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Market Outlook: Northbound Central American caravan

President Trump retaliates
October 23, 2018

‘’Guatemala, Honduras and El Salvador were not able to do the job of stopping people from leaving their country and coming illegally to the US. We will now begin cutting off, or substantially reducing, the massive foreign aid routinely given to them’’, said President Trump yesterday.  He’s talking about the estimated group of 7000 to 10000 people moving slowly towards the US border with Mexico.  He’s called this a national emergency and it could be an important electoral issue at midterm elections on November 6th.

Chinese state news agency Xinhua today reported the official opening, by President Xi Jinping, of the longest bridge cum tunnel in the world, linking Hong Kong, Macau, and the mainland city of Zhuhai. A 4-mile tunnel and 22 miles of road, it cost HK$120 billion.

DAX 30

Yesterday’s comprehensive rejection with a shooting star candle just ahead of the 11725 level, the neckline of a head & shoulders top as well as Fibonacci 38 per cent retracement support has kept the MACD bearish. Last night’s close just under the bottom of the inverted flag has forced the market under the next very long term support level at 11400.  We expect the drop to accelerate considerably this week.

 

SHORT TERM TRADER:  First target at 11425 met this morning but after seeing price action have decided to hang on for a drop to 11200.

 

POSITION TAKER:  Short at 12100; stop above 11850.  Target 11200, the half-way mark of the rally that started late in 2016 and maybe 10700.

FTSE 100

Lagging but backing up price action of the Dax with an inverted pennant (which we risk breaking out of today), a shooting star yesterday against pivotal support/resistance around 7100, and a bearish MACD.

 

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

 

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

S&P 500

Same idea as the other two indices covered here but a messier pattern.  Generally, the neater the pattern the more likely predicted moves are likely to succeed and meet targets.

 

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

Is it any wonder it’s all going a bit pear-shaped?  Chart levels are simply not holding and momentum isn’t there.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

EURO/US DOLLAR

Ducking back under the 1.1500 level – which is looking increasingly irrelevant. Yesterday Italian economy minister Giovanni Tria hit back at the EU’s criticism of his country’s proposed budget, saying it would not harm the single currency union’s financial stability and was essential to get his economy growing again.  The EU is expected to send the plans back to Rome giving them 3 weeks to be re-written.   

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

GOLD

Momentum’s bullish but moves are very subdued.   

                            

SHORT TERM TRADER:  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.