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Japanese Yen Aiming for the All-Time High – August 31, 2010

Good day ladies and gents. Well, it’s been a pleasant couple of months or even years for the Japanese yen bulls. As you can see, the USDJPY has sunk for 4 consecutive months in a row! It’s actually been on a downward slope since the last quarter of 2007! Nice. You see, the pair was running at a high of 124.16 back in 2007. Today, it touched a low of 83.59. That’s a gain of more than 4,000 pips in just three years for the yen over the greenback! The yen bulls would be celebrating with their sakes up high by now. Kombei! Still, things look even rosier for them as the USDJPY is poised for another drop. Just recently, the pair has fallen below it’s 2009 low. Given this, the next support that I see from the technical side of things is its previous low at 80.43 which was set way back in April 1995. If the yen continues to move up over the USD, then the pair would more likely revisit the mentioned all-time low.

The yen has been getting much favor from investors due to the recent weakness in the global equities markets. The market perceives the yen, aside from the greenback, as a “safe” currency due to its ultra low interest rate of 0.10%. Basically, Japan is lending out free money just to encourage lending and spending. Note also that Japan is the number three biggest country in the world. On top of that, like the US Fed, the Bank of Japan, has the capacity to just print more money to service their debt. So when there is risk aversion, the market tends to divert their funds to the safety of the yen and away from the higher yielding assets. And between the USD and the JPY, the latter is still perceived as the more safe given its lower interest rate.

Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa have been trying to verbally intervene in the markets by saying that they would start preventing the yen’s rapid appreciation. The market, however, called their bluff as evidenced by the ongoing rise of the currency. Remember that the BOJ has expanded again its loan program by 10 trillion yen on top of the 920 billion yen stimulus of the Japanese government to encourage consumption. Naturally, the yen should weaken given the increase in money supply but it did the opposite as it continued to strengthen. As of now, it appears the the overall market forces has the better say and power on the valuation of the yen than the BOJ itself. So if the global situation worsens ans and say the US market goes into a double dip, then the yen would more likely benefit some more.

The Home Depot Update – August 31, 2010

Hi stock traders! Here’s an update of my technical analysis on the largest home improvement retailer in the United States, The Home Depot, Inc. or HD in the New York Stock Exchange (kindly check here for the previous post). Right now in the HD stock chart, there is a reverse flag formation (indicated by the red lines) setting up and the stocks could breakdown from the flag’s support anytime soon. If it does, the immediate support could be $26.62. If the stocks drop further below $26.62 price mark, the next support it could encounter is $24.47. In case the stocks change its course and start to ascend, it needs to first break out from the 4-month downtrend. Once it does, the $29.00-30.00 could be the next resistance area. Its direction in the coming days will now rely on where the US market’s performance.

A Bearish Pattern in the AUDJPY – August 31, 2010

Hello forex peeps! For months now, the AUDJPY currency pair has been moving sideways. Apparently it has been setting up a triangle formation in its daily chart and could be bearish as it came from a downtrend four months ago. So is the AUDJPY currency pair bound to go lower? I would say “yes” once it breaks below the current support line (red line). If it does, it could head all the way down and test the 70.00 psychological support (black line) until it further drops again. On the upside, if AUDJPY manages to climb up, it could first test its current resistance (blue line). Once that hurdle get cleared out, there could be some selling pressure at the next resistance at the 80.00 psychological area.

Is the Euro’s Short Rally Over? – August 30, 2010

Good day to you my Forex friends! Here’s an update on the EURUSD or the fiber as what they call it on Wall Street. The last time I covered the pair (please see my previous post here), it had just broken down from a head and shoulders formation. Since then, the pair has rallied to form what appears to be a rising wedge pattern. In case you do not know, a wedge is generally a continuation pattern as it just represent a short term rebound in prices. Such rally could be due to profit taking or short covers. At present, the pair is encountering some resistance at the neckline of the head and shoulders. If it’s unable to move past the neckline and it falls below the support of the rising wedge, it could slip at least back to 1.2600 level. Further weakness could push it all the way down to the previous low at 1.2150.

