Late Week Portfolio Window Dressing Activity Creates New Opportunities
Written by Al Martin Sunday, 01 April 2012 21:46
(4-1-12) In Monday and Thursday trade, we saw the June Long Bond contract continue to move higher, even in sessions where equities also moved higher, as end of quarter short covering came into the US Government Bond market, prompted by those who had been selling Bonds prematurely. We still like trading the June Long Bond contract from the long side. Indeed we bought the contract in Friday's close at 137.26, where the contract dropped a whole point, as short covering buy-in was relieved in late Thursday session. We would look to be sellers of our position on a retest of 138.10 in Monday's trade.
The June Dollar contract continues to hover, just under 80, at surprising Euro strength. Also the end of quarter book-squaring phenomenon persisted. However we would expect the June Euro contract to begin to fall back in the coming week's trade and conversely the June DX contract to rise once again above 80.00.
The May Oil contract -- pressured late week under increasing speculation that there will be a global strategic petroleum release of as much as 100-200 million barrels. Oil is also being affected by record inventory builds in the industrialized countries and falling gasoline and nat. gas demand. We think that the 102.78 Friday intra-day low will be breached in the coming week’s trade.
We Told You to Trade the Bonds from the Long Side!
Written by Al Martin Monday, 26 March 2012 13:49
(3-26-2012) Despite the numerous pundits in financial media who pounded the bearish drum on Bonds throughout the week, we continue to trade the Bonds from the long side on dips, a strategy that proved successful throughout the week, as the Bonds continued to regain lost ground. The Bond bears are wrong. There is not a fundamental shift coming. In order for this shift to take place, there has to be the belief that the US is in a 3% GDP growth environment -- which is untrue. We would continue to trade the June Long Bond contract from the long side and would be looking to get long again on a retracement back to 137.16.
The Dollar bears out in force again last week, as the Euro continued to pick up a little steam. The Euro is now topping at the 1.3250 level. We continue to short on any moves above that, covering on any 30-40 point dips. We would expect the June DX contract to move back above 80 in the coming week’s trade.
Late Week Action Suggests Upside Blow-Off Scenario Still Intact
Written by Al Martin Monday, 19 March 2012 01:59
(3-18-12) With Friday’s second consecutive higher close in the SPX at 1400, although we were not able to initiate the blow-off in Friday’s action due to unsupportive economic calendar data, the higher close would suggest that the effort will again be made either in Monday or Tuesday’s trade.
In Sunday night’s overnight trade, we will be looking to trade the same way we did Thursday night -- looking to buy the “spoos” on any kind of a dip. We are looking to sell the Euros at 1.3215 or better. Also looking to buy the Gold at around current levels at 1660 and looking for a move to test 1665
Near Term Technicals Continue To Flash Warning Signals
Written by Al Martin Monday, 12 March 2012 01:46
(3-11-12) In our end of week technical assessment, we noted that 85% of S&P 500 issues are now trading above their 50-day moving average, continuing northward with the 14-day RSI, also now continuing northward of 80 weekly bull/ bear sentiment indicator, now reaching peaks not seen since the top of the 2005-2006 bubble, this combined with the perilous and continuing decline in the 180-day MA of the NYSE composite volume. We would also note that the 180-day moving average of new highs/ new lows daily indicator continues to flash overbought warning signals.
We finished the second week with net outflows from US domestic mutual funds reversing the trend that we saw in the first six weeks of the year. This has caused us to change our technical assessment of domestic equity markets from near term overbought-2 to now near term overbought-1. We would once again be looking to short the SPM contract on moves above 1370 in Sunday’s overnight electronic session.
Poor action in the USM contract Friday after the solid unemployment data. Although we would note that the data was not substantially above expectation and was between the official 210,000 estimate and the 240,000 whisper number, we must admit that 3-month revisions were stronger, wherein weaker numbers were expected.
