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Tuesday March 7: Five things the markets are talking about

Despite geopolitical tensions in Korea, lower 2017 growth target in China, and Trump's wiretap accusations, the U.S reflation trade remains somewhat intact with 10-year Treasuries gaining +4bps yesterday, briefly touching an intraday high of +2.50% during the session. Even the mighty dollar has steadied against G10 currencies in early European trade.

There seem to be no more doubts about a rate hike from the Fed next week (Mar. 14-15). It's the accompanying policy statement that equity investors should be most interested in, it will provide the market with more clues about the speed of subsequent futures rises.

Expect Friday's non-farm payroll (NFP) to also play a big part in solidifying a hike next Wednesday. Anything close to expectations and its a slam-dunk for next Wednesday, a slip and money-market dealers will be second guessing themselves.

Note: Employers probably added around +190k workers to payrolls, in line with the average over the past six-months and a sign of steady job growth.

1. Stocks rally peters out

Investors betting that the global economy is strong enough to withstand an increase in borrowing costs have supported global indices to print record highs. However, the market now seems intent to seek a new catalyst to push equities any further.

In Japan, the Nikkei share average edged down (-0.2%) overnight with investors deterred mostly by geopolitical tensions after yesterday's North Korean missile tests. The broader Topix traded flat.

In Hong Kong, stocks were firm on tech share strength and property rebound. The Hang Seng index rose +0.4%, while the China Enterprises Index gained +0.6%. In China, tech stocks also supported indices. The blue-chip CSI300 index ended up +0.2%, while the Shanghai Composite Index gained +0.3%.

In Europe, equity indices are mixed. Financials are trading generally negative in the Eurostoxx, while commodity and mining stocks are supporting the FTSE 100.

U.S stocks are set to open in the red (-0.2%).

Indices: Stoxx50 -0.1% at 3,385, FTSE +0.1% at 7,359, DAX +0.1% at 11,972, CAC-40 -0.3% at 4,959, IBEX-35 -0.2% at 9,782, FTSE MIB -0.2% at 19,407, SMI flat at 8,664, S&P 500 Futures -0.2%.

2. Oil prices hold steady, eyes on economic data

Oil prices are little changed overnight, with investors searching for direction as concern over rising U.S. shale output is being negated by OPEC's production cuts.

Brent crude is down -9c, or -0.1% at +$55.92 a barrel, while West Texas Intermediate crude has fallen -6c, or -0.1% to +$53.14 a barrel.

Expect investors to take their cues from this week's crude inventory reports and tomorrow's import and export data from China.

Note: Russia and Iraq said yesterday that it was too early to discuss if the pact by OPEC and non-OPEC members should be extended beyond May.

Gold prices have edged lower (-0.1% to +$1,224.86) as the USD consolidates. The yellow metal is hovering above its two-week low print ($1,222.51) from last Friday amid signals of a hike in rates in the U.S. next week.

3. Expect wild swings in U.S T-bills this month

Dealers are forewarning that this month's U.S T-bill market will be rather volatile as the outstanding stock of bills will fall by nearly -$100B between now and March 15, as the Treasury cuts its cash position in preparation for the mid-month debt ceiling reset. This will then be preceded by a surge in bill supply in the final two-weeks.

Yesterday's T-bill auction showed a jump of +0.25% in yield in the 3-month tender (average yield +0.745%) as the market prices-in to discount next week's rate hike. The 6-month tender was also up by +15.5bps (average yield +0.835%).

Elsewhere, the Reserve Bank of Australia (RBA) left its Cash Rate Target unchanged at +1.50% (as expected) and maintained its policy rhetoric that global economic conditions have "improved over recent months." Governor Lowe reiterated that a rising AUD ($0.7593) could "complicate economic transition" and also expects Aussie headline inflation to pickup this year.

4. Sterling getting pounded

Ahead of the U.S open, the pound has fallen to its lowest level in more than seven-weeks against the USD and the EUR.

GBP/USD has dropped to £1.2198 and EUR/GBP has rallied to €0.8679 – the pounds weakest level since the third week of Jan. Whom to blame? Aside from Brexit fears, a British Retail Consortium (BRC) survey overnight showed that U.K. retail sales fell last month. This is raising concerns that the U.K's important consumer sector is cutting their spending in response to higher prices caused by a weak pound since the Brexit vote. Also hurting the pound is this morning's Halifax data, which revealed weaker-than-forecast house price growth (+0.1% vs. +0.4%). Investors will now shift their focus to tomorrows U.K. budget.