The highlight of the week for the euro zone will be the the European Central Bank’s monetary policy decision on Thursday (September 2). The ECB is expected to hold its interest rates again at 1.00% following a drop in German yields. 30-year yield, for your information, have dropped to below 3.00%. And despite the “cheap” borrowing costs, inflation at least in Germany remains subdued. In fact, the latest month-over-month German CPI reading reads at 0.00%. With consumption and inflation low, the ECB would likely be a little dovish about its short term forecast on the euro zone’s economy as a whole. Such could then send investors back to the safety of the USD.

Yum! Stocks Update – August 30, 2010

Hi guys! Let’s now take a look again at Yum! Brands, Inc., the world’s largest fast food restaurant company, which I posted three weeks ago (kindly check here). The triangle formation in the YUM stocks looks to be riper now compared to when I last posted on it. Despite the bearish sentiments towards the indices of the US market , if the stock price breaks out of the triangle’s resistance, it could go higher. However, there could some selling pressure at the next resistance at $44.00. If the $44.00 price mark gets cleared out, the next target price could be $48.00 which is the size of the triangle’s base added up to the breakout point. On the flip side, the immediate level of support could be the $40.00-40.50 area. In case the stocks drop further below that marker and breakdown from the triangle’s support which is less likely to happen since the formation’s coming from an uptrend, the next support could be $38.25.

The S&P 500 and the US Economy on Shaky Ground – August 30, 2010

Welcome to another week of stock trading my friends! Last week I noted the possibility of a breakdown in the Dow Jones Industrial Average (please see it here). Well, guess what. The broader S&P 500 appears to confirm where the Dow and the US economy are heading. As you can see from the $SPX’s weekly chart, the index has been forming a head and shoulders pattern. Remember that a couple of month’s ago it already attempted to breakdown but failed. Of course, it was a good thing that that did not happen. The question is, will it be able to avoid a breakdown this time around? Well, the S&P 500 rebounded very well last Friday with a gain 1.66% to close at 1064.59. It, however, would need to print a lot more than that to be completely out of the woods. You see, a a break below the formation’s neckline around the 1,000.00 region could send the broader index just below 850.00. Notice also that both the RSI, which is already below 50, and the MACD, which is in the negative region, are now indicating that the index’s downside move is starting to pick up speed. Let’s just just hope that the index is able to rebound and move past the peeks of the two shoulders and the head to resume its uptrend.

Existing home sales sunk by 27.2% to a 3.83 million seasonally adjusted annual rate which was below the market forecast of 4.72 million in July. This marks the accounts lowest tally since 1999! New home sales also weakened significantly to 276,000 from 315,000. Last year, sales were supported by the government’s tax credits. Sales, however, became subdued when this program expired. As I’ve mentioned in my previous post, perhaps the government could support the industry by re-introducing the same program to encourage home buyers.

Last Friday, Fed Chairman Bernanke’s said that he foresees a rebound in the US economy in 2011. He added that the Fed is prepared to use another set of “unconventional measures” if the economy does not pick up as desired in the near term. Do I hear quantitative easing? Well, the Fed’s benchmark interest rate is already at 0.00-0.25% so the next thing that the Fed can do is to do another set of QE and/or reduce the financial institution’s reserve ratio to provide more liquidity in the market.

In my opinion, both the Congress and the central bank should work hand in hand in order to prevent the economy from collapsing again. Because if it does collapse, the average Joes would find themselves in worse shoes. Unemployment would almost certainly pick up with a deterioration in market confidence. This would not only affect the US but would also send shockwaves across the globe. There is no such thing as a perfect decoupling because of globalization and trade. Hence, if the US sinks, other economies, even the emerging ones would find themselves in a very difficult situation.

