It had been a good week for stocks and Resource/European currencies up to this point so it comes as no surprise that overnight traders were starting to trim positions and take some profits off the table. Selling pressure has accelerated, however, after the IMF cut its US growth forecast for this year to 1.7% from 2.0% and US retail sales came in short of expectations raising more concerns about the health of the US economy and the outlook for resource demand.
This news has sent traders running back into treasuries sparking a rebound in the oversold USD and JPY while sending US and European indices sharply lower and keeping commodities under pressure. European currencies have also taken a step back, particularly SEK, NOK and EUR. GBP and the resource Dollars (CAD, AUD and NZD) have also slipped back but at a more moderate pace.
Gold and silver are selling off again today, particularly against USD which still seems odd considering that QE should undermine the value of paper money as it has with JPY in recent months. This suggests that without an immediate crisis and with risk of a financial meltdown fading, the haven component of gold pricing continues to erode, while a slow global economy and falling commodity prices reduce the need for an inflation hedge.
It’s important for traders to remember that capital has been steadily flowing back into risk markets for several months now, particularly stocks and because of this we can have sharp corrections from time to time. Trading could be particularly choppy as we move into earnings season although initial results have been positive, particularly from two US banks this morning. JC Penney also could be active today with the troubled retailer apparently out looking to bring in new investors after a major profit warning and management shakeup earlier this week.
Significant economic announcements released overnight include:
Spain consumer prices 2.6% in line
Italy consumer prices 1.8% in line
Eurozone industrial production (3.1%) vs street (2.5%)
US retail sales (0.4%) over month street flat
US producer prices 1.1% vs street 1.4%
India consumer prices 10.3% vs street 10.7%
India industrial production 0.6% vs street (1.3%)
Singapore GDP (0.6%) vs street 0.0%
Economic reports due later this morning include:
9:55 am EDT US Michigan consumer confidence street 78.5
Earnings reports have started to pick up today. Highlights include:
JPMorgan Chase $1.59 vs street $1.39
Wells Fargo $0.92 vs street $0.89
North American indices
US30 met resistance near 14,900 and has started to backslide in a normal correction to ease an overbought RSI. If 14,780 initial support fails the 14,675 recent breakout point could be retested.
SPX500 has dropped back toward 1,585 after achieving an initial measured objective and peaking just short of $1,600. Initial support appears near 1,584 then 1,575.
NDAQ100 ran into resistance near 965 and has started to drop back, opening the door to a potential retest of 2,825.
US SmallCap 2000 has stalled short of 950 setting a lower high but remains in the upper half of its 910 to 955 trading channel with initial support near 935. RSI has rolled down from a lower high suggesting upward mo fading.
Canada60 was unable to hold 710 and has resumed its downtrend with RSI suggesting downward momentum accelerating. Next support appears near 700 then 692.
UK and European Indices
UK 100 peaked this week at a lower high near 6,415 and has dropped back but remains in an upswing above 6,375 with next support near 6,300 then 6.270 should that fail. Falling RSI trend suggests momentum turning negative.
Germany30 looks really vulnerable. It was unable to retake old trend line and channel resistance near 7,890 while RSI faltered short of 50. It has since resumed its downtrend with next support near 7,730 5,590 and 7,500.
France 40 was unable to break out of a falling channel failing short of 3,775 and has started to fall again with next support near 3,730, 3,680 and 3,640.
Italy 40 stalled short of 16,000 and has dropped back to retest its 15,750 breakout point and RSI 50 as new support. Should these hold, the index could resume its rebound but could slump back toward 15,400 if support fails.
Spain 35 was unable to break out through 8,150 trend resistance while RSI held under 50 keeping downward momentum intact. It now appears to have resumed its downtrend with next support near 8,000 then 7,790.
Gold is being drilled down again once again taking out both $1,560 and $1,550 on its way toward $1.535. A positive RSI divergence suggests downward mo slowing but in a washout it could still retest $1,525 or $1,475.
Silver is probing into its $26.00-$27.00 support zone overnight. It remains in a downtrend, however with RSI holding below 50 keeping downward momentum intact unless it can break $28.25.
Copper continues to consolidate between $3.37 and $3.45 but RSI suggests this remains a pause within a broader downtrend with next downside support near $3.30 then $3.24.
US crude is staging a major breakdown today. A double top has been confirmed by an H&S top with a neckline break under $91.75. Worse, there’s also a rare but powerful H&S in the RSI. Next support near $89.00 then a measured $85.50.
UK crude is breaking down today, taking out $104.00 to signal the start of a new downleg on trend with next potential support near $102.00, $100.00 and $97.75 on trend.
Gasoline is breaking down again today, taking out $2.86 which may become resistance and testing $2.80 with next support after that near $2.70.
Natural Gas touched another new high near $4.20 but with RSI overbought, a negative divergence growing and this week’s late winter storm now in the past, it looks increasingly vulnerable with support near $4.00 then $3.85.
USDCAD has bounced up off of $1.0100 support but remains in a downtrend below $1.0180. RSI indicates that broader momentum remains in favour of the loonie.
EURUSD has faltered short of $1.3140 resistance and has slipped back in a normal correction where it could potentially retest initial support near $1.3000 then $1.2880.
GBPUSD is having a minor correction but cable remains above its $1.5340 breakout point while RSI suggests its uptrend remains intact. Next resistance remains near $1.5425 then $1.5520 with more support near $1.5260.