The moves over the past couple of trading days have been run off SPU/BONDS and DAX/BUND. The sell off in the Bond markets have been keeping the equities buoyant.
Watch the price action in the Bond markets for clues to the equities. The spread is Long Equities/Short Bonds.
Currencies…
Early price action in Asia saw the Euro & EUR/JPY testing their weekly OHR levels and holding. Last nights lows +- a few points will become important closing levels.
EURO…Stops will be resting above 130.77-86…this years high.
EUR/JPY…stops here…above 100.36
AUD/USD…106 and 8156 AUD/JPY will be the first daily levels. keep your eye on the Equity/Bond spreads to see where this goes.
USD/CAD…the stops lie under 100.70 USD/CAD.( over 99.17 H Futures)
SILVER…I don’t see anything major until 33.40.
Model Trading Portfolio…Current Holdings
Long Moo
Long XLE
Long X
Short Term View…
Location,Location,Location…if you have a good trad able pattern ” Good Risk Reward” You just have to seize the opportunity and see what develops!
“Carpe diem” is the new watchword.
Trade to Make Money!
Medium Term View…
The 1160-70 SPU’s area “S&P 500 Futures” would provide an area for good risk reward for the Bulls early in the qtr. The first time down has the potential to be a great Bear trap.
We’ll be using 1220 ish for our new pivot area going into the first qtr. We’re looking to buy the hard breaks in the equities and sell the 30 Yr. Bonds when the opportunity presents itself early in the 1st qtr.
It is our view that the political and economic risks are still skewed to a largely cash portfolio over the medium term.
This upcoming Quarter will be one of patiently waiting for strategic opportunities. In other words, another year of limiting your downside risk and taking your money on your winners. Only trade ,either Long or short, when you can codify your risk.
We don’t believe the market volatility is going away anytime soon. This year should shape up to be another Trader’s Market. We’re particularly focused on opportunity in individual Commodities as well as the Commodity currencies in the first Qtr. It’s all about trade location!
30 Yr. Bonds …147 is the all time high in the front month futures. We will watch price action off this level for any potential surrogate moves in the Currencies or Stock Indices. 144.20 ish now becomes our macro pivot. All new closing strength over 145.20 would have us looking for more upside in the Bonds. Closing above this level would be short term positive the Bonds and negative the Equities.
Australian Dollar ( AUD/USD)…100-100.30 is the cash level we are using to match up with general Risk On bias in the overall market. Closing below this level, should mirror short term weakness in the stock indices. Remaining above, should have the opposite effect. “It will be a big macro pivot this qtr”. 102.33 & 102.08 AUD/USD are the past 2 yearly closes.
The big fly in the ointment this year will be Oil risk. Oil has become the risk commodity/ surrogate currency Du Jour, replacing the precious metals late last year. How high will Oil go before imploding the equities as in 2008?
This will Not be our our strategy…We are going to do exactly what we did last year…Be patient! Take trades on our terms with limited risk… then take the money!
Our view is that the beginning of this this year will be a High Volatility, Highly Technical, Rumor Driven, Time Frame, Lemming Effect Day Trade, on very thin volume just like most of 2011. The question is who’s day? Right now it’s still Europe’s.