| The Intermarket Report July 4, 2008 |
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| Written by Matt Caruso CMT | |
| Monday, 07 July 2008 | |
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The Futures / Inter Market ReportTrading the World’s MarketsJuly 4, 2008 British Pound in rally modeI have an article which has been published in the July issue of Stocks & commodities magazine. It is entitled “How to hedge against a bear market”. Perhaps you may find it to be of interest.The British pound has been correcting since late 07’ and now appears to be forming a bottom. The decline was not unexpected given its seasonal tendency to top at the start of January and to then decline into summer. If you missed the seasonal decline, perhaps there is now an opportunity to capitalize on the end of year seasonal rally. Unfortunately, markets do not follow the seasonal tendency every year, which is way I describe it as a tendency. However, there are certain factors that in my opinion are confirming the likely of a seasonal bottom at this time. The backbone of the major commodity markets is the commercial traders which use the products I their business. If the commercials don’t want the product, it is very unlikely that it will have a significant rise. If you take a glance at figure 1 you will see that commercials are just as bullish as in late 05’. If you check the data further back you will also see that this is almost the most bullish they have ever been. What is even more impressive is that commercials are just as bullish as in late 05’ but the current price is significantly higher. Despite the large climb in price over the past two years commercials are still very bullish and this means they believe the current price level is a great buying opportunity. Not only are commercials viewing this as a pullback in long-term uptrend, momentum as measured by the stochastic is also displaying a positive divergence indicating a likely bottom.
Figure 1 chart by genesisft.com I previously mentioned the seasonal top in January as well as a summer bottom. I would like to present a closer look at the historical seasonal pattern for July as calculated by genesist.com - the data is shown in figure 2. Just as I presented the strong June rally present in copper in my report two weeks ago, the pound has a similarly powerful seasonal rally in July. As you can see, there is a very strong bullish bias during this month and any weakness is likely a buying opportunity.
Figure 2 chart by genesisft.com Taking a closer look at the daily chart in figure 3 you will see that the pound has finally broken out of its downward slopping channel. Prices corrected yesterday and a pullback to the channel is likely sufficient to lead to another leg up. I also think it is important to watch a turn up in the stochastic for sign of a resumption of the up move – similar to what happened in March.
Figure 3 chart by genesisft.com --------------------------------------------------------------------------------------------------------------------------------- Disclaimer TradeSystemGuru.com obtains information from sources deemed to be reliable; |
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| Last Updated ( Sunday, 13 July 2008 ) |
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