The 8:30 trade deficit number also reported was substantially worse than expected. The 10 o’clock wholesale inventory numbers -- a little weaker than expectation, although with substantial upward revision. This combined with the final word on the current Greek bailout deal, wherein credit default swaps (CDS) will be triggered, albeit only for between $3-4 billion, nonetheless triggering a "credit event" in Europe for the first time in the post-war era.
This does not leave us with as strong data as we have had in the previous unemployment numbers, which has prompted lifts in the Sunday overnight trade, generated by rallies in the MCI Pan-Asian Index. Thus we would be looking at Sunday night trade to sell any further moves up in the SPM contract and to buy any dips in the USM contract.
Last Week’s Toppy Market Action Invites Short Sellers
Written by Al Martin Sunday, 04 March 2012 22:40
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(3-4-12) In last week’s action, after substantial volatility in Wednesday’s final day of the month action and large scale book squaring operations, new buying opportunities were presented in the now June Long Bond contract. We had bought the contract Thursday night at 140.21 and were sellers of the contract at 141.12 in Friday’s close. We are now trading the June contract, and we look for the 142 area to be tested in the coming week’s trade.
We sold our March Dollar contract at 79.50 in Friday’s close, taking a 100bp profit out of them on the week. Those who had taken our suggestion and had bought them at 78.50 were able to make money.
The April Crude Oil contract, of which we had been short sellers all week above 107, including covering at 105 on the Wednesday dip -- we were sellers again in Thursday’s overnight action at 107, covering at 106.50 on Friday’s close. We would expect the Oil to work lower to retest Wednesday’s 104.70 lows in the coming week’s trade.
Good action in the April Gold contract. We were short sellers of the contract at 1780 in Tuesday’s overnight trade. We covered at 1700. We then bought the contract at 1694 in late Wednesday afternoon trade, selling in Friday morning session on the test of 1720. We think the Gold contract has some consolidation in the 1700-1720 zone -- but will work higher again.
May Sugar contract – we continue to short at 25.00 and better, covering on 10-30 point dips. We now have standing sell orders in the contract at 25.05.
The May Orange Juice contract also picked up on end-of-month short-covering. It has reached our 190 fresh shorting target. Indeed we shorted the Juice on the close at 190.35 in Friday’s session. With the Brazilian fungicide problem receding and Florida peak frost period now also receding, we think it is time to get short the Juice again.
May Lumber continued to pick up late week in short-covering action. We had sold the contract away at 282. We currently have a cover order in at 272.
Grains also picked up in Friday’s session on renewed short-covering and fresh speculation on Brazilian Bean damage. We think the speculation is overdone. We shorted the May Beans at 13.33 on the close Friday and would be looking to cover on a test of 13.18. May Wheat now also once again overbought at current levels.
May Silver – we had shorted the Silver initially on our 35.99 stops as the Silver came down in Wednesday’s action. We have been consistently selling the Silver on moves back to the 35.00 – 35.20 area. We would also expect consolidation at current levels in the Silver, but we would expect the Silver to also work higher.
The April Platinum contract, which we had sold last week on our 1699 sell stops, once again reached 1700. We think this contract remains a sell on any move back to 1720.
May Copper contract – the weakest contract on the board throughout the week. We were consistent short sellers of the contract at 3.94 and would continue to look at that 3.94 area for fresh shorting opportunities, covering on 3-4 cent dips.
May Coffee – we continue to short the May Coffee between 2.05 – 2.06, covering on 3-4 cent dips. We continue to look at that 2.05 – 2.07 zone as a new prime shorting zone.
May Cocoa – we also shorted above 2400 as we recommended in our previous week’s column. That trade gave up a $100 profit during the week and we will look at any move back to 2400 as a fresh shorting opportunity.
May Cotton contract also continues to weaken after consolidation at the 90 cent level. We expect the contract will come down to 85 cents within the next five sessions.
We sold the Spoo contracts on our standing order of 1376.50 in early Friday’s trade. We have not covered those contracts yet and are looking for a cover position somewhere under 1350 as we believe the Spoos have now topped out.
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