The Week AheadBrian Kahn - Saturday, September 29th, 2012
Before previewing the week ahead, let's wrap up Friday's data. We saw the CHIPM headline number contract to 49.7. Sub-components such as new orders and employment were dismal. In fact, the employment component was at a two and a half year low. See my previous article titled "Stink, Stank, Stunk" for further commentary on last week's brutally soft economic data.
This upcoming week will be a whopper:
**Monday: ISM Manufacturing - watch the sub-components. Bernanke is also on the docket.
**Wednesday: ADP - blah, blah, blah - it is not a government number and has a terrible track record. ISM non-manufacturing is also on the docket - check the sub-components!
**Thursday: claims, Bank of England, European Central Bank, FOMC minutes and later that evening, the Japanese Central Bank
**Friday: monthly jobs data.
So why do I stress the sub-components of the ISM Manufacturing and Services data? Because it is unemployment Friday and any jobs data you can get prior to Friday's release will help you set up your trades and portfolio for that event.
Now, just to play the other side of things. None of the above matter. No matter if the data come in soft or better than expected, the market rallies.
But, and this is a BIG but! But, QE3 already happened. We know the Fed is basically out of the mix for at least a few months as new data comes in and the elections take place. So, if data comes in disamlly below expectations, the equity markets could start to back off.
Now this brings us to the ever important technicals. In SPX, watch 1425, 1408 and 1398. Below that, 1370-1350 is a real possibility and with that, a potentially sweet buying opportunity if you are optimistic longer term.
As far as specific charts go, I am looking for a "downtrend" to be in play if we make lower lows and lower highs. So far, the SPX topped out at 1460ish and came down to 1430. It spiked on Thursday back up towards 1450 only to sell off again on Friday. By the way, has anyone looked back to see the last time we were down more than 5 points in the SPX on a Friday? Are sellers now just a little more confident since QE3 has already taken place?
More charts with Fibonacci's will be up later this week if we do in fact break below the 1420-1425 area. It will be very interesting to see if the bulls can keep pushing at these "elevated" levels.
With regards to forex pairs, the song remains the same. Muted trading ranges compared to equities. Additionally, the USD is gaininga bit of strength as the "inter-market relationship" takes over where equities sell off and the USD rallies. Look for this to continue of equities continue to soften. Looking at the EUR/USD, let's see if the 38.2 and 50 levels will be tested. Will they be buying opporutnities?
Past performance is not indicative of future results
Happy Trading and Be Environmentally Cool
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
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Educational purposes only - no buy, hold or sell recommendations.
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