Note: The U.K's House of Lords holds its final debate and vote on Article 50 Bill.

Elsewhere, data from the Czech central bank this morning showed that it intervened on a massive scale in January, by +€14.5B – far exceeding any previous amount since the central bank introduced a currency target (€27.016) four years ago.

Note: CZK central bank has signalled that it may discontinue the target around midyear is caused investors to pour into the CZK and hence the reason for intervention.

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p>5. Eurozone growth unrevised

Eurostat has left its estimate for Q4 growth unrevised at +0.4% and +1.7% on the year.

Digging deeper, the breakdown showed the regions recovery has been kept on a steady path by a rebound in investment, and pick-ups in consumer and government spending. Trade was a drag, with imports rising at a faster pace than exports despite the EUR weakening in Q4.

The ECB should be happy to see a rise in investment, but expect Draghi to focus on inflation Thursday and potentially highlight that that consumer spending could be damped by rising inflation.

USD/JPY continues to hug the 114 line this week. Currently, the pair is trading at 113.90. In economic news, Japanese BoJ Core CPI edged up to 0.2%. The markets are keeping a close eye on Japanese Final GDP for the fourth quarter, with an estimate of 0.4%. Preliminary GDP came in at 0.2%. If GDP is revised upwards, the yen could gain ground. In the US, today's highlight is Trade Balance, with an expected deficit of 47.0 billion. On Wednesday, the US releases ADP Nonfarm Employment Change, ahead of the official Nonfarm Payrolls report on Friday.

Donald Trump continues to create controversy on an almost basis, much to the consternation of the markets. Still, the dollar remains strong, buoyed by a strong economy and the increasing likelihood of a rate hike at the upcoming Fed policy meeting on March 15. The likelihood of a March hike as jumped to 84%, according to the CME group, compared to 33% just a week ago. Why the huge jump in odds? One reason is that Fed policymakers have sent out strong hints that the Fed is leaning towards raising rates next week. Earlier in the year, the Fed sent out signals Fed sent out signals that it would stay on the sidelines until it had a clearer picture of Trump's economic agenda, such as an outline of tax reform or fiscal spending plans. That has changed, as the Fed appears poised to move ahead despite the lack of any details about the administration's economic policy. This week's job numbers will be critically important, as strong numbers will likely boost the odds of a March move as well as push the greenback to higher levels.

The DAX Index continues to have an uneventful week. The index is up slightly in the Tuesday session, trading at 11,968.50. On the release front, German Factory Orders declined 7.4%, well below the estimate of a 2.5% decline. Eurozone Revised GDP remained unchanged at 0.4%, matching the forecast. On Wednesday, Germany releases Industrial Production.

German numbers were generally solid last week, but it's been a different tune early this week. The markets were braced for a downturn from Factory Orders in February, but the decline of 7.4% was much sharper than expected. On Monday, retail sales, the primary gauge of consumer spending, declined 0.8%, compared to an estimate of 0.2%. This marked a fifth decline of six releases, as the German consumer continues to hold tight to her purse strings. The euro has held steady despite these weak readings, but if the negative trend continues from the Eurozone's largest economy, investors could get edgy and drag the DAX to lower levels.

Germany's Deutsche Bank was in the spotlight on Monday. The bank decided on a major reorganization on Sunday, which includes raising EUR 8 billion by issuing 687.5 million shares on March 21. Deutsche Bank has hit rough waters, and it seemed only a matter of time before it was forced took some drastic measures to right the boat. In December, the bank reached a $7.2 billion settlement with the U.S. Department of Justice for selling toxic mortgage-backed securities. Deutsche had a dismal 2016, with losses of EUR 1.4 billion. This capital hike is the fourth since 2010, and it remains to be seen if this move will attract investors and help set the bank in the right direction. Deutsche Bank shares have lost ground this week, weighing on the DAX.

