Crude Oil…only a recovery and a close over 92.45 is positive. Just below 90 is the next level to potentially trap new shorts.
Metals…Platinum and Gold need to hold the lows seen last night to avoid more selling. Platinum is hovering on a very long term up trend line.
Equity Indices…need to hold last nights lows within a couple of points not to take a trip back to their 200 day mvg avg’s .
30 yr. Bond Futures…148 is the top of value on the shorter time frame point & figure chart. Watch for tone..the Bonds have to stop rallying
right in this area for the SPU/BOND spread to have a chance at holding and the spread reversing.
Commodity currencies were saying adios to Risk On yesterday and last night.
Kiwi…looks to have a a date with 73.40-70. 74.60 is the Dec. low, matching the Spu low we rallied from.
AUD/USD…the Fibs from 2010 come in @ 95.74….93.85 would be the next macro level for a huge screw job for directional players
in a Risk Off world. Ultimately this is headed closer to 92 to complete my multi-year swing count.
USD/CAD…102.50 ( app 97.50 Futures ) will be an interesting tell. If given, we’ll see more Risk Off.
Yen Crosses…are the ping pong ball in the international tournament to best squirrel your cash short term.
AUD/JPY…77 looks to be a level that might provide some respite in this cross.
General Comments…
Most instruments have attempted a rebound from a very oversold condition. So far the rallies couldn’t even muster a 30% bounce.
Today’s retests ( lower probes) have to hold for the Equity Indices to have any chance of holding up.
It’s the Mid-Week Shuffle…Let’s see what we get. Pretty much everything needs to reverse from overnight levels.
You have to remind yourself every day, that we live in an environment where all trades are highly correlated!
Pretty much every trade is the same trade…either Risk On or Risk Off.
There is plenty of opportunity for the vigilant investor. Rewards await the patient and observant Trader.
Low risk surrogates…instruments where you can codify your risk are the ticket in this environment.
Model Trading Portfolio…Current Holdings
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No Current Holdings
Short Term View…
It’s very important to see how “and if” the breaks hold today. This will help determine whether or not we keep our Rally hats on for a couple of weeks.
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…
30 Yr. Bonds … 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 all rallies in the Copper against a 377 weekly close. We regard this as an ancillary short to the general Risk off theme we see going forward late into this qtr. Weekly closes much over 382 will give us pause to re-evaluate our premise.
I’ve been doing this 35+ years…I’m hard pressed to recall a year when we haven’t gone back and attempted a retest of the yearly close in the equity indices at least once. Yes, we are looking for a re-test in the next few months.
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 this @ the 1.70 level.
GLOSSARY