S&P 500 (Mar 13) INTRADAY
Review We had a neutral short strategy yesterday that worked by the skin of our teeth. The bid tone in the S&P triggered by the better than expected Initial Jobless claims took the index up to test our short entry level at 1515. Prior to this the sentiment had been negative given the worse than expected GDP data from the Eurozone. So the Initial Jobless claims created some brief respite and our short entry worked perfectly as the market then dipped and hit our first profit target at 1511 right on the US cash open. From there US equities put in a very resilient session given some reasonably large downside seen in European indices. Buffet’s Heinz deal perhaps a reason for some positive sentiment as the Heinz share price jumped 20% to match Buffet’s bid price.
Strategy Today’s US session is likely to be dominated by G20 headline risk and US economic data. The S&P failed to make a new five year high yesterday having managed this feet on each of the previous four days. However, given weakness in other equity markets the fact the S&P posted a small up day perhaps indicates that the bulls are still in town. We feel that the G20 will pass with a relatively positive outcome with regards to the global stance on currency wars. Japan’s Q4 GDP reading was timely and negative thus in our view completely justifying their currently aggressive monetary policy actions. The US data to look for is the Empire State Manufacturing and the Uni of Michigan consumer sentiment. Despite bullish resilience we prefer to err on the side of caution with a neutral short bias again today as the US consumer has recently been in depressed mood and this may drag sentiment lower.
Alternative Scenario Positive economic data may see a push to test the high of the week at 1522.
EUR/USD (Mar 13) INTRADAY
Review Similar to our S&P strategy our EURUSD short worked very well ni that the entry and the 1st target defined the range for moist of the US session. The fill on our short position came just after the US cash open and our modest firast target was reached just 20 minutes later with this range holding throughout the day before a drift higher resulted in the close coming just a few pips above our entry. It was a surprisingly subdued US session given the huge movements seen earlier in the day as the currency war headlines continue to dominate market price action.
Strategy Weidman made some typically hawkish comments this morning which gave the single currency some upside before some counter comments fro Draghi unwound that early strength. The stage is set for another currency war headline dominated session for the FX space. The EURUSD has been nibbling away at December’s high again this morning. This is the technical level that halted the sharp downside yesterday. We feel that this level will get breached this afternoon and that this should lead to a push down through the 1.33 handle and a test of the uptrend line on the daily view that has been in tact since the mid -November low.
Alternative Scenario Hawkish comments from Eurozone leaders or bad S data may provide a little upside for the EURUSD and a break back above the pivot.
US 10Y T-Note (Mar 13) INTRADAY
Review The main headline of the week, currency wars, was replaced by shocking GDP numbers from Europe which was a real negative as the markets have been rather positive lately. A sharp sell off was seen in the euro, though this was halted unexpectedly and we were trading in a tight range the rest of the session. For treasuries the picture was somewhat different as we went bid and even though there was a range for a few hours, it continued higher at 1700GMT and posted hits high of the day at 2300GMT. The strategy entry was tested firmly but did not hit the stop, and the strategy hit first target.
Strategy Unexpectedly the Italian bonds were not selling off yesterday, but was rather trading within a tight range. This may indicate that the market itself was in fact expecting some bad GDP numbers to come out of Europe and even though it was bad - will not have the relatively massive adverse effect on the markets that we first thought. Long term outlook is still OK - so this may just be a decent time to get in on a pull back in risk assets, or start positioning short on treasuries. The US10Y have been trading at the highs this morning, and are following the trend from yesterday. With data out of the US today we expect this to be better than expected, though with the sentiment from yesterday and the current market sentiment we prefer to go with the short term trend and the strategy today will be a long with an entry at the afternoon resistance yesterday.
Alternative Scenario Good data can turn sentiment and we will target the low from yesterday.
Crude Oil (Mar 13) INTRADAY
Review There were some bad GDP numbers posted across Europe yesterday morning which we believed would set the stage for a bearish afternoon across most risk assets. The sell off we saw did not see the continued strong downside however, and when the jobless claims from the US saw a great reading at 341k versus the expected 361k. The strategy entry was tested and almost stopped the strategy, though at 1800GMT we had retraced to the entry level and closed it at a small loss.
Strategy There has not been much news of note this morning. The main events of the day starts up at 1330GMT with Manufacturing data and later on we will see industrial and consumer sentiment. It will be especially interesting as we cover most bases except for unemployment, which was posted yesterday afternoon. The G-20 meeting is starting today; though the main event is tomorrow. There may be some participants who will try to take advantage of the obvious outcome. Statements in the newspapers will show "G-20 against currency wars" and "G-20 says there is no currency war currently on-going". It may lead to some movement in the yen and euro, but for now the USD should be largely unaffected. Today's strategy is short on the sentiment from yesterday and we target the low of Wednesday.
Alternative Positive comments over the world economy can lead to a bounce towards the high of the week.