FA Update for May 29

2019年5月29日

S&P500 (SPX)

The breakdown of the rising wedge which was posted a few weeks ago, looks to be confirming to the downside for further momentum which displays a clear risk-off sentiment still in play (if not even close to being priced in).

What's risk off? "Investors tend to change asset classes depending on the perceived risk in the markets. For instance, stocks are generally seen as riskier assets than bonds. ... When stocks are selling off and investors run for shelter to bonds or gold, the environment is said to be risk-off." -Investopedia

My downside target for the SPX is the 200 MA around 2775. With that being said, interesting things can happen around the 200 day MA. You can expect some pretty big moves, as this is THE MOST INFLUENTIAL MOVING AVERAGE FOR THE S&P. It's simply because it's so widely watched. It's the only moving average I will give respect to when comparing technicals to fundamentals. This week will be interesting. I'm not bullish on the S&P at the 200 MA, as I feel this will be a big sell-stop level for hundreds of billions in equity in open orders (source: bloomberg terminal). I will say, that when you get to around the 200 MA, you need to be nimble, as things can get dicey.

DOW (DJI)
The Dow broke it's 200 MA, broke, and is hanging around it. DOW futures are currently down 150 points, but we could soon leave the 200 MA behind with continued risk-off sentiment from equity funds and institutions alike.

AUD/JPY
AJ is SIGNIFICANTLY tied to stock market activity. Please note this for future reference. Especially seen recently ( in a risk off environment), the correlations are almost perfect. Keep in mind, if you're looking to trade AJ, you should be watching the US, Asian, and European/U.K. equity markets. We won't be interested in entering this pair until the 200MA of the S&P 500 (SPX) has broken the 200 MA.

DAX (DEU30)
Breaking the December TL, the question is now, where next? After a 200 point move in 10 mins. this week, I will be watching this closely. This is a great break/gap, however I don't see the gap being filled as being likely. Downside target is 11844.

UK100 Index (UKX)
Showing the same correlation to U.S. equities, the DAX, and other capital markets, 7170 is a level being tested, which if broken, could mean some serious trades are in play for the GBP pairs. (We'll get to that when it happens this week, possibly today). The 200 MA is being tested, and we could see outflows from the Pound, which would cause even further weakness. (BREXIT = risk-off)

WTI/OIL

Oil has come unraveled in the last few sessions, which I've been watching all week and we got one of the best entries yesterday. Once 60 was broken on Thursday of last week (-6%), this is moving in-line with risk, and it's all tied together.

Downside target is posted in the channel.

Brent (BCOUSD)
No Updates from yesterday's FA update.Downside target is mid 60s after a break of 67.13

Gold (XAUUSD)
Intriguingly in a very bad way. It doesn't know what to do. It's like it's confused between dollar risk, safe haven risk; it continues to seem to hold onto the august trend-line (daily, ascending), regardless of the break. However, it wasn't convincing enough. I don't know what to do with gold for trading it, so that being said; I'll be staying away from giving any entries or targets. The way indices are moving, oil, there's some big markers to watch with the 200-MAs as stated above, before we can get a bigger looking picture.

Silver
Silver is different. I am bearish on silver. It has a clean daily descending trend-line which has been tested over a dozen times.

Downside target fro silver is 14. If stocks are getting beat up, gold will have more upside potential; however silver is different in that it is not looked at by the markets "go to" precious metal in a risk-off scenario. Based on the way it's been trading, looking to any slight rally towards the TL, you could consider shorting for one of the easiest downside constitution trades I've seen in a while for metals. ONLY SELL at highs, never buy silver until 14.

Copper (XCUUSD)
Trading in a range, to me, it's another situation similar to the one above, where selling the rallys and not longing will be the only trade I am interested in. Downside target for copper is 2.62.

Aussie Index (AUXAUD)
Looking at the Aussie index, is a little more interesting to me because it's been so strong compared to other capital markets. It's been one that if we get a risk on situation, the AUXAUD will bounce. (Correlations are significant). Because of its relative strength, keep in mind it's over extended. I don't trade this pair, but if you can, we're coming back into a support price of 6380. If the TSE and SPX move sideways or downside price action, the Aussie index could propell to new highs.