S&P 500 (Mar 13) INTRADAY
Review The S&P has a perfect record for 2013 as in closing at at five year high of 1512.50 the index posted its sixth straight up week in a row this year. The range bound conditions for much of the week where replaced by a positive US cash open on Friday that generated the break of the technical resistance at 1511 which had consistently provided strong resistance for the previous five trading sessions. Strong Chinese trade balance data and then the narrowest US trade balance since 2010 triggered produced enough fundamental firepower to trigger the break. Our strategy worked perfectly as the index dipped to our long entry level just prior to the Trade balance data and then the market bounced strongly to breach both profit targets just over an hour later. Once the S&P had broken 1511 the market remained range bound into the close between 1511 and 1515.
Strategy This morning has seen very light conditions throughout the asset classes. There has been virtually no news flow of any significance and there is no economic data from the US scheduled for this afternoon either. Therefore, focus may fall on the Eurozone Finance ministers meeting where they are looking to finalise the structure of the Cypriot bailout package. Obama’s State of the Union speech tomorrow, US Retail Sales on Wednesday, Eurozone GDP data on Thursday and the US Consumer Confidence and the G20 meeting on Friday are the highlights of the week ahead. Today we expect the quiet conditions to continue and therefore look for overall a neutral strategy with a tight long bias.
Alternative Scenario Bad news on Cyprus may trigger a risk off move pushing the S&P back to 1500.
EUR/USD (Mar 13) INTRADAY
Review There has been somewhat of a trend lower the last week, as we posted the high of the year on February 2nd. The biggest sell off was seen Thursday last week when Mario Draghi stated the risk to the Eurozone was on the downside, indicating there still be more loose monetary policy ahead which would weaken the currency. It is however a positive for the Eurozone as a whole that these measures are on the table - so for the medium term we are favouring the upside for the pair. The strategy entry was not obtained, though the theme we expected for the day was in play.
Strategy This morning there has been a small bid tone in the currency pair as a risk asset, largely this is related to better than expected trade numbers by China and a much larger than expected import of crude oil, indicating that the second largest economy in the world is on the rebound. With a low data flow today we are expecting an exceptionally slow session with few moves to either side. We are looking to play the range with an entry at the high of Friday, and a stop at the low from the 5th February. Targets are relatively conservative as well being what we feel will be the low of the range. The most interesting news of the day is likely the resignation of Pope Benedict XVI - which is not market moving news.
Alternative Scenario With a lack of poor data we may see a pop to the upside and see R2 being hit.
** As of today we have switched to use the EUR/USD Futures market in this strategy report as opposed to previously producing strategies for the EUR/USD spot market. **
US 10Y T-Note (Mar 13) INTRADAY
Review On Friday our strategy in T-Notes was not well chosen as we pushed through the entry long at 131.205, the Pivot Level and overnight high, before retracing over the duration of the day back to the entry point. Although the stop was not executed it was indeed a difficult and uncomfortable trade to hold. On Friday we saw risk assets continue to grind their way higher which kept activity in the Treasuries subdued. Although we see equities firm again today which has put some pressure on T-Notes it is again with reluctant volume only.
Strategy Today we are not expecting very little action and low volumes throughout the session. Friday's entry of 131.205 also comes in as the Fibonacci 50% retracement level from the 2013 highs to the 2013 lows and we seem destined to oscillate around this level in the medium term. As you can see from the below chart Treasuries have appreciated over the last two weeks but are yet to find any convincing direction this year. In many eyes yields on these safe haven bonds are way too low and should the continuation in appreciation be seen across risk assets then a break of the low of 130.230 will be on the cards. However as the equities lack conviction to the upside and traders demand more fundamental justification for the positive sentiment we would not be surprised to see T-Notes hold onto the 50% level of the 2013 range.
Alternative Scenario T-Notes have been trending higher and a continuation of this patter would see our strategy short entry at 131.205 stopped out at 131.250.
Crude Oil (Mar 13) INTRADAY
Review There was an interesting session on Friday as the spread between WTI and Brent reached its highest since September last year. An initial range was broken to the upside and again WTI traded up through the $96 handle, though this was retraced in the late afternoon as a sell off started across risk assets. The strategy entry was reached to the tick and hit both the first and second targets only one hour and a half after sending out the report.
Strategy There has been a slight negative tone over the commodity this morning, though no aggressive moves have been made. Of note on the crude market the Chinese imports have risen to the third highest level ever recorded as the giant economy is rebounding after slowing down last year. Imports and exports also beat estimates. Goldman Sachs stated the obvious this morning by commenting that the recent rally in crude has more to do with the demand than supply side. They will not meet any protests from our side. There may be some troubles on the supply side in the US due to weather related issues. There is no data of note this afternoon, and we are not expecting any massive moves. The strategy favours the downside slightly, a neutral short from the high of the day and pivot.
Alternative Should the supply get hit today then we may see a sharp bounce on a dollar or two.