What Are The Markets Whispering for 2014?

I see 3 major trends for the markets next year in 2014:

  1. Investing in Africa only accelerates
  2. $GBPUSD enters 2014 at the bottom of its 5-year consolidation pattern (strong USD)
  3. The rise of women in finance

Last Thursday, at Stocktoberfest, I presented 2 of the 3 ideas on a panel with Howard Lindzon, Chairman, StockTwits, Christopher Perruna, Director of Project Management at Gardiner & Capital Theobald, Greg Harmon, DragonFly Capital, Cole Wilcox, CEO Longboard Asset Management, and Mike Bellafiore, SMB Capital. Here is my presentation:


(Infographics credit)

The Rise of Women in Finance

Enacted in August by India’s parliament, the Companies Act requires every listed company to have at least one female director within a year, while others reporting minimum revenue of 3 billion rupees ($49 million) have three years to comply.

Almost half of the top 100 companies traded on BSE Ltd., including the biggest two by market value, don’t have a single female member, according to data compiled by Bloomberg. As many as 6,000 women directors will be needed as firms look to fill the seats…

Just off the heels of Stocktoberfest where we heard about the rise of women in finance from DailyWorth’s Amanda Steinburg, Bloomberg breaks news of the Bombay Stock Exchange Companies Act. What excellent timing.

Read more: Women Sought on Boards as Stiletto Groups Grow: Corporate India (Bloomberg)

 

Big Deal

Friday’s close below 1.60 is a big deal for bears. It marks its first close below 1.60 after rallying for nearly 4 consecutive weeks.

GBPUSD monthly chart

Zooming in a bit to a weekly chart, we can see that a Friday close below 1.60, in most cases, led to a continuation lower.

GBPUSD weekly chart

It is also particularly bearish that the recent rally put in a lower high at 1.6250 than the previous 1.63 top. Perhaps cable will break out of this massive consolidation pattern after all and lead us back to 1.35. Before then, however, the Fibonacci levels on the weekly chart provide a 1st area of support and decision-making for bulls and bears.

 

What PMI Week Tells Us

You cant make someone change from being either a lefty in denial or a miserable pessimist (ukipers) that dont want a recovery. I for one will enjoy the upturn and reap the benefits with my company as I can already see. Must go work to do

The above quote is a comment on an article in the Telegraph yesterday that the UK economy is recovering at the fastest rate in the world. During the summer, the UK economy showed some great numbers from all sides of its economy. Construction and manufacturing were buzzing, consumers were spending and house prices were rising. From June through August, services PMI numbers surprised to the upside. Even construction and manufacturing had some very robust months which becoming a great sign of recovery as these sectors in particular suffered tremendously during the Great Recession.

UK PMIs

 OctoberSeptember
Manufacturing PMI56.757.5
Construction PMI58.960.1
Services PMI60.360.4

While this week’s PMI numbers may have missed expectations, these are some strong PMI numbers. All numbers are nicely above 50 indicating a very robust recovery in the UK. In fact, the September numbers were revised upward since 1st reported a month ago. It looks as though the fundamentals have come to reflect what price action has been telling us for the past few months.

So why the selloff this week? $EURGBP has rallied close to 150 pips off the lows. $GBPUSD and $GBPAUD have both tumbled handsomely from their highs. It looks like a classic case of buy the rumor, sell the fact. The market is forward thinking and now that fundamentals support price action, bulls are taking profits.

Sterling is still very much bullish even at current levels in $GBPAUD, $GBPUSD and $EURGBP. However, these corrections have broken key support/resistance levels opening the door for a deeper correction into next week to match these tremendous GBP rallies.

Mentioned above:

UK economy growing at fastest rate in the developed world (Telegraph)

Global PMI Data (Avondale Asset Management)

Read also:

GBP/USD In Yet Another Correction (FMFX)

Australian Dollar Puts In a Bottom (FMFX)

Reality Bites (FMFX)

Respect the Zone (FMFX)

 

 

 

GBP/USD In Yet Another Correction

$GBPUSD bulls just won’t give up. Every single time we have honored a previous high as support, we have seen cable take off to new mid-term highs.

Here is Exhibit A, the daily chart from September 19th:

GBPUSD daily chart

 Here is Exhibit B, the 4hr chart a week later on September 26th:

gbpusd_4hr_9_30_13_5_56_AM

Now here is today’s 4hr chart:

GBPUSD 4HR CHART

Bulls and bears are fighting it out, yet again, at a former high. Every battle won by the bulls have led to breakout rallies. A battle won by bears could see price fall to the level of support at 1.6130 which is also another former high (See Exhibit B). Below there is 1.6106, the 50% Fibonacci retracement level of this latest bullish wave. I don’t believe bulls will be truly done until 1.63 is challenged. These former highs are excellent areas for bulls to reload and gun for the ultimate prize above 1.6300.

Trade what you see.

GBP/AUD Still Looking for Highs

During the Tuesday Asian session and into the European session, the $GBPAUD fell to new lows at 1.72. This weakness is attributed to, first, the RBA staying pat on monetary policy when just last week the market was dealing with rumors of an interest rate cut from the RBA. A no-change announcement sparked a relief rally in the AUD, sending the $GBPAUD lower.

Into the European session, the downside only accelerated as UK manufacturing missed market expectations. This helped price reach the 61.8% Fibonacci level at 1.72. However, this price was met by bids and buyers took the weakness as the opportunity to pile into the long term bullish trend that is still very much intact despite the price weakness.

GBPAUD 1HR CHART

Now with price up over 80 pips already from those 1.72 lows, it looks too late to get into this long trade. Never chase a trade but learn, instead, from the missed opportunity. The moral of the story: when price starts to fall off its highs, draw the Fibonacci levels and wait for price to react accordingly. The trader can then act accordingly.