Crude Oil…all new price action over 91.70 is needed for higher.
Gold…look for the mid to high 1570’s to be tough zone.
GDX…as well as some names like NEM put in ORH days yesterday. As of now they look to be holding the pattern, which is positive.
EWZ ( Brazil)…49.25 was last years low. We came close yesterday. Sustained price action over 51.65 would be deemed positive.
As a pure value trade, this one looks like it has the most potential for a rebound with limited risk. 55 ish would be a first rebound tgt.
Usual Suspects for a Risk on rally…CAT, DE, Oil names like OXY can provide a much better Risk profile than the Indices, with less
angst for the average investor.
General Comments…
We’ve been keeping our head down as to trading recommendations because we believe the current environment is better suited to the well seasoned professional. This is not a game for someone looking for a longer time frame strategy.
Volatility is up which is great for a nimble day trader, The Nasd has been moving 35-40 points directionally at a clip. The Spu’ have been averaging 20 points, with yesterday being an anomaly with almost 25 points.
The markets have shaken off a lot of bad news and held last night. The upside hasn’t changed in the Spu’s or Nasd.
Every time we start trading oversold we get these ” Rip your face off, robot driven Time Frame, Lemming Effect Trades. We do our best to arm you with the daily market tells. Pay attention to your time frames and capital flows. We have been generally experiencing 2 distinct directional trades a day.
AUD/JPY has been a great Risk indicator. When the levels we watch are achieved, you should be wary of a contra trend directional trade developing. A lot of investors think that the Spu’s run the earth, however if you pay attention to the bigger game via the currencies you’ll start to see the turns in a different light. Minimally, you should at least learn to have your antennae up so you don’t get run over when the big currency levels are in play.
Model Trading Portfolio…Current Holdings
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No Current Holdings
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!
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