Anyway, the week will kick off for the US with the release of the Conference Board sentiment index on tomorrow (August 31). The CB consumer sentiment is forecasted to rise slightly to 50.9 from 50.4. Though the market’s confidence as of late has been obviously dampened due to the disappointing home sales figures. ADP employment change results and the ISM manufacturing index are also due on Wednesday (September 1). The ISM index is seen to have softened a bit to 53.3 from 55.5. Remember, however, that the latest tally of the Philadelphia Fed Manufacturing index showed a drastic drop to -7.7 from 5.1. Such could also reflect in the ISM’s number. On Thursday, pending home sales, which are anticipated to have dipped again by -1.5% after already losing by 2.6%, will be reported. still, a worse-than-projected count could happen given the previous results of the new and existing home sales. The spotlight, of this week though will be the NFP report of Friday. Firms are seen to have slashed another 101,000 jobs which could push the economy’s unemployment rate to 9.6% from 9.5%.

Given the recent data and the present market forecast, worse-than-expected results are very much likely in at least one of the accounts. Such could send the market back to risk aversion mode which then could send the major indices into critical levels. Still, anything is possible. Let’s just hope for the best and prepare for the worse. But given the uncertainties, I suggest that you at least lighten your positions in equities.

Warning! Double Dip Recession Ahead on the US! – August 26, 2010

Good day ladies and gents! Here’s my take on the US economy. In today’s feature is actually the daily chart of the Dow Jones Industrial Average or DJIA. For those who do not know, the DJIA or DJI is the stock index of the 3o biggest US companies. The index of course, reflects the present average prices of the included companies. Positive or negative sentiment towards any one of these firms are of course “priced in” in their respective valuation and in the index as a whole. So if these companies do well, then the demand for their shares would increase, thus, increasing their price as well and vice versa. Given this, the index, aside from the S&P 500, can be pretty much be used as a leading barometer of the US’s economy.

Anyway, as you can see from the chart, the index has been rising since it hit a low of 6,470.11 back in March 2009. Last April 26, 2010, it reached a high of 11,258.01, almost doubling its valuation, before cooling down. It seems, however, that the index has already lost its upward momentum. worse, it looks like it is starting to reverse by forming a head and shoulders pattern. If the index breaks out from this pattern and falls below the marked neckline, it could slip all the way somewhere near 8,000.00. That’s a drop of at least 2,000 points from the current market price so beware! A breakdown from the pattern could indicate that the US is back in the bear market again – a double dip recession I should say.

Recent economic data in the US are far from satisfactory. Both existing and new home sales have been down for the last 2 months with them even falling below the market consensus. Core durable goods orders have also fallen way short, in fact, it even unexpectedly contracted by 3.8% in July. The manufacturing activity at least in the US’s east side as gauged in the Philadelphia Fed manufacturing index has also been dreadful. the index fall back to -7.7 from 5.1, the first time it touched negative in 12 months. So with lending and consumption still subdued despite the Fed’s low interest rates, perhaps the US government could once again reinstate the tax rebates on big item purchases like cars and houses last year. This could jump start the economy, at least in the spending part, in the very near term. A lack of positive catalyst, however, could only drag the economy into another contraction or recession.

Updates on the Phoenix Petroleum Stocks – August 26, 2010

Hi stock traders! Here’s a follow up on my Phoenix Petroleum (PNX) technical analysis which I posted a month ago right when its stocks broke above the ascending triangle formation’s resistance. As you can see now on the PNX stock chart, the stocks continued to ascend upon the breakout tapping the minimum target price of 8.00 pesos which also is the immediate resistance as I mentioned before (kindly check here). Lucky for those who bought the stocks right at the breakout point as they could have already yielded around 10% in a month time if they sold at 8.00 pesos. Well, I bet the others are saying right now they could earn that in just a day trading other stocks lol.

As the Phoenix Petroleum stocks continue to move within the 8.00 peso resistance and the 19-month uptrend, they are going to lose their breathing space as those levels are about to intersect in a few months. Thus, the stocks could just either move past above that 8.00 peso marker or dive below the the 19-month uptrend. In case it breaks above the 8.00 peso resistance, the next one could be 8.70 pesos. On the other hand, if the stocks drop below the 19-month uptrend, the next area of support is 6.80-7.00 pesos. If the stocks continue to decline and clear out the 6.80-7.00 peso level, the next support could be 6.50 pesos.

