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S&P 500 (Mar 13) INTRADAY
Review Yesterday’s the E-mini S&P had a key break out above last week’s double top at 1522 following bullish cash open. Stop orders were triggered above this level that accelerated the move higher in what was a technical extension to this phenomenally sustainable rally that has been on-going all year. German ZEW economic confidence numbers were much better than expected that meant the positive sentiment remained in charge. Our long entry level was not obtained as the index did not pullback that far, instead a more aggressive entry at our first target would have worked well for the drive to extend the 5+ year highs.
Strategy Obama’s speech yesterday was very typical of recent commentary on the sequestration spending cuts. It is clear congress are still way off a deal to avoid these ’meat cleaver’ cuts. Therefore, perhaps it was surprising just how strong the positive move was in the S&P given this the fact that there is only 10 days until 1st March sequestration deadline. However, as any seasoned trader knows, the likely outcome will be a last minute deal containing just about enough concessions to avoid the full fiscal squeeze but at the same time again delaying the larger long term fiscal agreement that Washington has been procrastinating over for the last two years. For today, sentiment remains positive and we feel 1522 can now become the key support level in the coming days to continue this recent upwards pattern. This level will be our entry long for today but more aggressive long entries may come in at the pivot level.
Alternative Scenario Bad US data or negative Italian political headlines can lead to a break back below 1522.
EUR/USD (Mar 13) INTRADAY
Review Yesterday we had a long entry at 1.3325 which was Monday’s low. Our long bias was based on the longterm technical support coming in from the Dec 2012 high and the 3 month old upward trend line. Also, the currency war saga came to an end for now with the G20’s communique over the weekend stating that there is no currency war. The three week downside for the Euro in February has mainly been driven by currency war related commentary from the like of Draghi and Hollande. The bullish German ZEW data added some positive fundamentals and this allow the single currency to push on up to test the 1.34 handle. Our entry level was just missed but our second target capped the upside for the day.
Strategy This morning the single currency initially added to yesterday’s gains due to hawkish comments from ECB’s Noyer. But three times 1.3435 capped the upside and since then the correction has been 60 pips as EURUSD currently dips back to test the pivot level. This afternoon we have Housing data from the US and we are particularly listening out for any Italian political headlines that could have a large impact on the Euro heading into this weekend’s elections. Despite the downside over the last few hours we still believe the medium term picture is supportive for the Euro at these levels and so we look for a long entry at S1 this afternoon.
Alternative Scenario Negative political headlines from Italy can lead to a sharp move back to test key support around 1.33.
US 10Y T-Note (Mar 13) INTRADAY
Review The US10Y was in a nice range yesterday morning, and as the ZEW Economic sentiment posted a much better than expected number and so we assumed a slight risk-on theme for the rest of the session. There had also been a small downward trend since the beginning of February which we used as triple resistance in the strategy combined with the high of the day and R2. The entry worked very well and the strategy went on to hit both the first and the second targets - though the second was hit after the close of positions at 1800GMT.
Strategy There have been some risk off sentiment this morning in most markets, though this has correlated with T-Notes going down. This is suggesting positions are un-winded with expectations that the Feds may hint of an end of QE3 some time in the reasonable foreseeable future (Fed Minutes due tonight at 19.00). For now though it is expected to be held unchanged on all accounts, and it is only the outlook that may be altered from previous. Other news that may move the market are US Building Permits and Housing Starts, which indicates the health and recovery in the US market. We expect at least in line numbers here. We are short today, with an entry at the high of the day with a target at S1. The pennant we were looking for a break in yesterday has happened, and there was a nice classic opportunity last night.
Alternative Scenario Should there be rumours of a more doveish FOMC we may see the US 10 year test the high of the week.
Crude Oil (Apr 13) INTRADAY
Review We had a long strategy yesterday which just missed out on being filled. Crude dipped after the Nymex pit open and found support on the $96 handle which was just 20 ticks above our long entry level. The oil markets then benefited from a general positive sentiment around the risk assets and trended higher for most of the session with a break to new highs in the final stages. Some of this strength into close may have been due to the roll over as March futures are expiring tomorrow .
Strategy Gold has been coming under some heavy pressure this morning, breaking to new six month lows below the $1600 handle as the 50MA crosses down below the 200MA on the daily timeframe to continue a very bearish technical picture. Crude prices have moved lower in sympathy with this since midday with a break back below the $97 handle but for now crude has stabilised back in its overnight range. There are no DoE inventory data today as this comes tomorrow due to Monday’s bank holiday. Therefore, we look towards the US housing data at 13.30 and EZ confidence data at 15.00GMT for direction. The pivot level was not quite reached in the break lower earlier and we feel this can be good support this afternoon should the market get back down there. This will be our primary long entry for the session.
Alternative Risk-off generated by bad economic data, negative Italian political risk or an on-going strong downside for gold may lead to a sell off back to the $96 handle.