Spu’s…1457.25 will be the focus level the rest of the week. This is the ORH weekly #.
Maintaining above will entice all new buying. Rejecting the level will start the lemmings to run.
30 yr…146.12 is an important hold level. Closing below 145.20 creates more selling.
USD/JPY…79.40 is the 200 day mvg avg ( app 126 ish in the futures)
CAT…86.15 is the weekly ORH #
DIG…49.87 is the weekly ORH #
OXY…84.90 is the weekly ORH #
XOP…56.73 is the weekly ORH #
XHB…26.16 is a potential double top on a qtrly chart
General Comments…
Pay attention to the Spu/Bonds. The 30 yr. low was big last night.
We wrote some of the potential patterns and levels for big sector names to watch. Price action
around the areas mentioned will be pivotal for the next 2 days.
XCO…we’ve raised our trailing stop significantly. This has been a huge winner for us this year on 3 separate occasions.
We have effectively used other Natgas names (ECA & CHK) to capture big returns on the Natty rally as well, which seems to be getting a little long in the tooth.
SPU’s…every technician is watching the forming of a possible 12 year head & shoulder pattern in the index.
Meaning, is this the last rally in the forming of the right shoulder followed by another big market swoon?
Pay attention to the game. This will have a profound effect on a lot of asset classes.
Model Trading Portfolio……………..
Stop Close Profit Points
Long XCO
Long TBT 59.30 69
Profit areas have been hit. Investors should have reduced positions. Small core longs should be left in XCO and TBT.
We’ve raised our trailing stop in XCO resources.
Short Term View…
Let the price action dictate your actions.
Medium Term View…
30 Yr. Bonds …150.15 ish is our short term upside pivot. Closing above this level would be short term positive the Bonds and negative the Equities. Closes below 145.20 will be needed for another leg down in the Bonds. Short term we have held and we will continue to favor the short side of the Bonds when market conditions allow.
The Spu/Bond spread has been running the show all year.
When the markets trade Risk Off the Bonds will be the vehicle of choice to receive those outflows from the equities. Meaning, you have to be very patient with your sell levels in the Bonds. They can still get priced to very low yields with the help of investor sentiment and Fed meddling.
We will be monitoring the Bonds for a breakdown in the existing correlation. “Long Equities=Long Bonds” going into the fall. So far the Bonds have been a better indicator of Risk aversion.
Equities... last qtr had us looking for a trip to last years close (1250) and we came close. This qtr we’ll use 1462 close as our upside closing pivot.
Gold & Silver…the June lows now become extremely important support levels. Both metals have been used as the long side of the spread against Short Euro & Aussie. Investors have been buying Dollars and then purchasing Precious Metals with those dollars.
Currencies…
AUD/USD… continues to be a good risk barometer. 102.25 ish is the near term macro pivot! ( This is a multi-year level) 111 is the upside pivot. Anything in between is just that, in between….no break outs! Closes above 105.30 would be deemed near term positive. In the big picture the Aussie has completed swing counts in both directions from the 111 high to the 95 level twice over the past 2 years.
USD/JPY…79.22 will be our macro pivot. ( App 126.40 Futures). Look for this level to run the Yen crosses against the Commodity Currencies. Use the crosses as the general risk tools they’ve been all year. CAD/JPY…AUD/JPY up, it’s Risk On.
We will be looking to short the Yen around 130.50 Futures, start looking under 77 USD/JPY for a potential Yen high.
EUR/USD….“119.75” +- 100 pips….is the macro pivot. Any price action the first time into this zone should be suspect ( possible Bear Trap), however closing a couple of days below this level is key to another big swing. This level has run several 20 cent swings in the Euro. It’s a significant area! These #’s are static and will not change. Furthermore, only closes over 131.50 will be price positive.
Natgas…We will continue to strategically look to buy hard breaks. The names will continue to be our preferred way to play the Natty. For the average investor the names provide more liquidity and a user friendly venue for capturing Alpha. 3.00 now becomes the key hold and pivot area for the next qtr.
Grains & Softs…Our long term strategy is to buy 8-10% breaks in the ETN & ETF’s.
Corn.. 7.55 is the macro pivot.
Soybeans…16.50 will be used for our macro closing pivot.
Oil…continues to be a good demand indicator, with failed rallies telegraphing little follow through in the Equity Indices. $78 which is the 50% Fib for the life of the Futures will continue be a key level on the downside and $100 on the up. When the market is Risk On the names here will provide a better trading venue for the average investor.