Late Week Equity Rally Sets Market Up for "Buy the Rumor - Sell the Fact" Trade
BY AL MARTIN
(2-8-09) The March S&Ps broke out of perceived resistance around the 860 level in Friday's trade. We shorted the S&Ps at 865 and would continue to short them on any continuation rally in Monday's trade. We believe that once the fiscal stimulus package is voted on and the Geithner so-called "Big Rescue" plan comes out and disappointment is felt, we will experience a "buy the rumor - sell the fact" trade.
Furthermore, the March long bond contract did trade into a new low on Friday, breaking the 125.24 previous low. Bonds are dramatically oversold. We continue to sell the bonds from the long side on dips.
The March Dollar contract continues to move irregularly higher, although still being contained by the near-term 87.00 top, and continues to be a buy down to dips in the 85.50 area.
The March Oil -- we continue to sell on rallies to 41.50 or better.
The April Gold contract -- we continue to buy on dips at the 897/98 support area.
The March Sugar contract broke out above 1300 in Friday’s trade as commodities in general moved higher on “Wanton Bullish Shillism.” However, we continue to look at the Sugar as a sell on rallies to 13.20 or better.
The March Orange Juice Contract, despite hard freezes in Florida, fell back in Friday’s trade, and we feel that the contract is set to make new lows down to the 65.00 area.
The bogus rally in the March Lumber contract continued, as Canadian producers desperately try to withhold supplies. This is a bogus rally that has brought in many of the “unwashed.” We feel that the lumber will decline back to test the 150 area.
The March Soybean contract also managed to close back above $10 in Friday’s trade, once again in overbought territory. We like selling the beans at the 10.20 area.
The March Copper contract had a dramatic rally Friday, up to the 1.62/63 near-term top. We shorted the Copper at 1.6275 and would look for a retracement back into the 1.50s.
Coffee initially pulled back from the 1.20 area, although it is now retesting it. However we think the Coffee is still a short above 1.20.
Late week rally in the Cocoa brought the March Cocoa back above 2800, looking to sell at 2860 in Monday’s trade.
We continue to sell the Cotton at 50.20 or better and would continue to look at that level as fresh shorting opportunities in the coming week’s trade.
Our favorite trade for Sunday night is shorting the Copper.