The Aussie Bears’ Return – August 25, 2010

It’s a bad day for the Aussie bulls since it seems that the bears have just taken over the trading driver seat. As you can see from the AUDUSD’s 4-hour chart, the pair appears to have broken down from a head and shoulders pattern. Remember that the Australian dollar had risen to as much as 0.9200 over the greenback early this month after touching a low of just above 0.8100 in June. though, by the looks of it, it’s luck has already turned. Yesterday’s movement pushed the prices below the pattern’s neckline and also under the previous resistance-turned-support. Given this, the price could head all the way down to 0.8500 though the previous support at 0.8600 could possibly halt its descent. In any case, things still look bearish for the AUD unless it is able to move back up above the neckline.

Due tomorrow (August 26) at 00:00 GMT and at 1:30 am GMT are Australia’s Conference Board leading index for the month of June and the country’s second quarter private capital expenditure. The CB leading index had risen by 0.3% in May though it could print a lower gain or even a contraction given Australia’s weak home loans figure and the country’s high unemployment rate. In case you do not know, home loans have fallen by 3.9% in June after posting a jump of 3.0% during the other month. Unemployment rate has also jumped to 5.3% from 5.1%. The country’s private capital investments for the 2Q, on the other hand, is projected to have expanded by 2.3% after dipping by 0.2%. Capital investments take up about 28.54 of Australia’s overall GDP or output. Hence, an increase in this number could push the Aussie higher in the near term. Though in my opinion, a hike of 2.3% or lower is not enough to push the Aussie back on the bullish track unless of course the figure prints a much stronger score. Watch out for the report tomorrow!

Bullish Pattern for Union Pacific Corporation? – August 25, 2010

Union Pacific Corporation or UNP as listed in the New York Stock Exchange is engaged in the transportation business. Their operating company, Union Pacific Railroad, is the largest railroad network in the United States. Currently, there is a triangle formation setting up in the UNP stock chart. This is most likely bullish as the stocks are coming from an uptrend. If the stocks breakout from the triangle’s resistance, it could climb higher and look for some resistance at the $80.00 psychological area. If that psychological level gets cleared out, the next resistance could be $85.80. In case the stocks breakdown from the triangle formation which is less likely to happen, the significant support could be $66.00. If it further breaches below that level, the next support could be the $60.00 psychological marker.

EURO Breaks Out! But to the Downside! – August 24, 2010

Good day FX friends! Here’s an update on the EURUSD which I posted last August 17 (please see my previous blog here). In that post, I mentioned the possibility of the euro breaking out to the upside. It turns out that I was wrong as the EUR, instead of moving north, slid and broke down. As you can see from its chart, it appears that the euro’s recent rally over the greenback is over. After breaking out from an inverted head and shoulders pattern, the fiber or the EURUSD pair managed to achieve its minimum target and more. It then continued to rise and it even marked a new 3-month high at 1.3334 before dipping again. After its drastic slide from its 3-month high I though that it would reverse and turn up as suggested by what appeared to be another inverted head and shoulders. However, a break out from this pattern did not materialize. Its price then formed a head and shoulders (bearish and not to be mistaken with the inverted version) pattern. Its price action during the first days of this week proved costly as it pierced through and below its uptrend line and the formation’s neckline. Given this, the pair could now fall all the way to the 1.2150 area. Even if it rallies, the head and shoulders neckline at 1.2750 would prevent it from rising any further.

The euro lost its appeal on fears over Europe’s economy. The services PMI of France, manufacturing PMI of Germany, and the euro zone’s overall manufacturing purchasing manager index all failed to meet the market’s consensus. The French services PMI fell to 59.9 (versus 60.7) from 61.1. Germany’s manufacturing index also weakened to 58.2 from 61.2 which resulted into a broader fall in the euro zone’s number to 55.0 from 56.7. Note that the index can be used to gauge the business activity of the respective sectors in the economy. Why? Well, purchasing managers hold perhaps the most current and relevant insight into company’s view of the economy. For example, if the company is starting to pile up their invetory then perhaps it is expecting a uptick in its business in the near future. In any case, a drop in these figures suggests that the recovery in the euro zone’s economy could have slowed down.

