Tuesday, August 2, 2011

August 1, 2011

US Equities big drop today as UST rally. I haven't followed the news closely on knowing the debt ceiling issue would be very transient. It seems though weak growth and possible buying of treasuries is causing the 2.4% drop we saw in the S&P500.

The USDX view from June remains bearish. After finally breaking below its lower support on the its rising wedge it remains under pressure, but largely being supported by risk aversion in the markets. As long as it stays below the lower wedge resistance dollar weakness is still in play and now would present a great buying opportunity. The volatility is going to be very rough in the markets, it would be safe to be financials will be weak H2 2011.

Crude Oil somewhat of a puzzle is now much more clear confirming a previous conviction of prices remaining under pressure at 100. A very nice wide range is established from 90 to 100. A very mixed supply demand situation is also arising.

Time to look at:

  • New Projected Econ Growth
  • Updated Supply/Demand situation in Crude
  • Update chart outlooks 
  • Expectations and sentiment
Some Shallow thoughts. Long term picture perhaps still in tact for risk on. Equity picture way out of line, which could possibly mean short term deviation. 1200 becomes extremely important. Possibly short higher lows below 1350 before the test of 1200. UST ignored double top... maybe an outlier situation due to the whole debt ceiling decision... 

USDX picture sitll in tact. If the above scenario between UST and US equities is not a short term deviation (despite its large volatile move) USDX can be forming a bottom and is ont a continuation to the downside. Position for strong reverals USD/CHF become ideal candidate or USD/JPY. If that is the case where does this leave more volumous pairs such as EUR/USD or GBP/USD? This would leave a very wide band for the EUR/USD below 1.45 and the pound to be continued to be pressured below 1.64. My end year targets are much higher biased with risk on, so far the Sovereign debt situation has been weighing heavily on the pair while the spoty data with the UK economy has been bouncing the GBPUSD in wide ranges but overall inline with my analysis. 

Crude: Fundamentals maybe very relevant. Long term picture inline with analyst forecast with biased average to 100 - 103 end year. Wide range established between 90 and 103. It will be spotty trading the range. Possibly setting up structural long is the best strategy for crude. 

Short term thoughts for now, more indept look tomorrow.

Analyze Capital LLC

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