The technical trade continues. Last night brought another rebound from a very oversold condition. Given the way we closed, I think half my clientele were going to check into the local vet for a euthanizeation cocktail, after covering shorts earlier in the day.
The ultimate low risk contra-trend screw job was manifesting itself in the SPU/BONDS. The 1400 highs in the Spu were capped by the 50 day mvg avg in this spread. Yesterday saw this spread approaching the 200 day mvg avg.
Ideally ( In a perfect world) we were hoping for the 1320’s in the SPU while matching a 147 high in the 30 yr. Bond futures, to try a Long SPU/Short Bond position for a few days. So far, No Cigar. Since most of you are unable to pull up this spread on your systems we’ll send it out if it gets close.
Crude Oil…needs sustained price action over 95.10 for higher
Spu’s… over 1347 for more short covering.
General Comments…
This will be a price action trade over the next couple of days, and we are not ruling out another trip to the cellar. Aussie,AUD/JPY,Euro,Spu’s,Copper & Oil have all stopped at short term resistance.
We’ve re-posted the macro levels from last week. All of the above are static levels that do not change. Risk assets in general are trading short term oversold…Again this simply means DO NOT SELL weakness…Sell Rallies. Risk Assets traded overbought in the first qtr…now they are trading just the opposite, Oversold.
Hamsters…it’s all about trade location and time frame trading. Pick your spots and trade to make money. You should get opportunity from both sides of the market.
Let the day unfold. It’s the start of the mid-week shuffle..let the games begin.
Model Trading Portfolio…Current Holdings
……………… Stop Close Profit Points
No Current Holdings
Short Term View
We have a Risk Off bias
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!
Take what the market gives you , will be the order of the day.
Trade to Make Money!
Medium Term View…This will be updated next week for the 2nd Qtr.
30 yr. Bond Futures … 138.00 ish now becomes our macro pivot. Closing above this level would be short term positive the Bonds and negative the Equities. We will look to buy a multi-point break in the 30 for a rally into the fall in keeping with a general risk averse market theme.
Equities…While, we were in strategic buy mode for the first quarter, we now believe the market is fairly priced. The equity indices deserve a break. The operative question becomes, from what level and when can a break develop. We will monitor instruments on an individual basis vs. the general Risk On/ Risk Off correlation we saw last year, when most instruments traded via the theme of the day.
Copper…We’re looking to sell rallies in the Copper against a 377 weekly close. We regard this as an ancillary short to the general Risk Odd theme going forward into late this qtr.
We’ve been doing this 35+ years…I’m hard pressed to recall a year when we haven’t gone back and attempted a re-test of the yearly close in the equity indices at least once. Yes, we are looking for a re-test over the next 5-4- months. Indices can still grind higher to the upper tgt levels over the next few weeks before profit taking ensues.
We are going to be highly flexible this qtr….we are not getting married to a central theme , nor are we getting into the long term prediction business. Having a bias is one thing, being patient and executing with a defined risk parameter another. Our business is Intelligent Risk Management.
Currencies…AUD/USD continues to be a good risk barometer. 102 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.
NATGAS…We’re looking to buy the Natty @ 1.70.