Lots of action on today's session

Market Review

After some above average movement on Wednesday, we were excited about the prospects of Thursday and we went into the session with a very bearish outlook. It started off as a ranging session, and traders were weary about the prospects of yet another all time high as we were closing in on the top of the range after some marginally better than expected US retail sales figures for February– the top of the range was our short entry point for the S&P. The retails sales figures for January were revised lower however and the index started selling off. The risk-off signal of Japanese Yen strength started to gain momentum triggering a strong Dax sell off, closing in on the double bottom support handle from February and December. After hitting the first target in the S&P we decided to keep some of the position on, and gradually exited towards the pivot level before our trailing stop was obtained by the market on a bounce, and the average profit per contract was in the end 28 ticks. The US10Y entry was also obtained and even though we were happy taking the trade off at the first target, in hindsight it looks like it may have been a bit early as the risk off sentiment properly took a hold of the market. Even though we caught the sell off in stocks, we were somewhat surprised about the magnitude of the move due to finally getting some decent data, though an explosion in the US, general poor US data [with the most important one beating expectations so tapering continues], poor Chinese data, potential bomb threat in St. Pauls, London, missing aircraft, Ukraine trying to fend off Russia and the West trying to impose sanctions on a country with the most resources in the world, on the top of the fact that we are still just recovering from a recession and trying to avoid deflation in the Euro-zone… perhaps it should not be a surprise?

Today's Fundamental View

Today’s session is likely to see quite a bit of action. Many traders have come to their stations this morning and immediately started selling, though we want to be a bit more risk averse as we have seen time and time again massive reversals on days after big sell offs. The German Dax index is currently trading at the classic short entry from the double bottom mentioned in the market review, whilst the S&P has been caught in a relatively tight range, which is also true for crude and treasuries. The EURUSD has been wedged up around the morning’s highs in a tight range and is currently trading at the 38.2% Fibonacci from yesterday’s move, which is double resistance with the pivot level of the session. For today we believe the uncertainty surrounding Ukraine will continue to loom, though any attempts from the West to stop the referendum should be laughed at, as should any estimations that Crimea will not vote to break out from Ukraine. Number one the vote is fixed, and number two – even if it was not there is 60% of Russians in Crimea that will be voting. Also worth keeping in mind that 80% of the parliament is controlled by Russian politicians. The data today should create some good movement; the PPI number has been consistently increasing and is in a very nice uptrend. For this reason we may well see an in line or even higher than expected number, though the curve has been flattening as of the last six months. As long as the UoM is above 80 there should not be too big of a shake up in the markets, and with the income increasing and more people in work we may actually see a better number here.

Alternative View

Dovish comments from monetary policy makers or Chinese officials may adversely affect the markets.