European Stocks trade Higher On Potential Fiscal Cliff Resolution

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Erik Byrd
8 years ago
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1 December 27 th 2012 European Stocks trade Higher On Potential Fiscal Cliff Resolution Equities are trading higher in Europe this morning in this, the first trading day for stocks following the Christmas break as the fiscal cliff discussions look set to be agreed although unlikely prior to the year end a spokesman has confirmed. With Asian stocks gaining healthily, the overall bullish sentiment is likely to follow into the US session this afternoon giving the risk currencies their boost following their pre holiday losses. Gold is still very much in its down trend having come off its highs in October of to see a low just prior to the break at whilst oil has seen gains since mid November to sit at (Brent). This shows correlation at its best given the fact that the equity markets have had their largest gains across the board and thus weakening the greenback. Cable is currently trading near its highs of the session of at at time of writing having traded off its lows of (corresponding with the 61.8% Fibonacci retracement level) as session equities gain handsomely. Major support is given back at the session lows with resistance now seen at again corresponding with the 78.6% Fibonacci retracement level. Chart 1 (Cable H4) Whilst equities are continuing their bullish tones and weakening the dollar, expect an element of retracement prior to the next move up to the resistance levels mentioned above as seen in chart 1 confirmed by the VSA signal, the Upthrust specifically with weakness in the background. The 4 hour interval chart has been chosen as the weakness is clear to ascertain and the cluster of buying signals are very apparent. The volume is the key to the next moves as the professionals seem no longer interested in the higher prices at this stage indicating further downside pressure.

2 Chart 2 (Cable M15) The shorter timeframe of 15 minutes shown on Chart 2 clearly marks the VSA buying signal, the Two Bar Reversal also seeing activity by the professionals with the ultra high up bar (highlighted) although with tailing volume ensuing indicating that this is more a test by the professionals than an actual continuation of the bull move at this point. Do remember that equities are in the green and gold is down adding weight to further upside pressure for the short term. Should equities continue their move throughout this session and into the US, expect further pressure for the greenback. Eurodollar is currently trading at at time of writing having seen a low of in early Asian trading to see a high of Support is at the low of the session with resistance at today s high ahead of the December 20 th high and major resistance of and respectively. Chart 3 shows the current range which has now been in existence since December 18 th as we head back up to the major resistance level once again as equities continue to trade higher. Volume is tailing off indicating that the professional or smart money is no longer interested in the higher prices which has been subsequently confirmed with the VSA indicator Supply Coming In thwarting any further up move. The key to the breakout will of course be the fiscal cliff resolution so expect further range trading for the single currency. The 15 minute intervals shown in Chart 4 indicates the Testing by the professionals to the upside. Currently demand is being met by supply giving the small range seen at the far right hand side of the chart halting any move either way presently. The decreasing volume however would be an indication that the professionals are not interested in the higher prices at this time and so further downside pressure likely in the short term prior to the next leg up to re test the major resistance.

3 Chart 3 (Eurodollar H4) Chart 4 (Eurodollar M15)

4 The Aussie has lost all gains made up until mid December having traded at a high of to currently trade at having seen a low in this session not seen since November 21 st of The 50% Fibonacci retracement level of seems to be the current barrier to climb from both the upside and the downside. Support is at today s lows ahead of and the next Fibonacci retracement level (38.2%) of Resistance is at today s high ahead of and the 61.8% Fibonacci retracement level of Chart 5 (Aussie H4) Chart 5 clearly marks the downside pressure from the trend, the VSA signal Upthrust and of course the tailing volume indicating that the professional money are not interested in the higher prices as any attempt upwards is thwarted. However, look at the amount of testing and VSA green buying signals there are? This could well be the reversing of the trend to date and move the Aussie back into the correlation that s to be expected and that has been seen prior to mid December. The support level is most certainly to be tested once again however prior to any move northwards as we head into Q1. The downside pressure is actually more clearly marked on the 15 minute interval chart below. You can see that the resistance level has been firmly hit and volume has now tailed off from its ultra high volume down bar seen in early trading. This would indicate that the professionals are currently not interested in the higher prices and in fact presents a shorting opportunity. Once it revisits the support level shown, a long position would present itself to move back up to the resistance levels and beyond.

5 Chart 6 (Aussie M15)

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