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Market Outlook: Japanese inflation slows

Nowhere near target
December 21, 2018

Data out from Japan overnight showed that nationwide CPI slowed to an annualised rate of 0.8 per cent in November from 1.4 per cent the previous month. This is the sharpest month-on-month fall in almost 4 years and underlines just how far Abenomics and its three arrows are from hitting their targets.

Today is the Winter Solstice, the shortest day of the year in the northern hemisphere; the opposite is obviously the case south of the equator where my daughter, who is in Brazil, says, ‘it’s too damn hot!’ I will be taking time off between now and the New Year, partly because markets are irrelevant or illiquid, but also because I find it a good time to take stock, review, and sketch out rough plans for the coming year; I urge you to do the same. In the meantime, wishing my readers this Season’s Greetings. Back on Wednesday 2nd January 2019.

DAX 30

Baby steps as we tip-toe to the lowest levels in just over two years. A weekly close below 10600 should see bearish MACD increase its downside pressure.

 

SHORT TERM TRADER: Square.

 

POSITION TAKER:  Squared up my position at the original target 10500 and happy to do so just in time for my break. Superb!

FTSE 100

Holding at the bottom of the broadening top chart pattern underlining the importance of this area. 

 

SHORT TERM TRADER:   Will re-sell on a daily close below 6700.

 

POSITION TAKER:  Short at 6770; stop well above 6900. Target 6200.

S&P 500

Dropping again, with the MACD steadily bearish, as another key cabinet minister in President Trump’s government leaves – this time Defence Secretary James Mattis. In his resignation letter, he cited that the President has ‘a right to have a Secretary of Defense whose views are better aligned with yours’.

 

SHORT TERM TRADER:  Short at 2500; stop well above 2625. Target 2200.

 

POSITION TAKER:   Might sell on a close below 2500 today or, better, next Friday.

BRITISH POUND/US DOLLAR

Holding inside the 1.2600 to 1.3400 range that’s held since June.

 

SHORT TERM TRADER:  Squared up my long position with a puny little profit as I can’t be bothered with this sort of thing, at this time of year.

 

POSITION TAKER:  Square.

EURO/US DOLLAR

Suddenly perking up and looking as though it might have been worth holding my long position. Looking set to test trend line resistance taken from May’s interim high. Thin markets might cause a horrid short-covering scramble.

 

SHORT TERM TRADER:  Long at 1.1395; stop below 1.1350. Target 1.1585.

 

POSITION TAKER:  Square.

GOLD

Overbought now and can only put this sort of late year rally down to thin markets.

                            

SHORT TERM TRADER:  Stopped out of my short position for a small loss – and really glad I’m square now.

 

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.