Weekly Outlook: 2014, August 17 - August 24

S&P 500 forecast for the week of August 18, 2014, Technical Analysis

The S&P 500 rose during the course of the week, breaking the top of the previous week’s hammer. Because of this, it looks like we are heading back towards the 1990 handle, an area that can be used as a staging for the massive breakout that’s expected at the 2000 level. With that, the move would suggest that the market is going to break out and go higher on a longer-term move as well. You can see on this chart that we have a massive uptrend line that the market has been falling, and there is nothing on this chart that suggests we can continue to go higher.

Ultimately, money is looking for a place to go. In a world where the bond market simply don’t offer much in the way of yield, it makes sense that money will go into the stock market, and most specifically the stock market that represents the US economy, one that is doing much better than most other economies around the world. With this, we preferred the S&P 500 over most stock indices globally, and believe that it should be one of the best formers globally.

We look at pullbacks as buying opportunities, and have absolutely no interest in selling this market until we get below the 1800 level, something that is not happening anytime soon. With that being the case, we are not only a “by on the dips” type of firm, but we are also a “buy-and-hold” type of firm. With this market looking so strong, there’s just a lot of difficulty imagining that the market is going to fall apart all of a sudden.

True, we have had a significant pullback in the last couple of weeks, but we have already recapture more than half of it and there’s no sign of things leading up. Using short term pullbacks might be the way to take advantage of a longer-term move, because quite frankly once we get above 2000, this market should head much, much higher. In fact, we could very easily be at the beginning of a multi-year run higher.

Dow Jones 30 forecast for the week of August 18, 2014, Technical Analysis

The Dow Jones 30 rose during the course of the week but did struggle on Friday as Ukrainian and pro-Russian troops exchanged fire again. However, we believe that the market is still heading higher, and we most certainly are hanging onto a nice uptrend line. With that, we believe that this pullback will more than likely be a buying opportunity, and that the market should in fact continue to be positive, although we don’t the fairly expected to outperform some of the other US indices, is quite frankly the US economy is starting show strength.

US Dollar Index forecast for the week of August 18, 2014, Technical Analysis

The US Dollar Index tried to rally during the course of the week, but as you can see we have finished the week with a shooting star again. This suggests that perhaps the market is a little overbought at this point, and that a rally could be fading. However, we believe that there is enough support below that any pullback at this point in time should be a buying opportunity. This is especially true considering that the European economy isn’t exactly humming along, and a poor economic numbers out of the EU should do very little to convince people that the Euro is something to bet on.

Remember, the Euro versus the US dollar is roughly 40% of this contract value. That means that this essentially moves in the opposite direction of the EUR/USD pair, and therefore you have to pay very close attention to it. That market looks like it could bounce slightly, but the upside is certainly limited as there is a massive amount of resistance just above.

The European Support Bank looks as if it’s ready to continue easing, and if that’s the case we should see the Euro sank and value overall. On the other hand, the Federal Reserve looks as if it is ready to continue tapering off of quantitative easing, which of course is bullish for the US dollar. In that scenario, it makes sense that this market continues to go higher over the longer term. However, the latest move has been rather impulsive so it makes sense that we need to take a little bit of a break. This break should be relatively short-lived though in our opinion, and as a result we are willing to buy any supportive candle that shows up.

As far selling is concerned, we would have to break down below the 79 handle as it has been such obvious support. That looks like something that isn’t going to happen anytime soon, so essentially selling really isn’t a thought at this moment in time. With that, we are very bullish but recognize that a pullback might be just what’s needed to push the market higher in the long-term.

Silver forecast for the week of August 18, 2014, Technical Analysis

The silver markets as you can see initially tried to rally above the $20.00 level, but ended up hauling for the week. The market looks as if it has support down at the $19.00 handle, and as a result we feel that the market will probably fall to that level before finding buying pressure again. This would continue the consolidation that we have seen for the entirety of the year, so ultimately we feel that this is a shorter-term market in the sense that the only long-term play at this point is the buy physical silver.

Gold forecast for the week of August 18, 2014, Technical Analysis

The gold markets did very little during the course of the week, essentially going sideways. The candle looks as if it’s showing support at the $1300 level again, so it’s not a surprise to see that we ultimately went nowhere, especially considering that this is an area of such great interest. With that, we are not interested in this market from a longer-term perspective as far as trading is concerned. However, we do believe that ultimately the goal market will go higher, so perhaps purchasing some physical gold may be the way to go.

EUR/USD forecast for the week of August 18, 2014, Technical Analysis

The EUR/USD pair initially fell during the course of the week, but for the third week in a row found support below, and ended up forming a hammer. Because of that, we believe that the Euro is about to get a bounce, not only because of this chart, but because of some other EUR related charts. With that, we think that we are heading to the 1.35 handle first, and then will have to make more significant decisions at that level. In the meantime, we would not be interested in selling this market until we get below the 1.33 level.

Forex - Weekly outlook: August 18 - 22

The dollar was lower against the yen and the Swiss franc on Friday as heightened geopolitical tensions underpinned safe haven demand, while the euro moved higher, bolstered by expectations for fresh stimulus by the European Central Bank.

Tensions over the crisis in Ukraine escalated on Friday following reports that Ukraine's military attacked and destroyed a number of armored vehicles that entered the country from Russia.

