today's highlights - 06-21-11

8/6/2019 Today's Highlights - 06-21-11

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Market Commentary - for Institutional Client use only.

Refer to information, disclosures and qualifications at the end of this publication.

21 June 2011 Tom Fitzpatrick (1-212-723-1344)Shyam Devani (44-207-986-3453)

Alex Good (1-212- 723-3469)CitiFX Technicals Portfolio [email protected]

Todays Highlights

The Shanghai Composite went through 2661 supports suggesting lower levels in Chinese equitiesThe Dow Transportation Index has been holding its long term trend channel on a daily close basisfor the last 5 days. A push through the 55 day at 5330 would question our short term bearish view.The S&P 500s 200 day moving average has held at 1258European Bank Stocks held important supports in the 150-152 areaEURUSD has broken out of declining highs. The last time it did this it tested the 55 day moving

average (now 1.4410) and then moved lowerGBPUSD has held the neckline of its head and shoulders at 1.6110 that targets 1.53AUDJPY is hovering above pivotal 84.55 supportsEURAUD has bounced off 2 76.4% retracements with a neckline at 1.3850USDBRL paused at its long term base. A push through downward sloping tops near 1.6150 wouldopen the way higher to 1.6450Crude posted a morning star candle, reversing momentum at a number of key supports. Last yearwe chopped around the 200 day moving average before falling againGold looks poised to push through its triangular consolidation and move to the 1575 highs

Chart of the Day: Shanghai Composite Index (China)

Source: Aspen Graphics / Bloomberg 21 June 2011

As we pointed out in our note yesterday the Shanghai Composite went through 2661 supportssuggesting lower levels in Chinese equitiesThe first good support is the channel base at 2550. An acceleration through there opens the way to

2319 which is another 76.4% neckline which if broken could see the SHCOMP back to the 1716 lowslast seen in 2008

TechnicalsTechnical Developments in the Foreign Exchange andAsset Markets
mailto:[email protected]:[email protected]:[email protected]


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CitiFX Technicals 21 June 2011



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Dow Jones Transportation Index


The Dow Transportation Index has been holding its long term trend channel on a daily close basisfor the last 5 days. This support would be breached if we see a close below 5100.Given our focus on this Index as a leading indicator for asset markets in general, a close beneath the5000 area would be a bearish signal opening the way to the May 2010 4800 pivot levelContinued bullish price action especially would question our short term bearish view given the holdof supports

S&P 500


The S&P 500 Index will look very vulnerable if it breaks through 1250 supports that correspond withthe March lows and the upward sloping trend channelWe held the 200 day moving average on 16 June, at 1258. It appears that the price action isconsolidating in front of supports similar to the Dow Jones Transportation Index


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European Banking Stocks


The European Banking Index has held repeated supports in the 150-152 area and look poised for abounce given the hold

EURUSD


The 76.4% pullback on Euro has continued to hold and weve broken the 55 day moving averagewhich now serves as resistance at 1.4410The Euro has broken out of its pattern of recent declining highs. The last time it did this, it tested the55 day moving average and then fell sharply again1.3970 remains the key level to watch on the downside, a level that we still feel will ultimately giveway.

Similar price action

Hold of repeated supports


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GBPUSD


GBPUSD is testing the neckline of a head and shoulders pattern at 1.6110. A break below herewould target the 1.53 area.The hold of supports could argue a short term bounce

AUDJPY


AUDJPY is testing the 84.40 support area that was pivotal in both February,May and June. A breachof this level should open the way to at least 83.41, the 200 day moving averageA push below 83.41 would see AUDJPY without any obvious supports until the 61.8% retracement ofits move at 80.44

61.8% Fibonacci: Next support at 80.44

84.55: Support


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EURAUD


EURAUD has bounced of 2 76.4% retracements suggesting a potential push higher especially if wesee a move through 1.3850

USDBRL


USDBRL paused at its long term base at 1.5540 and has since headed higher off a 76.4%retracement at the lows.A push through the downward sloping tops near 1.6150 would open the way for a move to horizontalresistance (off which the 76.4% retracement was formed) at 1.6450.

Double 76.4%


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Crude Oil


Crude held an important support near its head and shoulders neckline, the 200 day moving averageand the base of a downward sloping trend channel with a top near $100A push through $92.58 would argue for a big push lower- the head and shoulders targets $75Last year when oil fell we traded in a choppy fashion around the 200 day moving average and thenwent lower again

Crude Oil (2010 Chart)


In 2010 Crude made a head and shoulders at the high, dropped, and then consolidated near the 200day moving average before making its next leg lower.Crude is currently consolidating near the 200 day moving average

Hold of support areawith morning starcandle formation

Brief consolidation around 200 DMA inMay 2010 before big push lower


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Gold


Gold looks poised to push through its triangular consolidation that has been forming for severalmonths. A close through $1545 will open the way to the highs at $1575


