Metals….all new strength is needed over 1628-30 in the Gold and $30 Silver to start another leg up. I think this will be a day trade until Friday at this point. We’ve seen 3 swan dives after unemployment #’s since Dec. 2009, with 2 big ones this year. Be patient with this.
Currencies…
Euro…EUR/JPY is in a tough area which should make sellers of Euro at these levels very wary.
Aussie…Point & Figure shows all new strength is needed over 103.80-104 for more upside. We’re going to look to buy this closer to 102.50, if given the opportunity, with a very tight stop.
Canada…I’d like to get closer to 102 USD/CAD to try buying Canada ( 97.80 ish on down to 97.40 in the H Futures)
Dollar Index…this has to maintain over 79.80’s to maintain direction.
OIL…The qtrly buy stops lie just over 103.37.
Expect 2 way action today. The Spu’s are caught between 1280 and 1267.75 at the moment. Everybody that bought equities yesterday will be slightly under water starting off today. Let the day set up and trade your time frames. We have to see if everybody that went all in yesterday, gets run out today.
Model Trading Portfolio…Current Holdings
No positions
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. Look for the “talking head’s” chatter to revolve around Reflation/Deflation vs. Risk On/Risk Off as the new buzz words this year. Same deal/new terminology/same result with a different banter.
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.