Welcome to the mid-week shuffle
Yesterday saw us get filled on some more AUD/USD shorts @ 102
The current board is still Risk On. The most I’m looking for is a break in the Spu’s to the low to mid 40’s coupled with a possible 20 tick rally in the Bonds. As long as the Spu’s remain above 1333 you want to be in buy the breaks mode.
We’ll use this opportunity, if shown, to exit the Aussie, which is a Risk Off bet.
Game plan is to get a break into last night’s low’s to exit 70-80% of the shorts and then lower the stop.
We might have missed that opportunity last night, so we’ll watch for a bit. There has been no price separation off this level which is putting me in the camp of getting out and watching.
AUD/USD…needs to sustain price action under 101.60 for any downside ( app 100.80 Futures)
General Comments…
This qtr end seems to be shaping up like the end of Dec. when the Spu & Aussie low was put in the 3rd Monday of the month. It’s time to start trading what the price action dictates vs. any opinion.
It remains to be seen if this will be the case but I’m not fighting the flow, which could take a few weeks to change.
Looking at some of the big cap tech stocks such as GOOG ( yesterday’s low was unchanged on the month)..AAPL will the Hedgies close this above 600 at month end, last qtr’s close?
The Agri stocks were on fire yesterday as a surrogate to the Grains. We’ll monitor these for a pull back to enter.
Today will be about how and where the equity indices hold on any break. Sustaining and closing above 1357-61 Spu’s will be positive and have me looking for another 30-40 point swing higher.
Hence, conceptually the low will be much more important than the high today. This remains a price action trade with everybody seemingly looking for a run up into the Fed meeting followed by profit taking.
The whole day will center around the Fed meeting. There is no reason not to expect a 20 point range in the Spu’s and 40 points in the Nasd 100 today.
The 30 yr. Bond futures will be the feature today with June futures expiring. We will look here for the keys to the board. Settlement of the futures occurs after the Fed minutes come out.
Model Trading Portfolio
……………..
Short AUD/USD 102.60 100.80-101 pay for the trade
Short Term View…Every Trade is the same trade. It’s either Risk On or Risk Off.
It’s time to hit singles, then take the money and run. The board is trading Risk Off with rallies for the past month, in all Risk assets, being met with sellers.
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. 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 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”.
Foreign Exchange/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.