquired an ECB helping hand and recently the Swiss UBS was added to the list, while liquidity was and is being bumped by the ECB.

The question facing ECB’s Trichet today will be is 4.00% the end of the cyclic tightening and is economic expansion now at the edge, will the euro now be only supported by a weak dollar, and is area going to suffer a slow down plus record FX rates as the US tampers recessionary stages???!!! The Questions are to be expressed and Trichet is to be transparent as always, as much as inflation will remain of the essence yet chances are slim that he will call vigilance in the conference, economic conditions and world turbulence remains the key as liquidity needs to remain ample in the euro area as exports absorb a soaring euro as they supposedly should survive yet will take the surprise hit, after all luxury remains the name prior to their exports so expensive seems merely an added bonus.

Flying back in time from the ECB’s predicament to UK’s stump, seems that a couple of months back our calendars both European currencies were boosted by rate differentials as the least seen was current rates, and now the picture isn’t as bright as the 6% is so far of the table for the royal currency and yet some are expressing a cut even to satisfy falling confidence and a soon to be hit housing market as finally inflation after a 3.1% decade high is anchored at target.

The turmoil has breached the English arrogance finally and King expressing reluctance to the situation and not acting in time has taken its toll on their financial institution by now after sterling took a rather violent fall after Northern Rock’s fallout and need of rescue by the Central Bank the recorded incident that shock BoE’s King image massively.

Two months of low anchored inflation aren’t enough to start questioning a soon to be seen rate cut and the bank’s perspective concerning it being still advanced to tell the credit squeeze and American slump on economic data and the UK economy is true. Any step to be adopted by the BoE in terms of easing the tightening bias will not be earlier to March February of 08, and still I argue that facts will arise till then.

Focus lately and specifically since August’s turbulence all the attention and focus has been of the equities crash, unwinding of risky financed assets, and finally the US essence of anguish, the housing sector; all now is being translated by the US economy’s headings to recession and the Feds 50 basis points cut which is now expected to be followed by more. Merely the American stand stole the European thunder and I see underestimation to the effect of recession of the other side of the Atlantic combined with soaring FX rates at the moment.

All will be addressed and analyzed today after we hear the 5.75% from the Bank of England’s MPC and then the 4.00% from Geneva by the ECB’s policy committee. The future upside prospects I still believe is tilted by priority to the Euro Zone at tops, UK to follow, and finally the US. The barrier now is truly financial brains and the larger portion here is at rest in policy members hands so gather your men presidents and may the best win as the nations economy is now yours to salvage. Enjoy the ride and chose your side to vote for, or rather take advantage of all sides and play it right… Leaving you now and after the decision we will meet again…

crosses technical analysis 04-10-2007

GBP/JPY

The Pound inclined against the Yen yesterday, yet could not hold above the 237.08 resistance represented by the 200 MA, even if the general trend is up, the pair has to breach this resistance in order to continue the upside move, and the point at 236.10 seems to offer good demand for the pair.

EUR/JPY

Yesterday the Euro also inclined against the Yen, yet declined back in a correctional move, the pair is still gathering some momentum to take it to the upside and reach the first target at the 166.10 level, and the point at 163.76 seems to offer good demand for the pair.

EUR/GBP

The Euro started gaining against the Pound, and the pair moved slightly to the upside, the general trend for the pair is still to the upside, and the long term target remains around the 0.7064 level, and the point at 0.6924 seems to offer good demand for the pair.

Major Technical analysis 04-10-2007

euro

The European currency dropped down yesterday extending the downside wave since it couldn’t breach the key resistance at 1.4200. The Euro succeeded to break the minor upside trend line to hit the low at 1.4070s. Hence, we expect it to progress today towards the downside until the levels of 1.4000.
The trading range for today might be between the key resistance level at 1.4120 and the key support level at 1.3970.
The general trend is up as far as 1. 3470 remains intact targets now at 1.4500 and 1.4780.
We expect selling Euro below1.4120 with a target at 1.4000, stop loss above 1.4160

gbp

The British pound yesterday managed to move towards the downside since it failed to keep the bullish potential. Meanwhile, the technical studies have adjusted to reflect the downside movements for today as well.
The trading range for today might be between the key resistance level at 2.0420 and the key support level at 2.0220.
The general trend is up as far as 1.9700 remains intact targets now at 2.0635 and 2.0740.
We expect selling sterling below 2.0340 with a target at 2.0260 stop loss above 2.0385

jpy

The dollar against the Japanese yen just started the real move yesterday passing the upside band in an irregular pattern with obvious high levels of volume. Nevertheless, the technical parameters still show some weakness in the upside direction.
The trading range for today will be between the key resistance at 117.70 and the key support at 115.40.
The general trend is down as far as 124.60 remains intact, targets at 112.40 and 111.20.