Donald Trump continues to create controversy on an almost basis, much to the consternation of the markets. Still, the dollar remains strong, buoyed by a strong economy and the increasing likelihood of a rate hike at the upcoming Fed policy meeting on March 15. The likelihood of a March hike as jumped to 84%, according to the CME group, compared to 33% just a week ago. Why the huge jump in odds? One reason is that Fed policymakers have sent out strong hints that the Fed is leaning towards raising rates next week. Earlier in the year, the Fed sent out signals Fed sent out signals that it would stay on the sidelines until it had a clearer picture of Trump's economic agenda, such as an outline of tax reform or fiscal spending plans. That has changed, as the Fed appears poised to move ahead despite the lack of any details about the administration's economic policy. This week's job numbers will be critically important, as strong numbers will likely boost the odds of a March move as well as push the greenback to higher levels.

USD/CHF - 1.0138

New strategy  :

Buy at 1.0110, Target: 1.0210, Stop: 1.0075

Position : -

Target :  -

Stop : -

Dollar’s intra-day breach of previous resistance at 1.0146 confirms recent erratic upmove from 0.9861 has resumed and bullishness remains for this move to extend further gain to 1.0175-80, then towards 1.0200-10, however, near term overbought condition should prevent sharp move beyond previous chart resistance at 1.0248, risk from there is seen for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy dollar on pullback as 1.0100-10 should limit downside. Only break of indicated support at 1.0073 would suggest an intra-day top is formed instead, risk weakness to 1.0040-45 but reckon support at 1.0009 would remain intact. 

GBP/USD - 1.2198

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has remained under pressure after meeting renewed selling interest at 1.2301, suggesting near term downside risk remains for recent decline from 1.2706 to extend further weakness to 1.2170-75 but reckon 1.2150 would limit downside due to loss of downward momentum and 1.2120-25 should hold, bring another rebound later. 

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Above the Kijun-Sen (now at 1.2231) would bring recovery to the Ichimoku cloud (now at 1.2261-69), break there would suggest an intra-day low is formed, bring test of said resistance at 1.2301 which is likely to hold from here . 

 

EUR/USD - 1.0574

Original strategy  :

Buy at 1.0545, Target: 1.0645, Stop: 1.0510

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0535, Target: 1.0635, Stop: 1.0500

Position : -

Target :  -

Stop : -

Although the single currency retreated after rising to 1.0640 yesterday and consolidation with initial downside bias is seen for weakness to 1.0560, reckon downside would be limited to 1.0540-45 and bring another rebound later, above said resistance at 1.0640 would extend the erratic rise from 1.0493 lo for retracement of early decline to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and possibly towards resistance at 1.0680, however, price should falter well below 1.0700-05 (61.8% Fibonacci retracement).

In view of this, we are looking to buy euro on dips. Below 1.0510 would abort and risk retest of 1.0493 but only break there would shift risk back to the downside and signal recent decline from 1.0829 has resumed for further selloff to 1.0470 and then towards previous support at 1.0454.

 

USD/JPY - 113.97

Original strategy  :

Sell at 114.50, Target: 113.35, Stop: 114.80

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 114.50, Target: 113.35, Stop: 114.80

Position :  -

Target :  -

Stop : -

As the greenback recovered after finding support at 113.56 yesterday, suggesting consolidation with initial upside bias would be seen and corrective bounce to 114.30-35 cannot be ruled out, however, if our view that a temporary top formed at 114.75 last week is correct, upside should be limited to 114.50-55 and bring another decline later, below said support at 113.56 would bring retracement of recent rise to 113.20-25 (50% Fibonacci retracement of 111.69-114.75), however, downside would be limited to 113.00 and 112.84-86 (previous resistance and 61.8% Fibonacci retracement), bring rebound later.

In view of this, we are looking to sell dollar on recovery for such move as 114.50 should limit upside, bring another decline. Only above said resistance at 114.75 would abort and signal the rise from 111.69 has resumed and extend gain to 114.96 (previous resistance) but price should falter well below resistance at 115.38.

