One of my favourite films of all time is Back to the Future, the one in which a time machine travels back in time to the 50’s from the 1980’s and the infamous “flux capacitor” is referenced! It raises the intriguing possibility of reading tomorrow’s Financial Times today, and of course the riches that such a machine could bestow, for example discovering ahead of everyone else whether Sirius Minerals (SXX) will have a smooth journey in terms of developing its unique tribute to the Yorkshire countryside.
It is interesting that after no one has blinked to date regarding the potash miner and all the twists and turns in the story, we are starting to see a few investors panic, with a near 10% dip in the share price some two weeks ahead of “D Day”. Even if you are a great fan of the company, there would appear to be absolutely no point whatsoever in kidding yourself that even with the best will in the world, the stock price is simply a binary event.
For what it is worth, the daily chart that whilst remaining above the main trend-line at 20p, the charting configuration appears to be telling us that all is well with what has essentially become a planning consent specialist company as well as a would be mining group. Nevertheless, as even the most ardent chartist will tell you, in “do or die” situations such as that of Sirius, price action really does play second fiddle to the fundamental picture.
Returning to my “Back to the Future” theme, and we are once again in the run-up to further revelations from Federal Reserve Chairman Ben Bernanke. Something that it appears is fast becoming a weekly event. Given the way that everyone’s favourite policy maker has already delivered a U-turn on the June attempt to call time on QE, it is to be assumed that tomorrow will witness more cringe worthy/tail between the legs mumblings regarding just how the best way forward for the US economy would be to continue with their currency debasement (sorry, asset purchases). But rather than polishing off the DeLorean and heading up to tomorrow afternoon, it would appear that the easiest way of finding out what the effects of “Yellow Belly” Ben will be is to look at the charts of both Gold and the Euro.
On the hourly chart of the Euro it can be seen how we now have a clear inverted head and shoulders formation in place since the last week of June, with the left and right-hand shoulders resting at the $1.30 level. The overall expectation is that at least while there is no end of day close back below the big figure, we should be treated to a minimum retest of last week’s intraday resistance at $1.32, with the June Spike zone at $1.34 the focus after that. Indeed, if Bernanke maintains an accommodative line tomorrow the expectation is for a $1.34 target, especially as the price action is backed by bullish divergence in the RSI window.
If anything, one could say that the hourly chart of Gold is even more bullish currently than the equivalent position for the Euro. This is despite the way of course that both markets are factoring in continued dollar weakness courtesy of bond buying something that is at complete odds with fund manager position for continued dollar strength as we relayed earlier here – http://www.spreadbetmagazine.com/blog/bank-of-america-fund-manager-survey-results-out.html.
We actually have a W shaped reversal in place now for the yellow metal since the end of last month, with the neckline of the reversal formation at $1269, and which was initial June support on the way down. This was then tested last week as support and backed by a 50 period/200 (60 minute) period moving average golden cross buy signal just a few days before. The message now is that while there is no end of day close back below $1269, one would be looking for a partial or even full retracement of all the early June losses for the metal from the $1400 area. The timeframe on such a move could be just a matter of a few days, especially if recent $1298 resistance breaks before the Fed Chairman speaks. On this basis the yellow belly reference may therefore be to the colour of Gold, rather than any perceived weakness in Mr Bernanke’s character…