Trainspotting Cyprus: bailout shows troika to be hapless incompetents

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Fintan OTolle, literary editor of The Irish Times sets forth some critical but brutally honest clear points on the preeminence of the Troika over European countries (specially those in need of financial assistance) focused on the lack of accountability and oversight and what is currently one of the most powerful bodies in the modern world.- The fact that this supranational-unaccountable corporation is setting the standard and conditions for assisting troubled economies doesnt leave much room for improvement, specially in lieu of the ever worsening situations on the periphery.

It is important to grasp that the stupidity of the proposal to raid guaranteed deposits is not an aberration. It is an inevitability. Why? Because unaccountable institutions with too much power always make bad decisions

Full article here.-

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€uro update * volatility roadmap * March 22

Headline risk is paramount in this type of situations. Rumors and news could come at any any time, so caution is advised.-

Regardless of the environment, the €uro has manage to find its footing into the 1.2840´s, are which has found buyers and has been respected since mid-November 2012.- It is the line in the sand, so far.-

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Sunday´s opening gap has not managed to get filled, though.- Last Friday close was in the 1.3080, almost 80 pips above from it is currently trading.-

It is not easy to establish direction during this type of situations, however, there are some important scenarios to address and clear reference levels. Swings will likely have bigger ranges than usual due to the extreme volatility of the situation.-

a-) FAVORABLE NEWS SCENARIO could provide some fuel from buyers, which are still aligned towards record levels, according to what I am currently seeing.-

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Price action from the lows at 1.2840 has been constructive. 1.2920-1.2890 as a key area.-

1.30120-1.3010 is a key area that is currently providing some rejection. However, It is important to note the pressure from buyers is currently on, as I’m writing this post.-

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Provided buying pressure continues, I will be watching 1.3085-1.3060, followed by 1.3075, 1.3087, 1.3108 & 1.3121.-

Above,  a clean brake of 1.3160-1.3040 could potentially open the door towards the the 1.3195-1.3182, followed by 1.3220, 1.3270 and finally 1.3320, as extended targets.-

Alternatively, bad news/bad interpretation of those news will likely bring a negative impact.- I pointed out above about the important positioning of longs. Similary to other instances in different assets I follow, this type of situation could spark an important selloff in which those longs gets pressured by intense selling pressure, fueling an important move.- It is not possible to determine the extent of that reaction.

However, some key levels to have a as reference are worth to note.-

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1.2918-1.2886 is the first key reference I am watching now, followed by 1.2880-1.2860. A breach of these will bring a test of the 1.2840 area, which buyers have defended over the last 5 months, sionce Mid-Novemeber 2012.-

Below, I am looking into 1.2805-1.2775, followed by 1.2740, 1.2720 and 1.2700-1.2660.-

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At last, a third option will be containment between the current area in which markets mantain balance awaiting for a resolution -either positive or negative, in that sense, I will be looking for a (wide) range between 1.3020-1.2880, eventually 1.2840 which -again- as a key price point.

DP.-

Gold * Still balanced

This one of the less volatile reaction in the market was probably one of the few things that I’ve heard today.-

Gold sold off less than $10 towards $1600 in which buyers (programs??) instantly reacted, fuelling a complete retracement in less than 5 mins.

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Two clusters of balance

$ 1616-$1600 (Broader)

$1610-$1600 (tighter)

Thus, no material changes to the alternatives provided back  Tuesday.-

However, it is important to underline the increase in terms of  short positioning – regardless that the price is $15 higher than of Friday´s close .-

There are many important econ. #´s beign announced in the following hours and tomorrow. Among others: China PMI, Euro, German and French PMI´s, Spanish 10 yr. Bond auction and Philly Fed Manuf.

Have some issues to address tomorrow, so likely is that will be no update.-

DP.-

Gold Update * March 19

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Last time a possible set of outcomes were drafted dates back from almost a week ago.- With Cyprus we are back into headline risk mode.- Also, this week brings FOMC (tomorrow), Spanish and German 10yr. Bond Auctions and a couple of European PMI´s, which should add to the menu.-

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Following is an excerpt of where I left off.

b.1) Buyers keep control of the situation and seek to bring price into higher value areas (clusters) – $1600 is particular appealing rounded number, which is right in the middle of the bigger area contained between $1601-$1599 – Specifically, I´m keying $1603, followed by $1608-$1610 & $1611-$1612.

Above, $1615, $1618 & $1620 are the levels I´ll be paying attention to.

b.2) I will tend to favor more upside, unless I see a reactive an intense response by part of sellers. In that event, I will be looking at $1586, which happens to be the top of the balance area developed during last week. If sellers decide to act, we could be in presence of an analogue move to what we had back on Friday (after NFP), but in a different direction.

…which was further develop during March 13 post…

So far, b.1 hasn´t played out. Buyers were not able to surpass the $1600, which is an important number. The break of it, would (eventually) attract more buyers.

Now, gold is currently trading between b.2 and b.3.- Price went as far as $1599 (too close, but not enough), only to retrace into the top of the balance area developed over the first week of Feb.-

What I am looking here is if this area will attract buyers, or not and how many  (in terms of buying pressure) of them will participate, if any.-

I will develop further in a later post, since currently gold is the middle of both scenarios and I would like to see how price action follows up and have a clearer picture.-

At last, $1592 is a key price point.- I am working with the idea of buyers pressuring in this level might open the possibility of challenging $1600.-

In that sense, $1583-$1580 might provide some buying response (I´ll be much more inclined into the short side if it doesn´t happen), followed by $1579-$1576

Buyers showed up into $1576 with aggressive commitment, rallying to $1596 into Friday.-

Open on Sunday was heavily influenced by the issue in Cyprus. Price reached a high of $1607.7, only to retrace (again)  into $1590.- The tame response left me with a slight lower bias, which was cancelled (at least for now) when the $1600 mark was able to attract interested buyers, which still happens to be my gauge for a possible change of scenario, alongside with other points which I will further develop.-

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I am currently seeing important levels of short inventories being held into the the market, both in longer and shorter time frames. This issue translates into two main scenarios that I am working with.-

a-) The fact that a high level of shorts in the market are not only currently withstanding, but have increased against $35 move is a behaviour that should be taken into account.- Add to that there are not many longs left and you get the recipe for an important sell-off.-

In that event, I would be looking for $1600 not only to be challenged, but breached, followed by $1596 and $1592, $1590, $1584 $1580-$1576, $1573 & $1568.- There are more areas marked on the chart below, but those are the main price points I will be watching.- This scenario might bring a rather accelerated move.-

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b-) Alternatively, those shorts could provide some important fuel for an eventual rally, in the event longs start pressuring and testing the commitment of those.- Thus, shorts covering will create the opposite effect morphing into a short cover rally.-

In that event, I will be watching $1620 as key price point, followed by $1625, $1629-$1627.-

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c-) consolidation into the current area of value contained by $1615 above and $ 1608 -or $1603 to a bigger extent.-

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DP.-