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Author Topic: Three assets, two signals, one way down  (Read 4829 times)
wd1040
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« on: October 31, 2012, 01:21:32 AM »

Easier reading with bolding and better formatting here: http://dliufx.wordpress.com/2012/10/31/three-assets-two-signals-one-way-down/

What we have here are three risk-correlated assets (in different degrees), GBPUSD, the Dax30 futures, and Spanish IBEX35 futures. All three have entered the cloud, and these few days of inactivity have led them to re-test, but fail the Span A (upper) resistance. With the current low volume-higher risk complacency trading atmosphere, a large return of volume tomorrow could start pushing risk lower.

Secondly, RSI14 have dropped below 50 on all three assets. There may be a retest above, but overall sentiment has turned negative (which hasn’t been seen in quite some time), and trend is expected to return to the oversold region again. 50 has proved a strong support resistance (depending on direction of test) for all three, and shouldn’t be discounted this time.

Risk-reward is excellent, with a stop around 0.250% above the span A and first limit (of whichever is first) at the cloud bottom. This gives around 10:1 in about a month. Second limit would be the equal to the Span B line minus the SpanA-SpanB gap.

—–

The Sterling: see that breakout candle on the second day? That was because of the GDP-induced productivity. Same thing happened for the Kiwi during the Rugby World Cup, so I’ll definitely be closing out before the next CPI report on Nov 11th (also mind you there’s a BoE decision, the second to last by Governor King) and looking for another short entry on this or GBPAUD, depending on position at the time.

HA doesn’t give as good as a signal due to the extreme chop. This should be used as a confirmation or rejection in the days to come. Stop is a daily close above 1.6140.



The DAX30 and IBEX35 are following the same drivers: topping at current range, HA turning moderately negative (which gives a bit more confidence than the pound). Additionally, the markets are still waiting for Spain’s final request. Even though that is a catch-22 with yields being brought down greatly due to the promise to purchase, Spain would be admitting they can’t really pay back all that debt at these rates. Nevertheless, anything short of a request will not restore confidence in the European markets, and will pressure the indices lower. Again, stops should be placed at daily closes above 20% of the span A top.



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