Today's Tech view
Tech View - 18.03
The slope of hope ?
The US markets exhibited significant divergences after a hugely volatile session spent most day in the red as the street went into a tizz on speculation that Lehman could be the next Bear and then momentum turned bullish late in the day, and the Dow Jones staged a remarkable triple-digit rally before pulling back to a gain of 21 points at close, The Nasdaq and S&P not so lucky losing 35 and 11 resp.The VIX hit 32, $ Index at 71 , the yen/$ at 97.30
Oil prices plummeted on profit taking as hedgies unwound positions once the yen puts at 100/ 97 got triggered.. Crude shed $4.53 to close at $105.68, in direct opposition to the direction normally taken after a Fed rate cut (usually, Fed action prompts a rise in oil prices). Gold futures rallied as high as $1,033.90 an ounce today, as the Fed's decision to issue a quarter-point rate cut and news from Bear Stearns and Lehman Brothers touched a nerve. The session closed with a far-smaller +$3.10 an ounce, to $1,002.60.
The Fed speaks tonight and the street is pricing in a total 75 basis point cut including yesterdays emergency cut The logic - the 2-Year Treasury note currently yields a paltry 1.48% . Comparatively, the Fed funds rate rests at 3%, implying that the Federal Reserve is still far behind the curve. Against this backdrop, it is doubtful that anything less than a 75-basis-point cut will have a positive impact on stocks in the weeks ahead.
If /when Co-ordinated Central Bank Interventions (CCIB) starts and Soveriegn funds begin to enter the demand Function (price follows volume) of the market - it will throw technical analysis off by a huge - huge margin. Is this the slope of hope ? Can't find a better way to put it than this than this blog Forward Thinking for the Markets by Mike Paulenoff
"I have one theory, having spent eight years proprietary trading foreign exchange for a major NYC bank: that the powers that be realize the dollar has to stabilize or be stabilized and that the carte blanche one-way "freebie" dollar short has got to come to an end -- to ensure that the global financial markets do not implode. If the G-7 or the G-10 coordinated a powerful intervention to sell euro and yen, to buy dollars, then my sense is that a massive one-way trade would rip towards the exits, the dollar could soar 5%-8%, gold and commodities would take a bath, oil would plunge, the flight-to-quality in bonds would be reversed, and money likely would flow into equities in a hurry."
http://www.safehaven.com/article-9698.htm
We saw a start of the CCIB action yesterday - Commodities particularily agri and base metals sold off as did oil . The yen is back above the 97 yen/$ mark and gold has fallen below 1000$. Expect no help from the Hangseng/ Taiwan or Shanghai as the political issues over Tibet will dominate investor sentiment in that part of the globe. The Nikkei and the BSE should lead a tentative Asian rally as the street waits for Ben.
No positional trades today. Hold existing positions.
The day ahead 18th March 2008
Support 14723/4448 - Pivot 15000/4500 - Resistance 15335/4600
PCR 0.70
Weak below 14723 / strong above 15000 BSE
Maintaining our view even though 4600 broke on a closing basis after 3 days of holding out with Bear Sterns liquidating deliveries.A one day blip on the back of a unprecdented event - a major I- Bank collapse can skew currencies and technicals for a day not the week. The Long term trend line is intact and technically markets are poised at support on the RSI and the PCR . While the Sensex has made a new low and has given the lowest closing this year, the Nifty is still holding out above the Jan low. The Dow , S&P and Nasdaq are also holding out above the Jan 22 lows.
Wait ,watch the price and the volume action today. Anyone shorting at lows today is in effect selling at support. A close above the 4600 spot level indicates the shorts are out and we are on neutral turf. If not, then we are back to the drawing board post Fed speak .
Tentative open , high volatility with dual moves but that PCR indicates we should close in the green
Regards,
Wellwisher
PS : I am not the author of this technical view newsletter.