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The Euro and Eurozone Crisis
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Despite the eurozone debt crisis, the euro appears to have held its own. For now.
Richard Olsen, CEO of Olsen Ltd, the Swiss-based quantitative asset management company, has told the Technical Analyst that the euro crisis will initially boost the euro because excessive shorting of the currency implies that minor upticks trigger margin calls of shorts, which fuel further upticks triggering additional margin calls. This process depletes the asset base of shorting traders and so strengthens the euro for extended periods.
Meanwhile, Tom DeMark indicators are targeting $1.2850 for EUR/USD over the next 3 months according to Paul Day, a strategist at Market Securities, a division of the Kyte Group in London. However, he says the Tom DeMark (TD) propulsion momentum indicator signals that support at $1.39 will need to be broken as a prelude to the lower projection. The TD Propulsion indicator is based on the idea that price moves have a tendency to repeat. For example in a rally, upward price moves through support levels will be of a fixed % of the initial price move. In the attached chart, the TD Propulsion indicator is marketed by the yellow hashed line. Day also says that an additional sell signal will be generated by the TD Sequential indicator if EUR/USD reaches the $1.49 region, a level that has previously signalled marked turning points for the currency.
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Trending Credit Spreads Hit the Eurozone
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Bob Prechter’s research firm Elliott Wave International has said that European equities are now entering the worst phase of the bear market as the credit crisis escalates. Their European analyst, Brian Whitmer, told us that as the crisis spreads, the demise of the euro will be inevitable.
As far as the debt markets are concerned, Richard Adcock, fixed income technical strategist at UBS in London says, “Corrections have developed in both Greek and Italian spreads against Germany but there is no evidence of any reversal patterns. As such, consolidations can continue but widening trends remain. Support for Italy is at the 238bp retracement, while Greece/Germany appears underpinned by 1168bps, which look set to prompt fresh widening and new highs soon” (see charts below).
Richard Martin, head of quantitative strategies at hedge fund AHL in London, told us, “There is quite a strong tendency for single name - and also index - CDS spreads to trend, and although we do not trade sovereigns at AHL, we suspect the same to be true of those. From a technical perspective I think one is well advised to wait for less volatility, and for a trend to develop, and then buy or sell into it.”
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News Analytics System Predicts Stable Oil Prices
A market sentiment analysis system developed by Khurshid Ahmad, Professor of Computer Science at Trinity College Dublin, is predicting that oil prices will remain steady for the foreseeable future. The system called Trinity-Troecht analyses market sentiment, via newswires and blogs in real-time, to generate price and volume forecasts for gold, oil and some shares. Ahmad claims a 57% accuracy rate in forecasting market direction for oil prices and says the system is unique in that is allows the user to adjust for different response times: real-time analysis for traders, daily analysis for traders/managers/news papers, weekly/monthly analysis for policy makers. Read more >
Khurshid Ahmad will be speaking at the Technical Analyst's 6th Annual Automated Trading Conference on News & Sentiment Trading, 22 September, London.
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News |
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Markets will approach a key inflection point around 29/30 July, according to Ron William at MIG Bank. Expect sharp price changes across EUR/USD, gold and other major markets. Read more >
US equities set to outperform UK equities, according to Management Joint Trust, Geneva. Read more >
US stocks target 13,500 in final leg of bull market, says Ron Meisels of Phases & Cycles. Read more >
Flash crashes increase in frequency. Traders learn to profit from them. (Reuters). Read more >
Are we in another Dotcom bubble? Following the surge in prices of recent dotcom IPOs, such as Linkedin and Zillow, Scott Sweet at IPO Boutique thinks we are.
US holidays have a positive return effect on European stock markets. Read more >
Research team unravels the puzzle of how wars affect stock markets. Read more >
A momentum approach to global cross asset allocation. Read more >
ICE Futures Europe has begun publishing weekly commitments of traders (COT) reports for their Brent and Gasoil contracts. Read more >
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