IIFT Daily Note with Peter Brown

Young Bear to replace the Old Bull?

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IIFT 2

Good Morning All,

Long term Daily Note readers will know from years gone by that it is tradition for Peter to miss some very significant weeks in the financial markets. As if the world knows Peter’s holiday plans and waits. Nothing of major significance has occurred just yet but it is worth noting how the US Stock market is in cheap territory trading at the bottom of a 15 month range and struggling to really take off. We a have had attempts to bounce but continued dips in Oil price along with negative sentiment is dragging it back down. It is quite possible that as the Old US Bull slowly drowns in Oil we could see a New Young Bear take over. From a technical Charting aspect this will be signaled by a break through the bottom of this 15 month range. If/when that happens, hold on to your hats as 2016 could be where the rollercoaster tips off the edge.

Yesterday certainly turned into the interesting day that was expected. Oil of course at the forefront. Hopefully we all kept a good close eye on it all day. Today we will of course be doing much the same. At this time yesterday we were trading over $31 per barrel and last night we closed below $30. If Oil had some stability it would have closed above $30.

Today we will continue as we would have yesterday…. If Oil is falling you need to be short on Indices and commodity based currencies like Aussie (AUD) and the Loonie (CAD). I also mentioned yesterday that although the BOJ have gone into negative Interest Rates we cannot be short JPY just yet as it will be sought after as the peculiar safe haven in these risk off markets.

As I write this we are seeing a small bounce, this will attract further sell offs if Oil dips again, which we would expect.

Watch out for US Crude Oil Inventories at 15:30

Niall

(Filling in for Peter this week)

On the calendar today:

09:30 – UK – Services PMI

13:15 – US – ADP Non-Farm Employment Change

15:00 – US – ISM Non Manufacturing PM

15:30 – US Crude Oil Investories!!!!

ttp://www.iift.ie/economic-calendar/

Comments and questions to noconnor@iift.ie

 

Day trading picture 1

S&P (Cash/DFB)

Dipped back into a short term downtrend yesterday as we broke through the support level as to be expected with Oil prices heading south. Breaking our support at 1922 we had our 20-30 pt fall as expected. Today is all about 1900, can the buyers hold it up above 1900. They just about managed it last night pulling the index back out of troubled water at 1900. The sellers will be looking to hold it’s head below 1900 which won’t be a pretty sight for those holding long positions. I do not expect S&P above 1920 today.

Conditions: Hurricane Resistance: 1,910 (but could creep up to 1920) Support: 1,900

Wall St (DFB)

Much the same as S&P as usual. Yesterday there was only one Dow Stock trading in positive territory which was DuPont after the earnings release while Alphabet surpassed Apple as the Largest Company in the US, also following earnings. None of this was enough to hold the Dow up of course. Expect more volatility in this around earnings.

Conditions: Hurricane Resistance: 16,500 Support: 16,300

DAX (DFB)

Dax continuing to under perform. Support and resistance lowered even further. Expect further sell offs.

Conditions: Hurricane Resistance: 9,600 Support: 9,450

FTSE 100 (DFB)

With Oil the topic of conversation again, we will continue to discuss sell options. Sadly FTSE fell 10pts shy of my sell level so you might have missed that opportunity reading this. As soon as I had posted it more or less dropped and continued all day. Look for shorts again today, hoping for a bit of a bounce further up to get more value. Fully expect support to be broken again later.

Conditions: Hurricane Resistance: 5,920 Support: 5,850

EUR/USD (DFB)

Same as yesterday – Looking for a push lower in March but in the meantime this is rangebound week to week so it’s a buy below 10,800 and a sell above 10,950. Breaking higher yesterday raises it’s levels again for today…. We are nearing the top of the range now so sell positions will start to flow in around the 1.0960 level, so I would expect to stall here and dip back down on a small low risk day trade and could develop into a strategic sell off back to the mid range as the week develops.

Conditions: Choppy Resistance: 1.0940 Support: 1.0875

USD/JPY (DFB)

My view from Monday about this heading for 122 and 123 going forward is still the same but now that the oil dip has taken over again. I want to buy strategically here at 119.50 but I will wait for the markets to settle first. When they do, this will bring in cheap buys targeting the 122 and 123.

Conditions: Choppy Resistance: 120.50 Support: 119.50

AUD/USD (DFB)

It has shown it’s weak hand on Oil dips. Another product to sell on bounces based on the weakening Oil. AUDJPY could be the short position again, hopefully some of you had a look at this from yesterdays note.

Conditions: Choppy Resistance: .7050-60 Support: .7000-10

GOLD (DFB)

Gold still looking strong but quite high now if you are a buyer looking for value. Looking a bit top heavy today on the short term. Trading quite calmly but no trade here for me. Tighter support and resistance, looks like it could break lower.

Conditions: Choppy Resistance: 1130 Support: 1125

SILVER (DFB)

I do not have much of a view on Silver. I know Peter was a buyer and looking for 15.95 so I will let him run that position with his desired stops and targets.

Conditions: Calm Resistance: 14.50 Support: 13.80

 

Strategic trades picture1

Bought Silver (Mar-16) @ 14.15 Stop @ 13.65 T/P 15.95

 

Equity Trades picture1

 

LIVE Trades:

To take advantage of the outlook for Irish growth we like Irish Continental Group Plc (ISEQ) It has had good results, is well managed and due to benefit from the Irish economic story. The share has had a solid rise so we have to be patient in order to get some value. We recommend three stage approach to buying.

Order to buy a third stake size @ 520 / 500 / 485  Stop loss @ 460 Target 600 plus

Bought a third stake at 520. Stop loss 460

Bought another third stake at 500. Stop loss 460

New Trade

Royal Dutch Shell PLC A (LSE) Jun 16

This is a buy right now with a 6 – 12 month timeline but with a few key points:

– firstly we’re bottom fishing given crash of oil and the fact that this is still a “falling knife” trade at 1490s level.

– so the stake now is a third or half at most with SLO at 1250

– further order or buy levels at 1450 and 1410 with SLO at 1250

– the target is a return to 2000 or £20

– SLOs will be adjusted upwards every so often if the trade is going well to manage to an increasingly favourable R/R level.

-the stock pays a large dividend circa 9% which spread traders will benefit 90% of.

3 Comments

Martin O Sullivan

February 3, 2016

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Niall,

— Just a quick one, would the crude oil inventories be a straddle event or is the market likely to whipsaw given the volatility?

Regards,
Martin.

Niall O' Connor

February 3, 2016

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Hi Martin,

The Crude Oil Inventories would certainly be a straddle event.

What you need to be careful of though is if does act a little volatile in the run up to 15:30 you would need to be careful of your orders being triggered too early.

If it is the case, then you may need to use a wider straddle and/or try to set it as close to 15:30 as possible.

It is a very tricky strategy for anyone who is a beginner so keep risk (stake sizes) quite low.

The straddle should provide somewhere from 50-120 pts and should happen within 15 seconds to 2 mins.

Anyone who is new to straddles should using a demo account for practise.

Niall

Martin O Sullivan

February 3, 2016

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Thanks Niall,

Regards,
Martin.