Long Term Update

It’s the first trading session of the month and today’s sell off session is another reason to put on our long term hats and take stock of where we are heading across the board. Quite a lot to talk about – so let’s jump right in:

On the equities side the one remaining bullish chart in my arsenal converted over to the dark side. If you are a sub you may recall that the bullish price objective on the P&F threw a bit of a monkey wrench into our long list of bearish divergences. Well no more – we did breach the Rubicon at 1295 and we now flipped to a bearish price objective near 1235. That’s right – a few handles can make a world of difference. The longs would need a push above 1310 to get their asses back into the game. If I am not mistaken this would constitute a long pole reversal and would at least throw us back into the neutral zone. (enough SciFi references for you?)

My long term SPX chart seems to agree regarding that bearish price objective although I we may see some early support near 1257 where we find the 100-week SMA. On the very long term perspective we did close May below that monthly NLSL at SPX 1312.45. Bearish and although we may see a bounce on the weekly I think this is going to drag us lower. Moving forward consider that 1312.45 NLSL resistance if the weekly eventually leads us back up.

And of course it’s all about the Dollar, which is doing wonders for my EUR exchange rate lately. Keep it up! Except that it probably will run out of steam here soon – we already are seeing a little slap down at the upper 100-week Bollinger. This should be good for at least a little shake out. But to get a more comprehensive perspective on what is driving ole’ bucky let’s step into my FX chamber and look at some long term charts. And while we’re at it we’ll also cover commodities for good measure.

AUD/JPY – we are now at weekly support and at minimum I expect the easy ride to be over for a little while – the odds for a bounce here are pretty good. On the monthly panel we finished May below the 78.07 NLSL. Not sure how low it’ll lead us yet but we are LT bearish here.

AUD/USD – looking ugly. Now that we are below weekly support there’s nothing but air below. Our weekly target is near 0.92 and the monthly near 0.88.

More on the Dollar theme. EUR/USD – my new nemesis and I enjoyed to see it suffer. But alas – inverse to the DXY chart we are now touching weekly support and I expect a bounce here soon. Monthly view: I have highlighted touches of the lower 25-month BB in the past few years. We are getting pretty close and I am not yet convinced that we’re going to see the floodgates open. For that to happen we need to see a breach through 1.18 – yes, one evil expats dream…

And let’s not forget cable – also nearing support. That was one nasty sell off and on the monthly we have a target of 1.52.

USD/CAD – approaching weekly resistance but still has a few pips to go. On the monthly we also have a bit more space to run and I have pointed out two possible target clusters. My money is on T1 as it coincides with the upper weekly BB.

USD/CHF – you got to admire that SNB intervention just for posterity’s sake. Since then we pushed above the 25-month SMA and area now free to run until the CHF resembles the Yen. I would love to see ole’ bucky above par on that one.

EUR/JPY – also at support now. Doesn’t mean it has to make an instant reversal but ask yourself if it’s worth holding short after six consecutive weekly down candles. Odds are lousy here, so be smart. On the monthly I am a bit skeptical about a bounce as everything is pointing down now but those touches have been observed in the recent two years, so it’s a possibility.

Let me be crude by saying that crude is just fucked. Yes, we could see a little bounce here but my weekly target is near 76. I hope prices at the pump respond accordingly in due time once they run out of those silly refinery related excuses.

Gold – the shiny stuff seems to have found support near 1450, which is good as many goldbugs started to develop suicidal tendencies lately. My condolences but I’m still going to enjoy your money. It’s easy to be long here with a stop below 1540 – I realize that’s a few handles away but we are talking long term trades here. I would also love to see a monthly inside candle by the end of June – let’s keep an eye on that.

Finally ZB (I hope you took profits on our ZN trade by the way) – we are running out of oxygen up here and I would not want to be long on any time frame. I’m however kicking myself for not having pointed out that weekly inside candle last week – bad Mole, bad!!

Bottom Line: The easy run for ole’ bucky should soon come to an end. Not that I would mind a run higher but it’s been a healthy short squeeze and a little correction would actually be healthy and give us an opportunity to get repositioned. Equities may of course find some support if bonds and the Dollar reverse – which puts that bearish PO in question. However, sometimes correlations detach and although I consider them I don’t base my trades on them.

Cheers,