S&P 500 (Sept 12) INTRADAY
Review Yesterday’s strategy was correct in that we had expected the market activity to be extremely subdued but we were guilty of having an entry level that was too bullish. We expected a test of the key 2012 high at 1419.75 and so had an entry at the pivot level. However, comments from the Bundesbank that again highlighted their opposition to the idea of the ECB of the EFSF buying peripheral debt mildly damaged the other wise positive mood. This took the S&P down to test Friday's low and in retrospect this would have been a much better entry point long. Ultimately it was a very uneventful session with the daily chart posting a doji.
Strategy This morning has seen ECB’s Assumen, who is German, speak in favour of the ECB buying peripheral debt and so has diluted yesterday's negative comments from the Bundesbank. There has also been positive noises with regard to Greece and the idea of lowering the interest rate on their bailout loans and extending the loan’s duration in a an effort to avoid a Greek exit. This has helped to push the E-mini S&P up to within two ticks of the 2012 high set in march. However, the session has again shown very little volume and with no economic data this afternoon from the US the subdued conditions are likely to persist. We are caught in the same catch22 as yesterday. We want to believe that the S&P can grind through the key resistance at 1419.75. Therefore, another long entry at today’s pivot would be the call to make. However, yesterday this lead to us being guilty of a long entry at the middle of Friday’s range and waiting for Friday’s low was a much better trade. Today we repeat yesterday’s strategy but should there be more negative comments from Europe then we would be more conservative with our entry.
Alternative Scenario Negative Eurozone headlines may push the S&P back to yesterday’s low.
Review Yesterday's session was initially bearish, but due to the rumoured developments within the European Central Bank and somewhat decent numbers that were released from the U.S. last week, the team here at Amplify were looking to a risk on scenario for the session. We were correct, and the currency pair bottomed out six pips above our neutral entry long before it shot up to hit our first target. After this there was only a quiet grind which had close to no pullbacks, and the movement was not worth getting in on.
Strategy We are starting where we ended yesterday's session. The European Central Bank is reportedly now loading its 'cannon' with what finally can be a decent measure to get the debt crisis under control, by capping the peripheral yields in comparison to the borrowing costs of Germany. This has lead leaders in Germany to get concerned over the ECB effectively becoming the founder of the peripherals - although we know it is not that easy. Guidelines for this rule must be implemented before it can become active - if not we expect the good sentiment to move over to bad not long after Draghi clicks launch on his control panel. The EURUSD is currently trading above the psychological 1.24 handle, which was breached this morning after the Telegraph wrote that Germany was to back Draghi’s plan despite the Bundesbank’s opposition. This is still creating a mild positive sentiment and we expect it to continue throughout the session, with the footnote remark that any comments from European politicians can change the sentiment rapidly. Today's strategy is long from at the 1.2400 handle.
Alternative Scenario Adverse comments from European politicians can quickly reverse the sentiment.
US 10Y T-Note (Sept 12) INTRADAY
Review Super quiet markets continue to dominate with the sideways trend identified by Amplify working perfectly yesterday as can be seen by the chart below. The entry was tough to get exactly after the strategy was sent out however at 15:00 BST T-Notes moved to test our second target at 132.215, R1 for the day, finding resistance before pushing lower for the rest of the session. This level was again in the early ours of this morning before T-Notes followed bunds lower as they broke the low set on Friday 141.45.
Strategy We see the low of the set range being tested today as investors continue to realise the reduced relative value of holding safe haven equities should there continue to be an appreciation of risk. Investors are not holding T-Notes for their coupon payments, which yield a negative return on account of inflation. More, they are an investment looking for capital appreciation and therefore once the future capital appreciation looks less likely, as is the case right now, large sellers may start to get involved. If we see a break of 132.050 the 132.000 will be in hot contention before an expected dramatic technical break lower to 131.050, not seen since April 25th this year. This would be an uncommon opportunity in Treasuries and we advise traders to be alert to the possible break of 132.000.
Alternative Scenario 132.215 is now a quadruple top as shown below. A break above here would force a technical push to 133.000.
Crude Oil (Oct 12) INTRADAY
Review Crude is in a very decent uptrend that has been in place since it bottomed out the 28th June at $77.28, and we can only count 14 down days in total which have been rather small in comparison to the day's which posted gains. Yesterday was an exception and joined the ranks of down day's, although the movement can be attributed to the commodity breaking as we are coming closer to levels that are considered high, especially as the American election is coming up - and rumours of a release of strategic reserves will hit the market price. The strategy yesterday was stopped on a down move, but our stop level served as the bottom for the session.
Strategy Today's session has started mildly bullish with a test of the $97 handle. As for other risk assets, the rumour this morning of the German government to back Mario Draghis alleged crisis plan, where the central bank is to put a cap on the peripheral debt in comparison to German borrowing cost, has been one of the main drivers so far this session, and we expect this to continue. Over night Barack Obama has stated that US forces can move to intervene against the regime in Syria if they are to use their chemical stockpile against their population. We believe both these scenarios are not likely, and especially as we are closing in on the election it does not look likely that the US is to embark on any new missions abroad - especially not as Russia is an ally of the regime, and the US is already struggling to convince the Kremlin that the weapon shield is not directed at them. However, Iraq's oil exports are also on the rise, and has reach post war (2nd invasion) records. This is one of the few pieces of news that are putting a damper on the crude price. In the north sea, there are platform returning to production, whilst other oil fields are preparing to shut down for maintenance.
Alternative Adverse comments from European leaders can dampen the economic outlook, which will feed through as a negative for the crude price and we can expect a move down to around $95.