 

China FX Reserves rises for 1st time in 8 months, Swiss and Czech reserves also rise

Notes/Observations

China Feb FX Reserves registers its 1st monthly rise since June amid capital curbs

SNB foreign-currency reserves soar signaling interventions

German Jan industry orders post biggest monthly decline since 2009

Overnight:

Asia:

RBA left its Cash Rate Target unchanged at 1.50% (as expected). Maintains policy rhetoric that global economic conditions had improved over recent months; reiterated rising AUD currency could complicate economic transition; expecteds headline inflation to pickup over 2017

China Fin Min Xiao Jie: 2016 govt debt to GDP ratio at 36.7% China govt debt level generally under control; won't change much in 2017

BOJ's Masai reiterated Board view that expected domestic economy to move into moderate expansion; would maintain its highly accommodative policy and overcome deflation

Commander of US Pacific Command: North Korea's latest missile launch confirms the need for THAAD deployment. Started to deploy anti-missile systems in South Korea despite Chinese opposition

Europe:

German Chancellor Merkel called for a European Union that allowed member states to advance at their own pace to ensure that the bloc was able to confront future challenges

French Conservative Party Chairman: Conservative Political Committee unanimously backed Fillon candidacy (France's Fillon wins party backing after Juppe rules out election bid)- House of Lords holds final debate and vote on Article 50 Bill. Govt at risk of 2nd defeat in House of Lords as Peers might call for a 'meaningful vote' and a guarantee that Parliament could veto the final terms of Brexit agreement if the deal Govt makes was not good enough

Fixed Income Issuance:

(EU) ESM opened its book to sell €3.0B in 10-year bond via syndicate; guidance seen +1bp to mid-swaps

(IT) Italy Debt Agency (Tesoro) opened book to sell EUR-denominated May 2028 I/L bond (BTPei); guidance seen +13bps

(ID) Indonesia sold IDR6.1T in Islamic bonds (Sukuk)

(ZA) South Africa sold total ZAR2.35B vs. ZAR2.35B indicated in 2023, 2037 and 2044 bonds

(ES) Spain Debt Agency (Tesoro) sold total €4.64B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills

(AT) Austria Debt Agency (AFFA) sold total €1.32B vs. €1.32B indicated in 2026 and 2034 RAGB bonds

Sold €660M in 0.75% Oct 2026 RAGB bond; Avg Yield: 0.498% v 0.601% prior; Bid-to-cover: 2.31x v 2.30x prior

Sold €660M in 2.4% 2034 RAGB; Avg Yield 1.078% v 0.964% prior; Bid-to-cover: 2.47x v 1.89x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.1% at 3,385, FTSE +0.1% at 7,359, DAX +0.1% at 11,972, CAC-40 -0.3% at 4,959, IBEX-35 -0.2% at 9,782, FTSE MIB -0.2% at 19,407, SMI flat at 8,664, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices are trading mixed after a positive end to the Chinese markets despite a negative end to Japan’s Nikkei; Banking stocks trading generally negative across the board with Eurostoxx losses led by shares of Deutsche Bank; shares of Intertek leading the gains in the FTSE 100 after releasing their FY16 results; Commodity and mining stocks also trading notably higher despite copper prices trading lower, but with energy prices higher intraday; shares of Paddy Power and Ashtead Group the notable laggards in the index after releasing respective results.

Upcoming scheduled US earnings (pre-market) include Brown-Forman, Calavo Growers, Dicks Sporting Goods, John Wiley & Sons, KLX, LGI Homes, Michaels Companies, Momo, and Navistar International.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Aggreko AGK.UK -12.4% (FY16 results), Ashtead Group AHT.UK -2.9% (Q3 results), Casino Guichard CO.FR -4.8% (FY16 results), Intertek ITRK.UK +4.1% (FY16 results), Just Eat JE.UK +4.2% (FY16 results), Lindt & Spruengli LISP.CH -0.9% (FY16 results), Paddy Power Betfair PPB.UK -4.9% (FY16 results), St Ives SIV.UK +1.4% (H1 results), Zumtobel ZAG.AT +3.8% (Q3 results)]

Energy: [EDF EDF.FR +0.1% (€4B rights issue)]

Financials: [Direct Line DLG.UK -1.0% (FY16 results), Paysafe PAYS.UK -3.1% (FY16 results), Shawbrook SHAW.UK -1.6% (Board rejects 330p/shr proposal, FY16 results), Vonovia VNA.DE +0.2% (FY16 results), Worldpay WPG.UK -2.0% (final FY16 results)]

Industrials: [Brenntag BNR.DE -2.8% (FY16 results, div increase), Forbo Holding FORN.CH +5.3% (FY16 results), VTG VT9.DE -2.9% (prelim FY16 results)]

