30 yr. Bonds…need to sustain under 149.10 for another point lower.
Spu’s…held the qtrly close yesterday and are now in recent mid market awaiting unemployment tomorrow.
Euro…has a small double top on the P&F chart @ 129.60 ish, which is unchanged on the year.
Currencies in general have been a better cross trade than an outright dollar trade.
OIL…can easily rally back to 90. Only closing over 91.50 will change the existing pattern.
We’ll look at some of the underlying names here after the opening.
In the meantime this complex is back to pushing out the Long Brent/ Short WTI spread.
Gold & Silver…keep holding. “Food for thought” Tomorrow will be all about the Metals in the A.M. Investors will need a strategy
here to be involved if you want long exposure.
A hold and a move up after the # @ 7:30 CDT will have everyone chasing. ETF players will be left out if they are not positioned by today’s close.
General Comments…
For our new readers…when we write about an instrument like DE yesterday we generally have two criteria;
First: is there an underlying commodity that has hit a major technical level or tgt to match up with associated names.
Why…because many of you don’t trade Futures and are looking for a low volatility play in the sector.
Second: Intelligent Risk Management
Yesterday it was the Soybeans @ 15. This was the tgt level we were looking for and spoke about on 9/24/12.
“it completed a big swing count”
DE was the standout on the low due to it’s defined risk parameter. You knew the risk or stop level to try a long.
We have been consistent in saying for the past 2 few months that picking up names or quality companies when the underlying sectors show value has provided greater alpha than chasing melt ups in the Indices.
Model Trading Portfolio
……………..
Long XCO
Long TBT 14.80 17.40-60 / 18.70/ 23
Profit areas have been hit. Investors should have reduced positions. Small core longs should be left.
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.