Market Analysis for 06-28-12

This is a quick market update for June 28, 2012

The markets have exhibited the deflationary behavior we were leaning toward. We are at a critical juncture at today's close. Acceleration lower in the EURO and stocks are possible within the next two trading sessions. Yet, we have to face the potential of a manipulated support here. The next 48 trading hours are key.

Currencies

AUDUSD: Quick long Aussie trade exited at our breakeven level stop (see daily chart below).

ACTION: Now we are recommending to be lightly short with an expected acceleration lower if .9967 is broken to the downside. Move lightly short position stops to 1.0100 (current price) if .9967 is broken, and use that as an initial stop if you wish to short at .9967 (on a stop to open).

aussie daily chart

GBPUSD: After our stated 1-3 day corrective rally scenario, the Pound Sterling experienced a two-day corrective rally and is in acceleration lower as expected (see Cable chart below).

ACTION: Continue shorting until further notice. Targets are: 1.5380, 1.5348, 1.5280 and 1.5248 (our two preferred lower targets for this wave).

british pound daily analysis

EURUSD: After our stated 1-3 day corrective rally scenario, the Euro experienced an inside daily bar, then a slightly higher corrective high, fitting our corrective rally setup. This pair is now in acceleration lower as expected. A break above the recent high of 1.2524 would negate the lower move scenario for now (see daily chart below).

ACTION: Continue shorting the Euro until further notice. Targets are:1.2375, 1.2320, and 1.2264 (our preferred lower target for this wave).

euro daily chart

USDCHF: Swissy broke out to the upside, which we were leaning towards in our strong US dollar scenario. The price is currently on the Andrews Median Line resistance area. Stops should now be at .9590 (well above breakeven) with our preferred target at .9790 or higher, which would then complete Wave 5 of larger degree Wave (3). See daily USDCHF chart below with analysis.

swissy daily chart

US Stock Market

DJ: US Dow Jones Stock Index sold off strong after the June 19th corrective high, then made an impulsive looking 5 wave down move to complete a likely Wave 1 low. We stated that the US stock market would also likely have a 1-3 day corrective rally, which so far looks perfect!

IMMEDIATE SITUATION: US stocks are on critical support (see 4-hour and daily Dow charts below). Breaking the June 26th low of 12378.65 and then 12310, would likely mean a Wave 3 of a larger degree wave (3) had begun and a devastating plunge would take hold, taking stocks over the cliff in the beginnings of a waterfall decline. However, since the ED interest rate futures pushed forward by 6 months vs. the SP500 (see third chart below) suggested a market rally into October or November, with the low beginning around June 3-5 (which happened), we could still see that scenario. We are now at the point of likely knowing the fate of the global economy and US elections, sooner, rather than later.

If the market does tank over the next few sessions, breaking the recent lows, then having a new US president is very likely. That would mean an ever worse 1st-year presidential cycle for stocks than the normally-bearish first year market event.

ACTION: Position traders continue short if already so, with a stop at 12578. Short-term swing traders and day traders be ready for a more likely big acceleration lower, yet with the outside

possibility that 12378.65 or 12310 could provide support. However, all our daily indicators are heading lower at this time.

dow daily stock market chart

Dow four hour chart

interest rate vs sp500 chart

Metals

XAGUSD: Silver is likely setting up to complete a 5th wave low within the next few sessions (see chart).

ACTION: Look for the 60-240 minute trends to reverse early next week to provide a some long trades for a change.

silver daily chart

XAUUSD: Gold is likely heading down to is critical support level of 1510.90, which if broken, would likely confirm a deflationary scenario. We still remain open to this being a large corrective wave. Silver may provide clues if it bottoms soon and starts to head up with gold holding above its December 2011 low of 1522.45 (see gold daily chart below).

ACTION: As long as 1510.90 is NOT broken, we MAY see at least a temporary low. Any rally will be examined for a wave counts to determine if the rally is corrective or impulsive.

gold xauusd chart daily

Summary

The next few weeks of trading may determine the 1-4 year fate of the EURO, GOLD, USD, and US stocks, hence, the global economy, especially when you consider that June traditionally is the lowest daily range month for the EURUSD (the summer doldrums). July, is often a more volatile month and has been one of my top three most profitable months over the years.

Stocks have tended to rally in the summer; but this year may be different. The next few days will be crucial to determine if this year begins the BIG BEAR YEAR or if we hold in this area (less likely) and stocks somehow pull off a miraculous (manipulated) rally. For now, we still favor the downside accelaration scenario. Again, the next few market sessions are crucial.

Long-term we are still VERY bearish, especially after early 2013 when all major US stock market cycles and demographic trends will be heading lower into 2016 +/- 6 months.

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