Happy Anniversary to the S&P 500
The S&P 500 topped exactly 10 years ago and then declined 57% in one of the most brutal bear markets in history. The week after the S&P made the 1576 high it fell 4%.
Sometimes dreams to come true.
>>> The Bullish Case for the USD Index and entering a short EUR/USD trade idea
· As long as we don’t trade at or below 89.62 (top of wave 1) the wave count suggested on the chart argues for 1 more bull leg in the USD towards 110.
· This view is based on Elliot wave count and offers a very attractive risk/reward.
· Given the positioning in the market which suggests that investors are short USD versus a bunch of currencies and based on sentiment a low for the USD might already be in place.
· Technical wise:
o Wave 2 corrected a bit more than 76.4% of wave 1
o Wave 3 extended 161.8% of wave 1
o So far wave 4 corrected exactly 38.2% of wave 3 and did not exceed the top of wave 1 which stands at 89.62
o Assuming all this is valid we should be starting a wave 5 which has a minimum target which is equal to the height of wave 1 and argues for a move towards 110
· Since the USD Index is heavily exposed to Euro (57%) the best thing will be to short EUR/USD to play this view.
Strategy: Short 0.50 unit EUR/USD from 1.1815, working a stop above the cycle high and on a close above 1.21
Weekly chart
EUR/USD weekly chart
From: Barry Lyss
Sent: 11 October 2017 10:35
Subject: Tech View US 30-10 Yield Spread - time for a bounce!!!
- The Yield spread between the US 30 and 10 Year Yield is trading at 0.53
- This level is very important on the weekly time frame as it marks the trend line connecting the lows since the year 2000.
- I don’t have a long term view but I think current levels offer a great risk/reward to bet on the spread to widen
- One way of playing this idea is by buying US 10 year Future and Selling US Ultra US-T-Bond future. Although the duration on these futures are not similar they are the best I could find
Feedback welcomed.
Weekly chart
From: Barry Lyss
Sent: 11 October 2017 10:03
Subject: Morning Call S&P 500, Nasdaq 100, Long Oil and Gas Vs Short Basic Resources in Europe (SXEP/ SXPP), AAPL US & US & German 10 Year Yield 11oCT17
Good Morning,
Yesterday was another non-event day in equities which once again managed to sustain its gains as NO DOWN DAYS ARE ALLOWED IN THIS MARKET. In the GOVT Bond market we did see some good buying flow but nothing special. In the FX market the USD was weaker all abroad and the Commodity space was on fire with Crude Oil, Natural Gas, Gold and Silver gaining some strength. On my trading ideas I cut my Long Crude Oil and AUD/USD positions late on the day but remain short S&P 500, Apple & USD/JPY and Long Natural gas for now. Today we get the FOMC Minutes and tomorrow we get US PPI ahead of Friday CPI in the US.
Equities:
S&P 500 Index (2550 last)
- The Index continues to trade at the top of the 9 year rising channel. Despite the overbought technical conditions, divergence between price and Momentum, historical low volatility, deteriorating percentage of stocks making new highs while the Index is making new highs and the fact that we have not witnessed nearly any down days this year there is no impact on price.
Strategy: Short 1 unit from 2547, target 2420 with a stop on a close above 2585.
Daily chart
Weekly chart
Nasdaq 100 Index (6063 last)
- Yesterday price action was bearish and a weak bearish reversal candle was posted on the Index
- The entire move from the 5600 level fits the criteria’s of a bearish wedge pattern. The break down level of this wedge is at 5950 and a sustain move below it would allow for a move lower towards 5600.
- The divergence between price and RSI with deteriorating momentum is a 1st confirmation for this view.
Strategy: Short 0.5 unit from 6070 (future ref 6067), target 5650 with a stop on a close above 6130.
Daily chart
Spreads and Single Stock Ideas
Long SXEP (Stoxx Europe 600 Oil & Gas Index) / Short SXPP (Stoxx Europe 600 Basis Resources Index)
- The ratio has broken out from a 1.5 year declining channel and should move higher over time.
- The idea entry level for this idea is at a ratio of 0.6915 which is the declining channel support and 55dma.
Strategy: work a GTC order to buy 1 unit at 0.6920, target 0.7950 with a 2% stop loss on a close below 0.6780.
Daily chart: SXEPEX GY Vs SXPPEX GY
AAPL US (155.90 last)
- Price broke down from its rising channel with the break down level and 55dma standing at 156 / 157
- As long as 156 / 157 caps the upside another leg lower should start with a downside target at 142.20 / 143.65
Strategy: Short 0.5 unit from 156.07, target 142.50 with a stop on a close above 160.50
Daily chart
Weekly chart
Government Bonds
US 10 Year Yield (2.3570% last)
- Huge resistance stands at 2.40 / 2.42 area and while below it a move lower should be on the cards.
- Two potential downside targets for this move is the 200dma at 2.3180 and then the 55dma which is also the a trend breakout level at 2.23.
- Whoever is betting on higher yield should probably keep a tight stop and willingness to add at 2.3170 and 2.230 which is the ideal entry level for this trade.
Daily chart
German 10 Year Yield (0.463% last)
- Major resistance zone at 0.50% and need to see if we breakout or move back lower and remain in the 1 year range
- Given the fact that we already broke out above 0.50% area in July and fell back into it the more likely scenario is for further range trading.
- A sustain move above 0.50% would be bullish yield but while below it the risk is for another leg lower possibly towards 0.16% worst case scenario.
Daily chart