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Market Outlook: EU leaders struggle to remain relevant

Add fire to Italy’s problems
May 30, 2018

Perhaps he was misquoted but yesterday German EU budget commissioner Gunther Ottinger suggested in a leaked media interview that market turmoil would teach the Italians not to vote for populist parties.  This forced Jean-Paul Junker and Donald Tusk to remind EU citizens that their institutions must ‘respect the voters’ and that their role was not to impose their will on the electorate.  Financier George Soros had to get a word in, suggesting the ‘that Europe is in existential danger; we may be heading for another major financial crisis’.  And the governor of the Bank of Italy warned that they were losing investors’ hard-won trust. 

Her Majesty’s Customs and Revenue admitted that last year 1 in 10 phone calls to the taxman’s help line went unanswered, up from 1 in 20 in 2016.  This is based on their data and is unclear how long people had to wait to get through the complex automated routing system.

DAX 30

This week momentum’s turned bearish as the index retreats from the Fibonacci 76.4 per cent retracement resistance, capped also under the trend line, with a big bearish Marabuzo candle yesterday.  We have now retraced 38 per cent of the rally since late March as banking shares lead on the way down.

 

SHORT TERM TRADER:  Tiny short at 13145; stop above 13050.  Target 12400.

 

POSITION TAKER:  Short on Friday’s close at 12935; stop above 13210.  Target 12000.

FTSE 100

Trading down from a record high for a fifth consecutive working day shows just how quickly sentiment can turn.  Yesterday we learned that RBS’s CFO Ewen Stevenson will leave to ‘take up an opportunity elsewhere’ after 4 years in the role.  Just what one needed when a potential banking crisis looms.

 

SHORT TERM TRADER:   Tiny short at 7855; stop well above 7800.  Target 7400.

 

POSITION TAKER:  Small short at 7799; stop well above 7900.  First target 7400.

S&P 500

Sagging a little as large US bank shares are sold because of the risk of global contagion.

 

SHORT TERM TRADER:  Short at 2725; stop above 2745.  Target 2625.

 

POSITION TAKER:   Small short at 2720; stop above 2755.  Target 2620.

BRITISH POUND/US DOLLAR

Dipping to this year’s low on trend line support and still stupidly oversold.  Almost a little hammer yesterday means we might be setting up for another attempt at the recent correction lower.

 

SHORT TERM TRADER:  New tiny long at 1.3275; stop below 1.3170.  Target 1.3800.

 

POSITION TAKER:  Square.

EURO/US DOLLAR

Like cable the euro has retraced almost half of last year’s gains, is sitting on trend line support, and is still very oversold; however, I’m in no mood to try and catch a European falling knife.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

GOLD

No longer oversold but fairly irrelevant and looking for direction yesterday, capped by the pivotal 1310 area.  Note that yesterday De Beers announced it will start selling laboratory-grown faux diamonds for jewellery.  ‘Lightbox [is] affordable fashion that may not be forever, but is perfect for right now’, they say. 

                            

SHORT TERM TRADER:  Short at 1292; stop quite a bit above 1300.  First target 1240.

 

POSITION TAKER:  Square.

Nicole Elliott is a long-standing Member of the Society of Technical Analysts and has taken over the IC’s trading coverage.  She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.