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The charts and comments in my Blog (posted in Eastern Time) represent my technical analysis and observations of a variety of markets...
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...an expanded version of the "Observations" section in my private Daily Trading Journal.

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Monday, 12 December 2011

Monday "Blues"...and mixed messages...


The Bank of Canada's Governor, Mark Carney, delivered a speech today entitled "Growth in the Age of Deleveraging"...here's an excerpt:
"These are trying times.
In our largest trading partner, households are undergoing a long process of balance-sheet repair. Partly as a consequence, American demand for Canadian exports is $30 billion lower than normal.
In Europe, a renewed crisis is underway. An increasing number of countries are being forced to pay unsustainable rates on their borrowings. With a vicious deleveraging process taking hold in its banking sector, the euro area is sinking into recession. Given ties of trade, finance and confidence, the rest of the world is beginning to feel the effects.
Most fundamentally, current events mark a rupture. Advanced economies have steadily increased leverage for decades. That era is now decisively over. The direction may be clear, but the magnitude and abruptness of the process are not. It could be long and orderly or it could be sharp and chaotic. How we manage it will do much to determine our relative prosperity.
This is my subject today: how Canada can grow in this environment of global deleveraging."
Here is the link to his entire speech: http://www.bankofcanada.ca/2011/12/speeches/growth-in-the-age-of-deleveraging/

Data released today shows a further decrease in the U.S. Federal Budget Balance resulting in a further increase in the deficit, as shown on the graph below (provided courtesy of www.forexfactory.com).


Not the most encouraging news today...as well, equity, commodity, and forex markets sold off today after digesting the latest from the EU Summit talks which ended last Friday.

The comments in my post from Thursday, December 8th refer...here is the link to that post: http://strawberryblondesmarketsummary.blogspot.com/2011/12/update-on-ym.html
Below is an updated 15-minute chartgrid of the YM, ES, NQ & TF. There was a divergence in price action today...while the YM & ES made new lows, the NQ & TF did not...and while the YM & ES closed below the initial 6-day trading range (depicted by the Fibonacci retracement drawing which starts from December 1st), the NQ & TF closed just inside...while the YM & ES closed below their 50 sma (red), the NQ & TF closed just above. The bearish moving average Death Cross formation is still in effect on this timeframe for all 4 e-minis. Until we see all 4 indices making fresh new lows in tandem, I'm a bit wary of today's drop.


Below is a 4-hour chartgrid of the YM, ES, NQ & TF. Price is bouncing around the 50 and 200 smas. The 50 sma is currently trading above the 200 sma on this timeframe in a bullish Golden Cross formation. Price bounced this afternoon and relieved an oversold reading on my short-term RSI indicator. What price does around these 2 moving averages will, no doubt, set the tone for the near-term trend...this may become clearer after the Fed announcement tomorrow afternoon.


Below is a Daily chartgrid of the YM, ES, NQ & TF. As can be seen, the 50 & 200 smas on this timeframe are playing an important role in providing either support or resistance...in the case of the YM & NQ, the 200 sma is holding as support...in the case of the ES & TF, the 200 sma is holding as resistance. Also, as I noted in my post last Friday, the 50 sma has crossed above the 200 sma on the NQ on this timeframe, in a bullish Golden Cross formation...will see if it holds in the days/weeks ahead. Here is a link to that post: http://strawberryblondesmarketsummary.blogspot.com/2011/12/1st-down3-to-go.html


While there was some headway made on the bear side today in that the YM & ES made new lower lows on the 15-minute and 4-hour timeframes, the NQ & TF have yet to confirm the resumption of a bear trend on the 4-hour timeframe. Also, the moving averages are not yet confirming the resumption of a bear trend on the YM & ES.

Below is a Daily chart of the VIX. In spite of the lower close on the S&P 500 today, the VIX also closed lower. It's sitting just above the 200 sma (broken pink)...25.00 is a very important level of Fibonacci, price and moving average support confluence...apart from the spike on October 3rd, it's in a very large descending triangle formation...a break and hold below 25.00 could send equities racing higher...perhaps in anticipation of a decent gift from Santa...otherwise if this level holds, the markets may awaken to a lump of coal for Christmas.