Full Moon Trading….
July Soybeans…expire today. November (X) is now the most active future.
Spu’s…need all new closing price action over 1362 for more upside.
AUD/JPY…82.50 is a significant resistance level in this cross. Resting stops are just above 83.30. All new closing strength over 84.40 is needed for another leg up in this cross. This is a Risk on indicator! Pay attention to these macro levels as they will surely line up with the Equity Indices.
Oil… has been the harbinger of the Equity strength all year. When the Oil has weakened the equity indices soon followed and vice verse. Oil rallied almost 8 dollars without a reversal from Thursday very late day into Friday’s close. It’s now in retrace mode. Price action around 82 will be monitored to determine if it holds for another rally.
General Comments…
We saw a massive qtr end markings in the stock indices and the individual instruments. Now we expect to see some residual income average buying going into to the first 30 minutes of Pit trading in the Equity Indices. The rest of the day will be a time frame trade!
Took a drive into Cheese Land (Wisconsin) over the weekend. Place is Bone dry! The grains are where to focus for short and medium term trading opportunities!
Model Trading Portfolio
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Long TBT 15.30
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 board is now trading Risk On.
We’re looking for a continuation of the Risk On scenario and the market to hold the breaks in the Equity indices over the next few weeks.
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 are currently short Bonds via the Long TBT (which is a risk on bias) and will continue to look to sell 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. They seem to be bought out, like the Bunds, in the near term.
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/USDcontinues 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.
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.