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.
Coming Week’s Trade Expected To Reach Volatility Peak
Written by Al Martin Monday, 27 February 2012 01:46
(2-26-12) Despite the S&P 500 VIX Index now hitting solidly under 20, we would expect heavy news flows this week on all global calendars, so that volatility will reach a peak for the month of February with expected ranges of up to 30 handles in the SPH contract and a likely 200 bps move in the Euros on the horizon. We exited Friday’s trade still being short the EUHs at 134.50. Look for negative reaction to G-20 failures over the weekend. We would expect the Euros and the Spoos to move lower in Sunday night’s session. Key news flow of the week will be the ECB LTRO second tranche auction. Will it be above or below 500 Billion Euros? A number above 500 Billion will elicit rallies. A number less than 500 Billion – a sell-off. But those will be only initial reactions. Look for quick counter-reaction off the moves.
Continuing Euro Uncertainty Heightens Market Volatility
Written by Al Martin Sunday, 19 February 2012 23:43
(2-19-12) While an ongoing string of better-than-expected US economic calendar releases continue to support our markets, European and Asian markets continue to lag, as stronger Friday data caused a back-off in the March US Treasury Bond contract. We had sold the contract, as it came back under par 143.00 in early Friday morning trade, covering on our standing order of 142.08. We like buying the Bonds again at the 142.02 level, looking for a half a point bounce.
The March Dollar index continues to lift off of recent lows at 78.65. We like the contract and we still believe the contract is good up to 80.00.
The Spoos – we were sellers once again in Thursday’s trade. We continue to look at the 1357-60 area as shorting opportunities, covering on 10 point pullbacks.
Late Week Correction Presents Fresh Trading Opportunities
Written by Al Martin Monday, 13 February 2012 01:48
(2-12-12) We were able to get filled on our standing 1350 sell order in the SPHs midweek. We covered on our standing cover order of 1335 in Friday’s session, 1335 now being an important support level if that continues to hold through next week’s heavy calendar. Then we would continue to trade the SPHs on the long side. If not, we would expect a further back-off to 1320. Watch for the Greek parliamentary vote on Sunday to start off the week’s news flows.
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