30 yr. Bonds…145.04 ( possible double bottom on the weekly), 144.20 ( 200 day mvg avg), 143.25 are the levels to coming down.
Bunds..141.09 is 1/2 way back on the year.
Italian Bonds…102.14-34…possible double top area on the monthly chart.
General Comments…
The big game is still the interest rates. Last night saw the German & U.S. rates head higher as the Italian borrowing costs move lower. All three are at technical levels that will either reject or accelerate through.
Day traders would do well to exercise caution at these lower levels in the Bund and 30 yr. Pressing direction early doesn’t
seem to be the wisest course of action. Be patient and let the market set up.
A little time is needed for the U.S. to digest just how much credence it’s going to place on the weekend articles out of Europe in regard to ECB rate intervention.
Model Trading Portfolio
……………..
Long XCO
Long Gold
Long GLD
Short Term View…Every Trade is the same trade. It’s either Risk On or Risk Off.
As of Friday’s close, The Equity Indices, Aussie and the 30 yr. bonds all closed at or near our pivot levels from March…
We continue to favor singles stocks or instruments over the broader indices, then take the money and run.
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. Short term these commodities have run their course putting in interim highs. The grains need to digest before we get new signals.
Corn.. 7.55 is the macro pivot and a close below will lead to good profit taking.
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 have been the driving force on the spread. There is not a lot of demand for minimal yields even when the equities turn negative. Now it’s all about the Bonds!
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. When the market is Risk On the names here will provide a better trading venue for the average investor.