On tap on August 25 and 26, respectively, are the German Ifo business climate index and the GfK German consumer climate index. Ifo’s account is seen to have retreated to 105.8 from 106.2 while the GfK index is projected to have increased to 4.1 from 3.9. But given the weaker-than-expected PMIs in the euro zone and the recent tentativeness in the global markets, business climate in Germany and the euro zone could have dipped as well.Such could very well reflect in the upcoming business and consumer climate surveys. If this is the case then the euro could once again take another hit.

SNI Stocks Forming a Head and Shoulders? – August 24, 2010

Scripps Networks Interactive, Inc. or SNI in the New York Stock Exchange is an American Media company that owns Cooking Channel, DIY Network, HGTV and co-owns Travel Channel and Food Network. They were formed back in 2008 as a spin out of the E. W. Scripps Company founded by Edward W. Scripps. During yesterday’s trading session, their stocks declined 1.43% to $40.74.

There could be a head and shoulders formation on their stock chart and this could propel the stock price lower. Once the price breaks below the head and shoulders neckline, it could find some support at $38.00. If that marker gets further breached, the next support could be $36.00. In case the stocks don’t breakdown from the head and shoulders setup and decide to move higher, the immediate resistance could be $43.15. If the stocks move past above the $43.15 price mark, the next resistance could $45.58.

US Dollar Index Breaks Out! – August 23, 2010

Welcome to another week of FX trading! In today’s fx feature is an update of the US dollar index. In my last post, I took specific note of the inverted head and shoulders pattern that was brewing at [Read more...]

Update on the Nikkei Chart – August 20, 2010

The Nikkei 225, the major stock market index for the Tokyo Stock Exchange (TSE), closed this Friday’s trading session at 9,179.38 with a 1.96% decline. The chart of the Nikkei index has been moving sideways for a year now and could continue to head this direction until breaks from major levels take place. In case the index drops below the 9,000.00 support, the next support could be 8,493.77. If that price mark gets breached further, the next support could be 8,084.62. On the upside, the immediate resistance is the 4-month downtrend. If that gets cleared out, the next resistance could be 9,807.36 then the psychological resistance at 10,000.00.

US Dollar to Make a Comeback? – August 19, 2010

Hiyo forex peeps! In today’s FX feature is an update on the US dollar index (please see my my previous post here). As you can see from its daily chart, the index appears to be poised for a break to the upside. Why? Well, [Read more...]

The ABS-CBN Run! – August 18, 2010

The ABS-CBN Corporation or ABS in the Philippine Stock Exchange is one of the top TV station network in the Philippines. They are the country’s first and largest integrated media and entertainment company. The last time I posted my technical analysis of its stock chart was three months ago and many price movements have taken place since then.

Back in my last post on this Lopez owned company (kindly check here), the 9-year resistance line was still intact and the stock value was still at 35.50 pesos. Based on the stock chart now, the stocks broke out from the 38.50 peso 9-year resistance a months ago (indicated by the red circle) and made a new 9-year high of 54.40 pesos the past few days. A nice 40% gain in less than a month would have been bagged if you bought at the breakout point and sold at 54.00 pesos. Definitely not bad at all! If the ABS-CBN stocks successfully clear out the 54.40 peso price mark, it could aim for the next resistance at 56.50 pesos. Then the next resistance after that is 67.00 pesos. On the downside, if the stocks fall, it could find some support at the 50.00 peso psychological area. If it further falls below that level, the next support could be 44.50 pesos.

Short Term Bullish Reversal Seen on the Euro? – August 17, 2010

Good day forex peeps! Here’s an update on the EURUSD pair or the fiber. Last August 12 (please see my last blog here), I noted the pair’s disastrous month when it fell by more than 450 pips after reaching a new 3-month high of 1.3334 on August 6. It’s a good thing that the previous support at 1.2750 and the uptrend line. Since August 11, the pair, however, has been consolidating into what appears to be an inverted head and shoulders formation. Are we about to see a bullish reversal in the euro’s valuation? Maybe. Anyway, if the pair breaks above the neckline of the formation then it could go all the way back to 1.3300. A fall below the uptrend line, on the flip side, could push it back to 1.2750. But since the uptrend line is still intact, the pair has a higher chance of moving north.