Major Market Mover: Quiet Day…

Today marks another rather fundamental free market as economic calendars lack key releases from the US as well as to just EU nation data from inflation to employment; despite the unemployment being at a record low still yet expectations for steady rates remain the target by the ECB this week.

Market participants on the other hand, remain throughout this week vigilant and edgy for what the end of this week holds for us from key releases on both Atlantic shores, America and Europe…

The signs to Friday’s big report are on a role this week after yesterday’s first slight incline in manufacturing ISM employment sub-indices, yet the confidence in the cut carried by the feds is still floating in the markets and fundamentals so far haven’t been rainbow bright at all yet showing a slowing in the new home sales tumbled to the lowest in almost seven years isn’t much convincing data.

Today and mainly those couple of days till week end will be merely the god given right and time for investors to lock in their ballots and absorbs the facts at hand to continue the undergoing slumping dollar trend. So stay tuned for we never know it might always get messy…

Asia Market Update

Investors bet that the worst of the U.S. credit crisis is behind us

- Forex: The USD stayed in tight ranges against European currencies during the Asian morning. Traders didn’t sell the USD after the weak headline ISM reading, with the stronger employment component hinting at some stability in the jobs market ahead of Friday’s crucial Nonfarm Payrolls data. Traders said that Japanese exporters are stepping back from selling the USD to hedge their overseas earnings as the second half of the business fiscal year has just started. The market has started to think that the worst of the U.S. credit crisis is behind us, boosting support for commodity-related currencies during the U.S. session. Asian traders booked some profits on the AUD and the CAD. Traders were nervous about pushing the NZD higher, with RBNZ governor Bollard saying that monetary policy alone cannot easily curb the NZD. The Kiwi managed to hold on to gains above 0.76, a level where the NZ Reserve Bank first intervened a few weeks ago. Between 17:00 ET and 23:05 ET: GBP/USD -0.07%, AUD/CHF -0.60%, NZD/USD -0.42%, USD/CAD +0.11%, NZD/AUD +0.17%, USD/JPY -0.29%, EUR/JPY -0.33%, AUD/USD hovered around 0.89 for most of the session.

- Aussie manufacturing slows down in September: (AU SEPT AIG PERFORMANCE OF MANUFACTURING: 50.7 V 52.4 prior) AiG said that new orders remained soft, adding that exports remained stable. “Companies cited the higher Australian dollar exchange rate, skills shortages, weather and Chinese demand and competition as factors influencing economic conditions,” AIG chief executive Heather Ridout said.

- Japan’s monetary base rises for the second straight month: (JP SEPT MONETARY BASE YOY: 0.7% V 0.1% expected, 0.7% prior) Analysts pointed out that the sustained rise in Japan’s monetary base has undermined the impact of the continued draining of extra liquidity from the short-term money market.

- South Korea’s current account surplus narrows during August: (KS Aug Current Account: $610M v $1635.5M prior; Goods Balance: $2.94B v $3.04B prior) Analysts were surprised by the reading, as a surplus in August is uncommon because of outbound tourism during the vacation season. In related news, the KRW gained for the seventh straight session as USD/KRW moved to a 10yr low.

- Equities: Asian financials and resource-related stocks led a broad-based rally in Asia, with Japan’s Nikkei +1.02% at 22:43 ET (trading above 17,000). Sydney’s ASX scaled to new record highs once again, trading up by +1.32% at the end of the morning session. The Kospi is higher by more than 1.0% on gains in shares of exporters and easing nuclear tensions with North Korea. The Hang Seng is higher by more than 2.0%, trading above 27,900 as the index continues to make new record highs. In related news, Goldman Sachs upgraded the H-shares of Chinese banks to overweight.

- Commodities: Spot gold saw some mild profit-taking, losing -0.49% between 18:00 ET and 23:01 ET (staying above $750/oz). Traders talked about gold’s technical momentum, pointing out that that there’s a little follow-through on the gold charts. Crude oil prices continued to move lower (-0.05% at $80.20/bbl) after the market failed to make new highs on Friday, and it seems there’s been heavy selling by large speculators since