EUR/USD resumes its downslide in narrower range

Following the ECB announcement of its QE program, the plunge of the Euro against the US Dollar overshot the mark, then, of course, bounced back. Now the Euro resumes its downslide, within the purple range I have drawn, narrower than before but just as steeply downwards over-all. There should be quite a shock to its progress, however, when it hits the psychological barrier of even money to the Dollar!

Intel's spikey up-trend promises substantial reward

Publication of Q4 results on 15 Jan prompted a spike of 2%, on Intel's downswing. This was followed by two more spikes.

On 12 Jan, I indicated that I would by-pass this possible spike, because of Intel's current down-swing.

The downswing is near its end, and it should rebound strongly off the bottom line (unless a correction in the Nasdaq gets under way and brings down everything). An upswing of nearly 10% is to be expected, spread out over a week or so. Entry point $36 to $36.70; exit at $39 or $40.

EUR/USD downspike tomorrow in response to ECB press conference

Thursday, 22 Jan (tomorrow), the ECB is expected to confirm purchase of 500 Billion Euro of European government debt. Expect a downspike of over 2% in market response.

EUR/USD to descend into Nether-zone

The Euro's decline against the US Dollar has accelerated. The ECB's declared intention to purchase over €500 Billion worth of European government bonds has been re-asserted and progress on this is expected at next Thursday's (22 Jan 2015) meeting. The Swiss Franc has been decoupled from the Euro and immediately rose by 30%, moderated somewhat later. The US economy continues to out-perform the Euro zone.

We can't expect the decline of the Euro against the Dollar to end anytime soon. I have removed my former target of $1.10, and instead anticipate a continuing free fall, placing a Trailing Stop at 2% to take me out temporarily if a bounce of any significance occurs.

NASDAQ: how hard will it fall?

If the present down-swing continues, how much of a correction will we see? A 5% fall will bring it to the 2-year Support Line; a 21% fall to the 5-year Support Line, and a 60% fall will bring it to the 25-year Support Line, lining it up with the bottom of the Dotcom crash of 2000. Perhaps the strength of the American economy will restrain it to the 5-year Support Line; however, once it starts into a down-trend, it may be hard to stop.

KB Homes: Spike shot down

KB Homes: yesterday I predicted a spike on the publication of Q4 earnings, similar to last year's Q4 report (brown arrows indicate these spikes. This year again Q4 was good, and initially the price rose. However, questions put elicited the information that Q1 is expected to be down and that the company's targets would not be met. the price plummeted, bringing a down-spike instead. A punt that did not come off!

EUR/USD: Where to place a Trailing Stop

The range of the current down-trend of the EUR/USD is shown by the shaded area. Allowing c. 2.4% for upswings within the range (as indicated by the brown arrow) suggests a Trailing Stop above 2.5%, e.g., at 3%. While the Euro has 6% more to go, as we near the target of $1.1, we should not be too surprised if a trend reversal happens a little early. We would review and reduce our Trailing Stop as the target is approached.

EUR/USD: Getting ready for the end (of the Trend)

Click chart to enlarge it.
Since April 2014 the Euro has fallen nearly 15% against the US Dollar and continues to trend strongly down. When it reaches Support Line C, it will have fallen by 21%. The strength of its downward momentum might carry it right through this Support LIne. The reversal, when it comes, is likely to be quite sudden. The last down-trend (though not as steeply sloped as the current one) did not make it to Support Line C, so it is possible, if not very probable, that the present one would stop somewhat short of the target. It would be advisable to have a Trailing Stop in place in anticipation of a sudden reversal.

Spotting spiking shares

Publication of quarterly reports is often preceded by a spike in share values. Here is a list of shares whose quarterly reports (Q3 or Q4) are due shortly. I will have a look at their charts to see which, if any, are likely to spike.

• KB Home Q4 13 Jan;
• Intel 15 Jan Q4;
• Ryanair Q3 2 Feb;
• Santander Q4 3 Feb before market opens;
• Linkedin Q4 5 Feb;
• Alcatel Lucent Q4 6 Feb.

KB Home:

As last year, it may have a spike after results announced tomorrow morning, Tue 13 Jan. Over the last year, the Resistance Line has been falling, but there is support at the present level. Resistance Line and Support Line are converging, so one or the other must give. Expanding economy, the USA, I would expect Home Building to be doing pretty good. Worth a punt, if we can get in early! Place order to buy not above $17 and exit at $18.

Intel

 

Intel has had a good year, but is on a downswing. Following last year's pattern, it won't spike on quarterly report, but could be a long or medium term punt; for this place an order to buy at the Support Line (at present this would be $36). However, bear in mind that the Nasdaq is due for a substantial correction, which would probably bring Intel down with it. Maybe we should hold off for the time being.

Ryanair:

 Last year's rally began around 20 Jan, when the price bounced off the Support Line. This year, it is just coming off a magnificent upswing that went from October to December. The price could now continue to fall right back to the Support Line. Pass.

Santander:

 Well, this Spanish bank has dipped to the Support Line, and Soros has just now bought bonds. However, a quick, bouncy spike? I don't think so. Pass.

 Linkedin:

This time of the year usually brings a spurt; however, we would have been disappointed last year, when the share continued on a severe downtrend until April, after which it made a great recovery and continues the long-term uptrend. If a correction in the Nasdaq were not imminent, this would have been a good bet for a bounce off the Support Line. I am not too sure it will happen.

Alcatel Lucent:

The trend is downwards, and still seems to have some way to go, no matter that the company is  reported to be doing very well. another pass for me!

Summary: that's one Punt and five Passes for me!



Nasdaq and Dow to fall soon

 

Here is an image of the Dow and Nasdaq from Yaboo Financial. I have added a pale blue ("Support") band. Click on the image to enlarge.

Notice the pattern? The graphs tend to rise up above the Support Band, but suddenly come crashing down to it again. In the long term, the rate of growth is indicated by the slope of this band.

The Nasdaq tends to really go wild, rising to mighty heights. When it parts dramatically from the Dow, a crash is due.

As we enter 2015, we can see that a crash is now due. Both must fall, but the Nasdaq has the furthest to go. The spark that will light the fuse for this crash this time is the imminent rise in FED interests rates. ZIRP (Zero Interest Rate Policy) has been followed in the US since 2008 to spur economic growth. Now that the American economy is growing, American Interest Rates will rise, bringing down the price of shares.

The pattern is for share prices to fall much more quickly than they rise, so we can anticipate a dramatic fall in the coming weeks.

Euro to continue to fall against the US Dollar

Click on image to enlarge.
The Downtrend of the Euro against the US Dollar that began in April 2014 continues unabated. The movement is spectacularly smooth, reminiscent of (though not quite as steep as) Downtrend B of 2008, which brought the value from a high of $1.57 right down to $1.27. Since the American Economy continues to strengthen (while Europe languishes) and the end of ZIRP in the Dollar zone (but not in the Euro Zone) is inevitable, and Long-term Support Line A is decisively breached, there seems to be nothing to stop the downtrend along Line D until $1.1, or thereabouts, is reached.

The following chart shows the historical effective FED interest rate. It is clear that Zero interest rate is an anomaly and will end very soon. It reached a high of 19% in June 1981 and sank to Zero in November 2008.