Welcome to the Mid-Week Shuffle…
Oil…83.00 +- 10 ticks is a key Fib level which we failed to reach yesterday. The oil never acted as bad as the Equity indices yesterday. 85.20 ish looks to be the top of value on the Point & Figure charts as of now. I need a close under 82 for downside.
Spu’s…did not close below our macro pivot yesterday. Now we have to see where this rally stops to determine if we go short. Bears would like to see it stay under 1344.
Euro…above 123.40 ish all the shorts will get run out.
General Comments..
Yesterday saw a myriad of ORL’s across a wide array of assets ranging from individual Big Cap Stocks,Metals and Equity Indices in the U.S. to Brazil. Just as interesting is China and Germany did not confirm these patterns. To be clear, I am not saying they look particularly good, I’m only commenting on the pattern.
I still need confirmation of further downside with closes in the Spu under 1333 & Nasd 2540. This leads me to look for a failed rally on a retest of the reversal lows similar to the price rejection we saw in the Natty, failing shy of 2.95 for a continuation of this sell off.
We’re looking for pattern confirmation. There are 3 possible scenarios: Immediate continuation of the pattern, A retest of the reversal low and a continuation of the pattern ( the first two being Risk Off), or a close back above Monday’s close which would lead one to have to consider this a one day wonder.
Let’s see which patterns are real. Be patient and pick your levels.
Model Trading Portfolio
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Long AAPL 600
Short Term View…Every Trade is the same trade. It’s either Risk On or Risk Off.
We continue to favor singles stocks or instruments over the broader indices, then take the money and run. The summer is setting up for another roller coaster ride.
The Grains and the Softs will provide the best trading opportunities over the near term. The weather should make these instruments the better trading venues. We will look to buy 8-10% breaks.
Use the June closes for your short term pivots in everything.
Medium Term View…
30 Yr. Bonds …150.15 ish now becomes our macro pivot. Closing above this level would be short term positive the Bonds and negative the Equities. We will continue to look to sell good rallies for the foreseeable future.
The Spu/Bond spread has been running the show all year.
The Bonds have not had big reactions to the latest equity swings, which just tells us that the Spu’s are the driving force on the spread. There is not a lot of demand for minimal yields even when the equities turn negative.
We will be monitoring the Bonds for a breakdown in the existing correlation. “Long Equities=Long Bonds” going into the fall.
Equities... last qtr had us looking for a trip to last years close ( 1250) and we came close. This qtr should be a 2 way trading affair. When the board goes Risk on as it did 6/29/12 , look for high yielding beaten up names to provide greater returns with a lower risk profile than the indices. We will use 1333 as our level for bias.
Copper…Dr. Copper caught the recent low in the Equity indices. We’ll monitor the 360 level to possibly match up with another shorting opportunity in the Equity Indices.
Gold & Silver…the June lows now become extremely important support levels.
Currencies…
AUD/USD continues to be a good risk barometer. 102.25 ish 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. In the big picture the Aussie has completed swing counts in both directions from the 111 high to the 95 level twice over the past 2 years.
USD/JPY…79.22 will be our macro pivot. ( App 126.40 Futures). Look for this level to run the Yen crosses against the Commodity Currencies. Use the crosses as the general risk tools they’ve been all year. CAD/JPY…AUD/JPY up, it’s Risk On.
EUR/USD….“119.75” +- 100 pips….is the macro pivot. Any price action the first time into this zone should be suspect ( possible Bear Trap), however closing a couple of days below this level is key to another big swing. This level has run several 20 cent swings in the Euro. It’s a significant area! These #’s are static and will not change.
Natgas…We will continue to strategically look to buy hard breaks. The names will continue to be our preferred way to play
the Natty. For the average investor the names provide more liquidity and a user friendly venue for capturing Alpha.
Grains & Softs…the summer weather market is upon us. Our long term strategy is to buy 8-10% breaks in the ETN & ETF’s.
Oil…continues to be a good demand indicator, with failed rallies telegraphing little follow through in the Equity Indices.
78 which is the 50% Fib for the life of the Futures will be a key level. Near term, we have tgt’s for this swing @ 88-90.
When the market is Risk On the names here will provide a better trading venue for the average investor.