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Equities Cant Sustain Rally As Oil Makes New Lows Jan. 13, 2015

Risk Aversion Setting In?

Of course just as many of us who write about finance start talking about risk aversion hitting the markets the Plunge Protection Team or other teams of the big boys come out of the woodwork trying to show that we are wrong so Im not going to say that wont happen again. I am sure they will still do “what ever it takes” to try and protect the status quo just like they have been for the last several years. However at some point in time there will be a day when a few of them stop cooperating and do what they can to protect them self, at that point things could change fast. As I was talking to a member yesterday, we discussed the potential for the charade lasting longer than our lifetime being surely a possibility. However right now there are more potential flash points hanging out there than any time in the past. Who knows what will be the trigger whether it be a Greek exit or some smaller Asian country like it was in 1997 sending shock waves through the world economy getting the ball rolling. The issue here is that the domino set has never been larger in terms of what a small shock can and will do to such a fragile set up. The big boys know this and is why they have continually bailed out the banks since the 1980s.

The last thing I am going to do is say that this seemingly risk off trade will hold longer term but when Gold is on the rise while other commodities like oil, copper and iron ore are dropping, something is up and its not just one government playing games to try and hurt the other. As many have said in the past, when demand drops off since there has and never will be a true recovery with the current system, its only a matter of time before the true market does come back because losing all you have gained trying to maintain a failed system just dont compute. At that time one does what they can to protect them self and the dominoes start to fall. We may be there and we may not. However the tell will be if equities can hold above the December 2014 lows. If not we will likely see the last gasp from Central Banks as they lose all credibility. At that point, depending on whether or not they will be believed, the reset will happen or not. Its going to be an interesting weeks and months ahead.

EUR/USD Asia False Conviction

As I said in yesterdays commentary I am always going to question conviction on the EU and GU during the Asian session. It has a higher probability of being a fake out than true and yesterday was a good example of that. At this point I see the EUR/USD as going into a chop and they have no plan on pushing it so I will be looking at the extreme levels for the safest trades. The 1.1869 has the best probability for a short while the 1.1846 daily level is valid but a riskier entry. In order to take it there I will want to see either conviction below the Asian lows during London or at least leave the Asian box at the lows and see them suck in the break out traders to the lows first. Otherwise yesterdays lows are valid for the long but having the two levels just below it would be best to see them hit the ADR before taking the long without something showing they wont let it pass 1.1785. If it does reach that low I prefer to be short looking to take profit.

EUR/USD hourly chart 1-13-2015

GBP/USd Gets Unclear on Direction

When price moves like it did yesterday rejecting the push down it does raise the probability of a move up but isnt enough to give me a bias without showing conviction on the second push. I will be open on direction here today as well looking to potentially short from 1.5190 or look to take the long if we get some conviction above yesterdays highs. Otherwise if there isnt a short entry and it moves off without me to the downside I will wait for a test of the lows around 1.5112 but prefer the 1.5098 being safer.

GBP/USD hourly chart 1-13-2015

EUR/JPY Makes Second Push

The EUR/JPY made the clean second push yesterday with a nice set up at the 140.73 level. Good job to the members who caught that trade. The safer entry was when it came back to test after the two pins at the high of the day since there wasnt a pullback but never the less a darn nice trade. Today I will be looking to see the third that has likely already started. There was a early set up I was watching but never came back for an entry this morning so I will be looking for a backside entry during the London session. I have my doubts they will bring it back to the Asian highs but if yesterdays lows hold I will consider it there as well. They may push as high as 139.87 but so far it dont look like they will.

EUR/JPY hourly chart 1-13-2015

 

Forex News Today

The calendar is rather bare again today with the exception of UK CPI data. Expected to drop slightly but getting closer to the zero mark. If it does disappoint then the GBP should weaken depending on how bad it is. Probably mostly against the Euro but the GBP/USD should follow as well. A drop below zero and we should see a major drop as deflation thoughts sink in.

The US does have a Fed member speech that has potential to cause a stir. They seem to be looking to do more of the verbal intervention as of late and with the effect getting lesser every time the rhetoric may just get stepped up.

Happy Trading

Chad

MY APOLOGIES FOR THE BROKEN VIDEO OF INSIDE JOB IN THE COMMENTARY. I DIDNT THINK I WAS COPY WRITE INFRINGING WITH AN ITALIAN VERSION ALREADY ON YOUTUBE. HOWEVER YOU CAN STILL WATCH IT AT THIS LINK. STILL A MUST SEE!

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