240910 for ig

8/8/2019 240910 for IG

http://slidepdf.com/reader/full/240910-for-ig 1/4

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573E-MAIL [email protected] WWW.SEVENDAYSAHEAD.COM This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sourcesbelieved to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness oraccuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold orheld on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein wereconsidered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,relationship or arrangement in relation to them.

In association with

Market Bulletin 24th September 2010

Are Bunds recovering?

The Technical Trader’s view:

A S O D 2006 A M J A S O D 2 007 A M J J A S ON 2008 A M J J A S O N D 2009 A M J J A S O N D2010 A M J A S O N

5000

10000

15000

x100

108

109

110

111

112

113

114115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

109.66 Low

124.60 the High from 2005

118.48 High

126.53/52

Cont. Triangle

Parallel channel from 1995

Euro Bund Continuous

MONTHLY CONT. CHART

The Bund’s long-term chart

is fascinating.

The breakout of a long-term

parallel channel was

reversed, but there appears

to be good support from the

top of the parallel channel

and the price congestionthat formed the continuation

Triangle that drove the

market further on up.

Look closer.

8/8/2019 240910 for IG




In association with

21 28 5

July

12 19 26 2

August

9 16 23 30 6

September

13 20 27 4

October

1

500000

1000000

125.5

126.0

126.5

127.0

127.5

128.0

128.5

129.0

129.5

130.0

130.5

131.0

131.5

132.0

132.5

133.0

133.5

50.0%

61.8%

126.53/2 Prior

Pivotal High from weeklycontinuation chart

March 2009

130.37 Jun High (2.5% yield)

Continuation Triangle

131.82 Prior

Low resistance

Euro Bund Dec 10

DAILY CHART

Looking specifically at the

December contract we can see

the very short-term rationale for

the bounce in the monthly

chart- a completed bull falling

wedge.

Note too, the 50% retracement

support

and the proximity of the 2.5%

yield support at 130.37.

Wedges are not the most

reliable of the signals, and there

is still telling resistance above

the market, for example, the

band of Fibonacci and prior

Low resistance at 131.82.

So we are not yet entirely

convinced of the short-term bull

case. But the seeds of a turn

are in place.

8/8/2019 240910 for IG




In association with

The Macro Trader’s view: The story of the Bund throughout much of September was one of decline as traders first took

profits and then went short. The Bund had enjoyed a long rally as traders fretted over the

global economy and more specifically the US economic recovery, but sentiment changed early

in September. Why was that?

There are several reasons:

1. German economic data had been very strong, suggesting the Euro zone as a whole

would be dragged better by the German locomotive,

2. Fed Chairman Bernanke in a speech let it be known that the Fed could do more to

help the US economy if the US recovery weakened further, and

3. The US non-farm payroll report released at the beginning of September, was better

than expected, turning sentiment even more positive.

The impact on the markets was clear:risk aversion subsided, allowing stocks to rally throughout

much of the month, drawing traders away from bonds and back into equities, as safe haven

trades lost their allure.

So why now are stocks under pressure and Bonds, including the Bund beginning to rally?

Again there are several reasons, but mainly:

1. Euro zone data has turned weaker over recent weeks, with today today’s Euro zone

PMI composite survey coming in weaker than expected, led mainly by weaker data from

Germany, and

2. The recent FOMC policy statement which again saw the Fed pledge to ease further ifthe economic recovery weakened further, weighed on stocks this time.

So crucially the Euro zone economy that was fuelling the Euro zone recovery; Germany has

cooled off, and the very promises from Bernanke that earlier in the month helped fuel the rally

in stocks, has caused traders to rethink.

8/8/2019 240910 for IG




In association with

Instead of taking the promise of additional easing by the Fed as a positive for the economy,

they are instead thinking the economy is in bad shape for the Fed to even consider a new

round of QE. The result is clear: risk aversion is again rearing its head and the safe haven

status of Bonds is once again being sought.

This change in sentiment could drive the Bund much higher, at as far as the highs of August,

as traders are now thinking the rest of 2010 is going to be something of a struggle for German

and Euro zone growth.

Moreover this might re-awaken sovereign debt fears that seemed to have been put to rest over

the summer months, since weaker GDP will make the austerity measures adopted by many

Euro zone countries seem even more unpopular.

Mark Sturdy

John Lewis Seven Days Ahead

240910 for ig

Documents