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Market Wire Update:
Interest Rates Drive Value
The market expected two interest rate decisions on Thursday, but this has failed to spark volatility throughout the European or early U.S. trading hours.
This is a huge change from just a few months ago, when the market was moving double or sometimes, even triple digit pip trends following the monetary policy decision of a central bank. The shift from a very volatile trading down to almost no effects has happened gradually, with its peak reached throughout the credit crisis.
Another factor that influenced the market’s calm reaction – with the pound having a range of only 50 pips one hour ahead and after the BoE, and with the Swiss Franc having a 50 pips daily range the entire session – was that the decisions taken by the SNB and BoE are in-line with the consensus. The Bank of England decided to keep the monetary policy at 0.50%, while it maintained the size of the quantitative easing (QE) program, called the Asset Purchase Facility, at 200 billion pounds. Both decisions where widely expected.
TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.
For the Swiss National Bank, things are a little different. The SNB decided to halt the QE programs, even though no further clues were provided in this direction. The SNB joins the list of banks that are preparing to exit the QE strategies, a list that also includes the ECB. It is expected that in February the BoE’s Asset Purchase Facility will also end, putting the BoE in- line with other European central banks.
At the total opposite end is the Bank of Japan, which has just embark new fiscal and monetary expansionary strategies, while somewhere in the middle is the Federal Reserve, where things are looking really mixed.
On top of the decision to halt its buying spree of Swiss franc bonds (the SNB’s QE strategy), the Swiss central bank has made one more important step: it removed the references about the value of the Swiss franc from the monetary policy statement. This is a first in almost a year, however, to counter-balance this, the Chairman of the SNB, Jean-Pierre Roth, declared during the press conference “SNB will continue to act decisively to prevent any excessive appreciation of the Swiss franc against the euro”.
TheLFB Charting: Gold Elliott Wave view
4 Hour chart trend: Short Price Points: 1116, and 1226 Looking for: Bottom of a Short wave A)
Momentum: Gold bullion moved into another long momentum cycle on the 3rd of Nov, and has held above the long break of 1060 that came with it. That Long trend is just about flattening out now. The pull-backs are getting bought when they hit an oversold 4 hour chart sentiment read, every 4-5 days.
Elliott Wave: Recently, gold hit new lows around 1116, where traders may look for a near-term turning point. We are looking for the bottom of a short wave A) as we can count five blue sub-waves of decline, which signals for a corrective bounce to move into a long red wave B).
The red wave B) is a corrective wave that may reach the 1170-1180 area with a three wave move up (blue A-B-C) over the next few days, before the short trend continues.
The wave count remains valid as long as the market stays under the 1126 highs.
MACD read is over-sold and crossed, which indicates that the bottom may be reached.
TheLFB Charting: S&P Futures Elliott Wave view
4 Hour Chart Flows: Mixed Price Points: 1066, and 1118 Looking for: An ending diagonal
Momentum: S&P futures moved into long mode on Nov 13th and have held that trend, which has allowed the tests of the 4 hour chart support to be bought. There is a tight sideways channel forming and that is allowing the move from overbought to oversold and back again, to be completed over a 4-5 day period.
Elliott Wave: S&P futures hit the lows of the week on Wednesday at 1084 where a bullish bounce appeared, as the market was unable to break through the support line of an ending diagonal pattern. Overall, we are looking for a near-term recovery on the majors and a decline at the same time on dollar index, which matches perfectly with S&P expectations.
Wall Street closed higher on Wednesday after a support line test, which indicates a bounce to the up-side is close, and looking to move near to the 1105 area or even higher, before any down-trend can continue.
A break of 1066 support will confirm a bear market, while a move through the 1118 top will signal a more complex wave 5) formation of an ending diagonal.
