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Market Outlook: US to terminate nuclear agreement

President Trump says
October 22, 2018

At an election rally in Nevada on Saturday President Trump said, ‘’Russia has not, unfortunately, honoured the agreement so we’re going to terminate the agreement and we’re going to pull out’’.  He was referring to the Intermediate-Range Nuclear Forces Treaty negotiated and signed by President Reagan and Premier Gorbachev in 1987.  Russia now threatens to retaliate.

In a report by EY profit warnings, of which there have been 68 Y/Y, those in Q3 2018 saw firms lose on average 21 per cent of their share price – the highest figure since the financial crisis. Link Asset Services reports that dividend payments rose by 4.1 per cent in Q3 2018 to their highest ever for the period at £32.3 billion.  Commodity groups and banks led the field.

DAX 30

A second consecutive weekly close below 11725, the neckline of a head & shoulders top as well as Fibonacci 38 per cent retracement support adds to the bearish picture.  A comprehensive rejection at last week’s high at 11850, to form a dragonfly doji, hints that this will now act as an intermediate top.  This morning’s bounce may well be capped at the horizontal neckline.

 

SHORT TERM TRADER:  New short at 11650; stop well above 11850.  First target 11425.

 

POSITION TAKER:  Short at 12100; stop above 12000.  Target 11200, the half-way mark of the rally that started late in 2016 and maybe 10700.

FTSE 100

Though still holding inside the potential broadening top formation this was the first time we’ve seen a second consecutive weekly close below horizontal support at 7090.  Still working inside the inverted flag formation on the daily chart and last week’s little doji suggests the market is looking for direction.

 

SHORT TERM TRADER:   Short at 7025; stop above 7125.  Target 6400.

 

POSITION TAKER:  New short at 7075; stop well above 7200.  First target 6800.

S&P 500

Still working inside an inverted flag formation and despite this month’s sudden slide, we remain clearly above first Fibonacci retracement support.

 

SHORT TERM TRADER:  Short at 2755; stop above 2825.  Target 2600.

 

POSITION TAKER:   Short at 2770; stop well above 2825.  Target 2600.

BRITISH POUND/US DOLLAR

Too dreary for words – which is probably a good thing considering the endless Brexit discussions which have become so boring many just want to get on with it.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

EURO/US DOLLAR

Holding (just) the range set since May.  Keeping an eye on Italy and how the EU will deal with its budget deficit.  Note that on Friday Moody’s downgraded sovereign bonds to just one notch above junk; wondering how this might affect commercial banks’ access to credit.   

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

GOLD

Staging a half-hearted recovery after the slump since April’s high.   

                            

SHORT TERM TRADER:  New tiny short at 1227; stop above 1240.  Target 1190.

 

POSITION TAKER:  Square.

Nicole Elliott is a long-standing member and Fellow 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.