Not only has the Treasury bond market been sending out warning signals for years, as always marching to its own tune and ignoring central bank directives, but interest rates all round the world have been on a secular downward trajectory for between 10 and 40 years – depending on the country. This week the yield on US 10-year TNotes is below that of 2-year paper, and it’s also at a new record low. This has been the case in some European countries for months. Stock market investors have suddenly woken up to this ‘anomaly’ with many indices today trading below their 200-day moving average; they had already closed below the 50-day one on Friday or earlier this summer. Assumption Day holidays in France, Italy and Spain today.
Swiss import and producer prices fell again in July, increasing their annualised decline from 1.4 per cent in June to 1.7 per cent last month. This explains in part why Swiss Conf bonds have such negative yields. Money tomorrow buys more than it does today – so why be recompensed via interest income?
DAX 30
Another candle with a big body – known as a Marabuzo - and a red one underling the force of the rejection from Fibonacci 38 per cent retracement resistance.
SHORT TERM TRADER: Took half my profit at first target 11400. Will think of how to tackle the other half depending on Friday’s price action.
POSITION TAKER: Short at 11835; stop well above 11865. First target 11000.
FTSE 100
Yesterday’s big sell-off has maintained strong bearish momentum as we hover barely above this month’s low.
SHORT TERM TRADER: Small short at 7200; stop above 7300. Target 7000.
POSITION TAKER: Short at 7570; stop above 7350. Target 7000.
S&P 500
Another swoon from the 2940 level yet bearish momentum is not quite as strong as one might think. Keep a close eye on so-called momentum traders tomorrow as though we do not have a death cross on US indices, many are now trading below their 200-day moving averages.
SHORT: Short at 2885; stop above 2945. First target 2785.
POSITION TAKER: Square.
BRITISH POUND/US DOLLAR
Oversold and still stuck at the bottom of this year’s range.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
EURO/US DOLLAR
Not quite as perky as some might have hoped. Note that Spain’s Ibex stock market index looks set for a close tomorrow with the 50-day moving average below the 200-day one – known as a death cross as they are both pointing down.
SHORT TERM TRADER: Small long at 1.1165; stop below 1.1060. Target 1.1340.
POSITION TAKER: Square.
GOLD
Though overbought it’s holding up quite well at this year’s highest levels. One for investors to remember: when things get to a serious push and shove, one is forced to sell off one’s most liquid assets first to prop up the ailing specialty products.
SHORT TERM TRADER: Small short at 1500; stop above 1535. Target 1440.
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.
