S&P 500 (Dec 12) INTRADAY
Review We had a neutral strategy overall yesterday as we expected very little action due to the US bank holiday and this view was fully validated. Our short entry level was at 1451.25 and this level operated as a good short entry point throughout the US session. However, the sell offs from this entry level were, to say the least, uninspiring and the low of the day came at 1447.50 which was less than 4 points from our entry and 6 ticks off our first modest profit target. The Europgroup meeting had the potential to generate some price action but in the end very little came from it as the Greeks are still negotiating with the Troika on their 2013 budget and until those discussions are finalised ultimately the Greek risk lingers.
Strategy Today is another quiet day on the economic calendar. However, we do have the official start of the US Q3 earnings season with Alcoa reporting their earnings after the close. The important earnings will not start until Friday however with JP Morgan and Wells Fargo before the season really hots up going into next week. Merkel is arriving in the ’dragon’s den’ this afternoon as she makes a symbolic trip to Athens but judging by her comments earlier this morning she is not taking her cheque book with her. Stocks have come under a little pressure following the European open with the S&P bottoming out at S1 for now. We maintain a similar view to yesterday in that overall we expect sideways markets but favour the short side.
Alternative Scenario Bullish news from the Athens can lift sentiment and take the S&P up through the pivot to test yesterday’s high.
EUR/USD Spot INTRADAY
Review Yesterday the currency pair was in a steady downward trend in the morning as risk aversion was the main driver in the market ahead of the European finance ministers meeting. The movement in the pair was largely correlated to that of crude oil, but the S&P was largely unmoved and US bond markets were closed for trading. The official inauguration of the ESM created some positive sentiment. The strategy entry was not obtained as there was very little movement in the currency pair in the afternoon.
Strategy The entry level from the US strategy yesterday worked very well this morning as it was finally tested. The first target was for about three hours acting as the top of the range, although as we write this strategy the pair has now broken out as there have been positive comments from Germany's Chancellor Merkel about creating greater German presence in Greek industry, as well as US Treasury Secretary Geithner stating that the US is growing close to it potential, as well as positive comments on the US fiscal cliff which has been received well by the market and lead to a small risk on sentiment. We do however not expect this to continue in to the session, and are awaiting adverse comments from various euro-zone speakers that more likely than not will tear on the gains and developments. The data expected this afternoon is not massive, and as IBD/TIPP is the most noteworthy we are looking for a news driven market. Entry short will be at the key support yesterday afternoon, which should not be too risk averse. At the same time we have a stop at the high of the day, and should the entry get broken the pivot is likely to cap the upside before we would be stopped, and this can be a place to add to your position.
Alternative Scenario Risk on sentiment can lead to a breach of 1.30 and we would then target yesterday's high.
US 10Y T-Note (Dec 12) INTRADAY
Review On Monday we looked for and entry long at 133.040 as sentiment showed a bias to the downside during the US holiday to celebrate Columbus. Our entry was being tested on publication of the report and was tested again at 13:15 BST before T-Notes pushed through target 1 and just missed reaching target two at 133.100. The entry point 133.040 has come into play again overnight and this morning to cap the downside to the Treasury market multiple times.
Strategy Today again we expect a very quiet market despite the potential tension that could have arisen from Merkel's visit to Greece. So far she has been amicable of course and after an initial sell off in risk before Draghi repeated prior comments this morning markets have ground in a sideways trend. Draghi ruled out ever printing money and adopted an overall negative tone. We will look to implement a similar strategy today that worked so well yesterday on expectation of light market activity, once again this entry point is being tested at the time of writing.
Alternative Scenario Should risk make a recovery after the sell off this morning T-Notes will break our tight stop at 133.015.
Crude Oil (Nov 12) INTRADAY
Review Yesterday's markets surprisingly went bid in the afternoon after some morning downside in a continuation move from Friday last week as Chinese traders returned to their desks after a week of national holiday. The bounce in the afternoon was unexpected as there was low volume and movement across the markets, but the positive sentiment can me contributed to the inauguration of the ESM - as well as the continued turbulence in the Middle East. The strategy entry short did not hold up as American traders came in to the market at NYMEX and NYSE open, and for one hour there was a one way street that stopped the short entry.
Strategy This morning the commodity has been in a limbo beneath the R1 level and has just edged lower to now trade below the $90 handle. Of news this morning Angela Merkel has arrived in Greece and commented that she wanted to build German corporate interests in Greece as well as having one ratification round for the German parliament as this will be easier to pass through and take relatively shorter time than the planned four. Should these comments come to life we might see Greece move in to a German protected zone which will be interesting to see as the nations cultures are so widely different - although we think a bit more relaxation from the Germans and more iron will in Greece would do them both well. All jokes aside, the Greek economy can see decent developments on the back of this. A negative for the crude price is the IMF cut of global growth forecast this morning, which marks the second time since early summer. Turkey has also stated it will do anything to protect itself from Syria - although we do not believe in further escalation from the Turks as they have massive political pressure on them not to pursue a major attack;. Today's strategy is short as we do not see any events today that will be able to push the commodity through the high of the day.
Alternative Escalating tensions in the Middle East can give crude a boost up through R3 and the $91 handle.