Earlier today, Germany’s and the euro zone’s Zew economic sentiment indices for the month of August came in mixed. Germany’s index unexpectedly slipped 14.0 (versus 20.9) from 21.2, registering a new 6-month low. The broader sentiment index for the euro zone, on the other hand, surprisingly jumped to 15.8 from 10.7 (vis-a-vis 10.6). Mixed data from these two accounts caused the euro to just trade flat. And with no more data coming out of the euro zone in the horizon, the EUR could just trade in a range bound fashion for the mean time. Still, the top tier economic reports in the UK and US tomorrow could cause some volatility on the euro’s short term valuation. UK is seen to have posted another 0.4% gain in its retail sales on top of its 0.7% hike in the previous month. Initial jobless claims in the US, on the other side, for the recent week is seen to have tapered to 479,000 from 484,000. Also the US’s Philadelphia Fed manufacturing index likely reached 7.2 in August from 5.1. Watch out for these reports on August 19 at 8:30 am and 12:30 pm, respectively! Upbeat tallies from any of these accounts could bolster the demand for the non-dollar currencies like the EUR.

What’s Next for The Home Depot Stocks? – August 17, 2010

Hello trader friends! Here’s an update of my technical analysis on the largest home improvement retailer in the United States, The Home Depot, Inc. or HD in the New York Stock Exchange. The last time I posted on this was when it just had broken down from its 15-month uptrend last June (kindly check here). After that, the selling pressure followed through and the stock price went all the way down clearing out the $29.44 marker and found some support around the $27.00 area like what I pointed out on my previous post on this topic. If you were able to short at $31.00 or right at the breakdown point, that’s around a 10% gain upon covering your short position at its closing price yesterday of $27.38… not bad at all!

Right now, the HD stocks are still facing downwards and could head further down. If it does, the immediate support could be $26.62. If the stocks move past below the $26.62 price mark, the next support that it could encouter is $24.47. In case the stocks change its course and start to ascend, it needs to first break out from the 3-month downtrend. Once it does, the $29.00-30.00 could be the next resistance area.

Dow Jones Industrial Average Current Levels- August 16, 2010

Since the start of this year, the Dow Jones Industrial Average seemed to have just been moving sideways by looking at the chart. There were times I thought it had broken down and there were also times I thought it had broken out (kindly check here). Well yeah, the 3-month resistances and supports got broken but this is just looking at the smaller picture. If you look at a bigger picture, the 8-month time-frame for example, the index could just be moving sideways after all.

As it moves sideways, there are current levels we need to be looking at. The immediate support is the 10,000.00 psychological level. If the index drops further below that marker, the next support could be 9,600.00. On the upside, the significant resistance area could be 10,755.70. If the ^DJI moves past above that, the next resistance could be the 11,000.00 psychological level. Once that gets breached, the next resistance is the one-year high at 11,309.00. If any of those levels remain untapped, the Dow Jones Industrial Average could just move within those numbers. The question is, which direction would this US benchmark take in the coming months? Well, it all depends on the future global economic data.

FLI Profits! – August 16, 2010

Hello there! Here’s an update of my technical analysis on Filinvest Land, Inc. (FLI in the Philippine Stock Exchange) that I posted two weeks ago (kindly check here). The last time I posted about FLI stocks, they were still trying to breakout from the triangle formation by consolidating and going in and out of the resistance level. Fortunately, they were able to fully breakout and made a 2-year high of 1.18 pesos. Once the 1.18 peso price mark gets cleared out, the next resistance that could be aimed for is 1.33 pesos which is the base of the triangle added up to the breakout point (red circle). However, the stocks went back down and found some support at 1.04 pesos. If the stocks breach below the 1.04 peso marker, the next support could be the 1-peso psychological area.

Word on the street, Filinvest Land Inc. launched five new projects to meet the demands for residential properties. At the same time, they bagged a good 2nd quarter 2010 net income of 31 percent or 998 million pesos compared to 759 million pesos during the same period last year. This in turn propelled their stocks to rise 2.8% to 1.10 pesos during the trading session earlier.