USD/JPY touched session lows of 102.14 and was down 0.09% to 102.35 late Friday. USD/CHF ended Friday’s session at a three week low of 0.9024, down 0.46%.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.20% to 81.48.

The euro pushed higher, with EUR/USD up 0.27% to 1.3400 late Friday. Data on Thursday showing that the euro zone economy stagnated in the second quarter fuelled speculation that the ECB will embark on quantitative easing to bolster the faltering recovery in the region.

Elsewhere, the pound posted its sixth straight weekly loss against the dollar, with GBP/USD at 1.6691 late Friday. For the week, the pair was down 0.51%.

The pound found some support after revised data on Friday showed that the U.K. economy grew at a rate of 3.2% in the year to June. Second quarter growth remained unchanged from the initial estimate of 0.8%.

The Canadian dollar rallied to more than two week highs against the U.S. dollar on Friday before later retracing most of those gains, after a revised jobs report showed that the Canadian economy added more jobs than expected in July.

Statistics Canada reported that the economy added 41,700 jobs in July, well above the original estimate of just 200 jobs and ahead of expectations for jobs growth of 20,000. The unemployment report ticked down to 7% from 7.1% in June.

The statistics agency released a revised version of the jobs report after detecting an error in the original jobs report released on August 8.

USD/CAD fell to lows of 1.0860 before pulling back to 1.0896 late Friday.

In the week ahead, investors will be looking ahead to Wednesday’s minutes of the Federal Reserve’s latest meeting, while the Bank of England and the Reserve Bank of Australia are also to publish meeting minutes. Thursday’s data on euro zone private sector activity will also be in focus.

Monday, August 18

• Germany’s Bundesbank is to publish its monthly report.
• Canada is to release data on foreign securities purchases.
• The U.S. is to produce private sector data on the housing market.

Tuesday, August 19

• The RBA is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.
• New Zealand is to release reports on producer price inflation and inflation expectations.
• The U.K. is to produce data on consumer inflation, which accounts for the majority of overall inflation.
• The U.S. is to release reports on building permits, housing starts and consumer inflation.

Wednesday, August 20

• RBA Governor Glenn Stevens is to speak, his comments will be closely watched.
• Japan is to publish data on the trade balance, the difference in value between imports and exports.
• The BoE is to publish the minutes of its latest policy meeting.
• Canada is to release data on wholesale sales.
• Later Wednesday, the Federal Reserve is to publish the minutes of its latest policy meeting.

Thursday, August 21

• China is to release the preliminary reading of the HSBC manufacturing index.
• Switzerland is to release data on the trade balance.
• The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
• The U.K. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is to produce data on unemployment claims, manufacturing activity and existing home sales.
• The first day of the annual economic symposium is due to take place in Jackson Hole, Wyoming.

Friday, August 22

• Canada is to release data on retail sales and inflation.
• Fed Chair Janet Yellen and ECB President Mario Draghi are both to speak at the second day of the annual economic symposium in Jackson Hole, Wyoming.

EURUSD weekly outlook: August 18 - 22

The euro pushed higher against the dollar on Friday as weak data on euro zone second quarter growth fuelled expectations for fresh stimulus by the European Central Bank.

EUR/USD was up 0.27% to 1.3400 late Friday and ended the week little changed.

The pair is likely to find support at 1.3347, Thursday’s low and an almost nine month trough and resistance at the 1.3450 level.

Preliminary data on Thursday showed that euro zone gross domestic product failed to grow in the three months to June. Economists had expected a small expansion of 0.1%.

Germany’s economy shrank by 0.2% in the three month to June, the first drop since 2012 and worse than forecasts for a contraction of 0.1%.
French GDP was flat in the second quarter, the second consecutive quarter of stagnation.

The weak data indicated that the economic recovery in the euro area is losing momentum, adding to pressure on the ECB to do more to bolster growth after it cut rates to record lows in June.

The euro’s gains were held in check as heightened geopolitical tensions weighed on market sentiment on Friday.

Tensions over the crisis in Ukraine escalated following reports that Ukraine's military attacked and destroyed a number of armored vehicles that entered the country from Russia.

Elsewhere, the euro drifted higher against the yen, with EUR/JPY rising 0.18% to 137.16 late Friday.

In the week ahead, investors will be looking ahead to Wednesday’s minutes of the Federal Reserve’s latest meeting, while Thursday’s data on euro zone private sector activity will also be in focus. Speeches by central bank heads Janet Yellen and Mario Draghi on Friday will also be closely watched.

Monday, August 18

• Germany’s Bundesbank is to publish its monthly report.
• The U.S. is to produce private sector data on the housing market.

Tuesday, August 19

• The U.S. is to release reports on building permits, housing starts and consumer inflation.

Wednesday, August 20

• The Federal Reserve is to publish the minutes of its latest policy meeting.

Thursday, August 21

• The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
• The U.S. is to produce data on unemployment claims, manufacturing activity and existing home sales.
• The first day of the annual economic symposium is due to take place in Jackson Hole, Wyoming.

Friday, August 22

• Fed Chair Janet Yellen and ECB President Mario Draghi are both to speak at the second day of the annual economic symposium in Jackson Hole, Wyoming.

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