Technology: [Logitech LOGN.CH +1.5% (Affirms outlook, $250M share buyback)]

Telecom: [Iliad ILD.FR +3.5% (FY16 results)]

Speakers

EU Leaders Summit draft: To stress WTO role and commit to address all free trade agreements

Czech Central Bank Gov Rusnok: Could correct any excessive FX move once cap is removed. Reiterated CZK currency (Koruna) cap removal most likely to occur around mid-2017

China FX Regulator SAFE: Foreign Reserves to gradually stabilize; reiterated that outflow pressure expected to ease

China PBoC's Zhou: FX Reserves were not inexhaustible; govt would not allow radical fluctuation of CNY currency (Yuan) rate

Currencies

USD was steady with markets now expected the Fed to hike rates this month.

GBP/USD hit fresh 7-week lows after Halifax data also revealed weaker-than-forecast house price growth and registered its lowest reading since July 2013. Focus set to turn to UK budget on Wednesday

Fixed Income:

June Bund futures trade at 161.18 up 30 ticks trading off highs as Futures roll to June. The Mar-Jun spread currently stands at 322 ticks. Resistance lies initially at 161.59 followed by 162.32 then contract high at 163.12. Support lies at 160.63 then 159.96.

Gilt futures trade at 126.61 up 9 ticks pushing to session highs despite a reversal in Equities. Resistance moves to 126.87 followed by 127.35. Support moves to 126.39 followed by 126.12.

Tuesday liquidity report showed Monday's excess liquidity fell to €1.345T down €3B from €1.348T prior. Use of the marginal lending facility rose to €276M from €232M prior.

Corporate issuance saw $22.7B come to market via 11 issuers in an active start to the week headlined by HSBC 2 part $5B offering, Great Plains Energy $4.3B 4 part offering and McDonald's $2B 3 part offering. This puts issuance for the month at $36.7B.

Looking Ahead

(UK) Lords hold final debate and vote on Article 50 Bill

(IL) Israel Feb Foreign Currency Balance: No est v $101.6B prior

05.30 (UK) Weekly John Lewis LFL sales data

05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender

05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

05:30 (BE) Belgium Debt Agency (BDA) to sell 3-Month and 12-Month Bills

06:00 (BR) Brazil Apr FGV Inflation IGP-DI M/M: 0.1%e v 0.4% prior; Y/Y: 5.2%e v 6.0% prior

06:30 (CL) Chile Feb Trade Balance: $0.3Be v $0.7B prior; Total Exports: $5.0Be v $5.5B prior; Total Imports: $4.8Be v $4.8B prior

06:30 (CL) Chile Feb International Reserves: No est v $39.9B prior

06:30 (EU) ESM to sell €1.5B in 3-month Bills

06:45 (US) Daily Libor Fixing

07:00 (BR) Brazil Q4 GDP Q/Q: -0.5%e v -0.8% prior; Y/Y: -2.4%e v -2.9% prior, GDP 4-quarters accumulated: -3.6%e v -4.4% prior

07:00 (BR) Brazil Jan PPI Manufacturing M/M: No est v 0.7%prior; Y/Y: No est v 0.8% prior

07:00 (CL) Chile Jan Nominal Wage M/M: No est v 0.8% prior; Y/Y: 4.4%e v 4.7% prior

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (PL) Poland Feb Official Reserves: No est v $113.7B prior

08:00 (RU) Russia Feb Official Reserve Assets: $395.5Be v $390.6B prior

08:00 (RU) Russia announces weekly OFZ bond auction

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Jan Trade Balance: -$48.5Be v -$44.3B prior

08:30 (CA) Canada Jan Int’l Merchandise Trade: C$0.8Be v C$0.9B prior

08:30 (SI) Slovenia Debt Agency to sell 12-month Bills

08:55 (US) Weekly Redbook Sales

09:00 (BR Brazil Jan CNI Capacity Utilization: No est v 76.0% prior

09:00 (EU) Weekly ECB Forex Reserves

09:20 (BR) Brazil Feb Vehicle Production: No est v 174.1K prior; Vehicle Sales: No est v 147.2K prior; Vehicle Exports: No est v 37.2K prior

09:50 (UK) BOE to buy £0.78Bin APF Gilt purchase operation (over 15 years)

10:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

10:00 (CA) Canada Feb Ivey Purchasing Managers Index (Seasonally Adj): 58.5e v 57.2 prior; PMI unadj: No est v 52.3 prior

11:30 (US) Treasury to sell 4-Week Bills

13:00 (US) Treasury to sell 3-Year Notes

15:00 (US) Jan Consumer Credit: $19.0Be v $14.2B prior

15:00 (MX) Mexico Banamex Survey of Economists

16:30 (US) Weekly API Oil Inventories

GBP/USD – 1.2193

 
GBP/USD – Wave 4 is unfolding as an (A)-(B)-(C) and could have ended at 1.7192

 
As cable has fallen again after brief recovery, suggesting the decline from 1.2706 is still in progress and may extend further weakness to 1.2150, then 1.2100, however, as broad outlook remains consolidative, reckon downside would be limited to 1.2040-50 and price should stay above recent low at 1.1986 and bring another rebound later. In the event sterling drops below said recent low, this would signal the major downtrend has finally resumed and extend weakness to 1.1900-10 and then 1.1850 but near term oversold condition should limit downside to 1.1800. 

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has possibly ended at 1.7192, below support at 1.4232 would add credence to this count, then further fall to 1.4000 level would follow but reckon downside would be limited to 1.3655 support and price should stay above previous support at 1.3500.

On the upside, whilst initial recovery to 1.2250-55 cannot be ruled out, reckon upside would be limited to 1.2300-05 and previous support at 1.2347 should turn into resistance and put a lid on cable. A daily close above another previous support at 1.2383 would abort and signal the fall from 1.2706 has ended instead, bring a stronger rebound to 1.2440-50 and possibly towards 1.2500 but price should falter well below resistance at 1.2570, bring further choppy trading later.
 

Recommendation: Sell at 1.2300 for 1.2100 with stop above 1.2400.

 

 
Longer term - Cable's rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver with wave (A) ended at 1.3500 (23 Jan 2009), wave (B) itself is labeled as A: 1.6733, triangle wave B: 1.4813 and wave C as well as top of wave (B) ended at 1.7192 (2014), hence the selloff from there is an impulsive wave (C) with wave I : 1.4566, wave II 1.5930, an extended wave III is unfolding and already exceeded our downside target at 1.3500 and 1.3000, hence weakness to 1.2500 and possibly 1.2000 cannot be ruled out, however, price should stay well above psychological level at 1.0000.

GBP/JPY – 138.95

GBP/JPY – Wave 5 as well as wave (III) has possibly ended at 116.85



Although sterling has remained under pressure and near term downside risk remains for weakness to 138.55 support, below there is needed to signal a possible downside break of recent established range, bring further fall to 137.50-60 and later 137.00-05, however, reckon previous support at 136.50 would contain downside, bring another rebound later. Looking ahead, only below this level would signal another leg of decline from 148.45 top is underway for retracement of early upmove from 120.50 to 135.90-00, then towards 134.45-50 (50% Fibonacci retracement of 120.50-148.45) which is likely to hold from here.

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.

On the upside, whilst recovery to 139.70-80 cannot be ruled out, as outlook is consolidative, reckon upside would be limited to 140.70-75 and 141.75-80 should remain intact, bring retreat later. A daily close above resistance at 142.80 would signal the pullback from 144.75 has ended, bring further gain to 143.40-45 and then test of 144.10-15 but said resistance at 144.75 should hold. Looking ahead, a rise above 144.75 would signal the rebound from 136.50 is still in progress and may bring further upmove to indicated resistance at 145.40, break there would add credence to our bullish scenario that correction from 148.45 has ended at 136.50, bring further gain to 146.40-50, then 147.10-20.
 
Recommendation: Stand aside for this week.

 



The long-term downtrend from 570.99 (29 Feb 1980) is labeled as an impulsive wave with III with circle ended at 129.77 (20 Apr 1995) and the corrective rebound to 251.12 (20 Jul 2007) is treated as wave IV with circle and the wave V with circle selloff from 251.12 has possibly ended at 116.80 (almost reached our indicated target at 116.00) and major correction has commenced from there and indicated upside target at 183.90-00 (50% Fibonacci retracement of 251.10-116.85) had been met, reckon upside would be limited to 199.80-90 (61.8% Fibonacci retracement) and bring wave (V) decline in later part of 2017.