A death cross is a technical indicator that
provides confirmation that a major trend change is underway. It
occurs when the 50 day moving average drops below the 200-day
moving average. It confirms the start of a new downtrend and is
the opposite of the more commonly known golden cross.
Back in July, the US Dollar index peaked and
since then, USD and its moving averages have been rolling over.
Today the 50-day and 200-day averages are "Even Steven" but any
further decline from here would generate a death cross, a bearish
signal for USD. The previous golden cross occurred a year ago,
while the last death cross on USD was in September 2010, as
expectations of the QE2 program were building.
There are two trends now undermining USD. First, the greenback
and US treasuries had benefitted earlier this year from huge
inflows of capital from other regions in a flight to safety.
While the global economy is sluggish, for many countries it’s
more of a correction within an expansion than a new recession.
Also, Europe continues to muddle along causing fears of a
financial meltdown to recede as shown by falling treasury yields
for countries like Greece and Spain even though they continue to
struggle with austerity. As fears dissipate, and the US economy
shows signs of life with recent employment numbers, capital is
starting to work its way back out into other markets including
stocks, commodities, resource currencies and European currencies
in a normal rebalancing.
Second, although many countries are easing monetary policy
through interest rate cuts and QE programs, the US QE3 program
appears particularly aggressive with its open ended nature. This
can undermine the value of the greenback against other paper
currencies and particularly against gold and silver.
These broad shifts of capital highlight why stocks, commodities
and precious metals, which had rallied so much and become so
overbought in August and September, have remained well supported
in recent weeks and have essentially consolidated at higher
levels rather than dropping straight back.
With earnings season starting in earnest, and the potential for
developments in Greece and Spain, the next several weeks may
generate a lot of news driven short-term trading opportunities.
It’s important though for traders to avoid getting too caught up
in day to day chatter by stepping back and recognizing the
broader capital flows in order to best take advantage of market
US producer prices were up 2.1% over year last month, more than
the 1.8% street estimate.
China new yuan loans were 623B in September, down from 703B in
August and short of the 700B the street had expected.
Advanced Micro (AMD) put out a profit warning last night,
announcing it expects Q3 revenue to be down 10% from Q2. Previous
guidance was for revenues to come in between a 0.4% decline and a
Earnings reports are out from two major banks
JPMorgan Chase JPM $1.40 vs street $1.21
Wells Fargo WFC $0.88 vs street $0.87
North American indices
The Dow Industrials (US30 CFD) is holding 13,300 support for now
as it bounces up from an oversold 4-hour RSI but needs to clear
13,400 in a meaningful way to call off the current
The S&P 500 (SPX500 CFD) is up a bit this morning but
remained below trend resistance overnight. It needs to clear
1,445 to call off the current downtrend with next resistance near
1,460 and current support near 1,425.
The S&P/TSX 60 (Toronto60 CFD) remains in the lower half of a
695-715 channel currently flirting with the 700 level
- Copper has fallen back a bit toward the low end of its
$3.70-$3.85/lb trading channel with next support near
- US crude remains nicely supported above $91.50/bbl with
resistance near $93.00, $93.75 and $94.80.
- UK crude has slipped back a bit with narrowing spread with WTI
suggesting political tensions may be easing for now (but could
resurface at any moment). Resistance now near $116.00/bbl with
support near $114.00 then $112.25.
- Gasoline was unable to break $3.10/gallon and has dipped back
under $3.00. A break of $2.96 could signal a deeper downdraft
toward key neckline support near $2.86.
- Natural Gas remains above $3.40/mmbtu, a breakout point that
has become a new support level with measured upside resistance
near $3.60 and $3.80.
- Corn is testing $7.70/bushel, a key support/resistance level
today with next support near $7.40-45 and resistance near $7.70
- Soybeans was unable to break through $15.90/bushel resistance
and has slumped back toward $15.45 with more support near
- Wheat has slipped back from $8.80/bushel toward $8.65 with more
support near $8.45 following yesterday’s big jump.
- Gold held $1,760/oz support, setting a higher low that keeps
its broader uptrend intact. It has started to work its way higher
toward $1,775 with key resistance in place in the $1,795-$1,800
- Silver has been holding steady near $34.00/oz overnight within
a $33.50-$35.00 trading channel.
- USDCAD continues to bump up against $0.9800 as it tries to
decide whether to break out or resume its downtrend. Lower highs
suggest the primary downtrend remains intact with next support
near $0.9730 then $0.9630.
- EURUSD continue to recover, trading near $1.2975 with next
resistance near $1.3000 and $1.3075 and support near $1.2950 and
- GBPUSD continues to claw back lost ground, advancing on $1.6100
today with next resistance on trend near $1.6200 and support near
- USDJPY is holding in the upper half of a 77.00 to 79.00 trading
- AUDUSD stalled short of $1.0285 and has dropped back a bit with
support near $1.0230 then $1.0200.