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PLEASE NOTE THAT: The tables and information specified below under Short Term Conviction views, Long TermConviction views, CitiFX Technicals Portfolio, Strategic Portfolio, and Tactical Portfolio ARE NOT INTENDED AS, ANDDO NOT CONSTITUTE, AN OFFER, RECOMMENDATION, ADVICE OR A SOLICITATION TO BUY, SELL OR TO ENGAGE IN ANYSTRATEGY, WHATSOEVER, IN ANY FOREIGN CURRENCY CONRACT OR ANY INSTRUMENT OR INVESTMENT. EACHDECISION BY YOU TO ENTER INTO ANY FOREIGN CURRENCY CONRACT OR TO INVEST IN ANY INSTRUMENT OR ENGAGEIN ANY STRATEGY MUST BE BASED ON DILIGENCE AND ANALYSIS INDEPENDENTLY UNDERTAKEN BY YOU AND YOURADVISORS. PLEASE CAREFULLY REVIEW THE DISCLAIMERS AT THE LAST PAGE OF THIS DOCUMENT.

Short term conviction views 1

Instrument ViewDate view was

establishedTarget Level today

Crude

Bearish daily reversal at the

highs and breach of near termsupports suggest short termweakness

13 April

* $93 Target Met andextended to $83.40(200 week moving

average)**In addition a move to

$75 (Head andshoulders target)

cannot be ruled out.

$94.25

EURUSD Bearish weekly reversal at the

trend highs09 May

1.4156**Target Met. Extended

to 1.37 (200 day)1.4372

CRB Index

Weekly reversal at the highs,momentum diveirgence and

large 55-200 day movingaverage gap

09 May 317 (200 day) 338

NDX Breached the 55 day and trend

support arguing for a move tothe 200 day

24 May 2,200 2,204

EURCHF Breached 5 month

consolidatiojnj with a doubletop in place

23 May 1.16 1.2133

EURGBP

Breached 55 day and 50%retrace of the rally from Jan.Setups in Fixed Incomespreads also argue for a movelower

25 May 0.8450 0.8873

USDJPY 76.4 against the highs and

close below 80.70 suggestslower levels ahead

06 June79.57 and possibly

78.4480.15

1Convictions represent the views of the CitiFX Technical staff and not actual trades.


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Source: CitFXTechnicals Views 21 June 2011

Long term conviction views1

Summary of our strong conviction 2011 views as we open the year.

(As we continually note, when and if factors/dynamics change, we will adjust them into our thoughtprocess. These are our views we hold with conviction today. As we head through the year we willupdate our level of conviction on an ongoing basis.)

Instrument View for 2011 on 03 Jan 2011Conviction on 03

Jan 2011Conviction today-

21 June 2011Level today

S&P 500

Bearish year with double digitpercentage down close of 15-16% (1,055-1070) expected.

Intra year bear market (High tolow fall of 20%+ ) also a danger.

Peak could well come in theopening days of the year.

Strong Strong 1278

U.S. long endyields

10 year yields to head towards4% and possibly 4.5% by end ofyear.

30 year yields to head towards5%

Strong Strong10Y at 2.97%and 30Y at

4.21%

Crude A move above $100 and

possibly towards $120Strong $100 target met. $94.45

Gold $1,700 this year and as high as

$2,000 eventuallyStrong Strong $1,544

Palladium A move above $1,000 this year Strong Strong $746

EURUSD

A move to high 1.40s (1.4850)by end of year) with possible1.50+ and even 1.60+ in early2012

Strong

Weak. We have nowchanged our year endview and believe that

the move seen to1.4940 on 04 May has

established a longterm peak earlier than

we thought.

1.4372

Data as at 21 June 2011


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CitiFXTechnicals PortfolioStrategic trades will likely be / intended to be of more medium term nature using the variety of building blocksthat we articulate in that medium term view.Tactical trades by definition are likely to be more short-term and driven more by day to day price dynamics,risk management P&L etc.

The strategic portfolio will be made up of 100 units of capital with the potential for modest leverage while thetactical portfolio will comprise 50 units of capital also with modest leverage potential.These portfolios represent actual trades in FX, EM, Fixed income, Commodities or Equity indices

Strategic PortfolioData as at 21 June 2010

Instrument PositionDate

establishedComment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

Tactical PortfolioData as at 21 June 2010

Instrument PositionDate

establishedComment Entry

Stop(If breached

unlessspecified

otherwise)

TargetPresent

level

EURCHF Short 23 May 2011

5 monthconsolidation

seems over andthe double top

argues for furtherlosses

1.2375 1.25201.20 andpossibly1.1575

1.2133

EURGBP

Long 0.8450Put Option

(expiry 06July)

25 May 2011

Price action issimilar to that

seen at the highs

in October 2010suggesting further

losses

Spot ref.

0.8666 Premium paid 0.8450 0.8873

EURUSD

Long 1.40 Putoption

(Expiry 28June)

27 May 2011

Short term priceaction looks

corrective and thesetups still remind

us of Nov 2010

Spot ref1.4235

Premium paid Sub 1.40 1.4372


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Shyam Devani London 44-20-7986-3453 [email protected]

Alex Good New York 1-212- 723-3469 [email protected]

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today's highlights - 06-21-11

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