Hello All,
I hope everyone had a joyous holiday with friends and family.
It surprises me that we can't get through a holiday without a major worldwide event occuring. First it was Dubai's credit crisis on Thanksgiving, and now we've had a thwarted terrorist bombing attempt on an airline, in addition to Iranian riots escalating in the last 6 months to their worst level since the rigged Iranian elections. Regarding the terrorist attack, we must note that US stocks held firmly and the Euro also held its ground as crude ticks higher. Historically I would have expected stocks and the euro to fall in face of terrorism, so the bullish case cannot be ignored. We must note the Sanctions on Iran since 1987, the recent Iran gasoline sanctions bill, and the fact that the vote should be by new years and all of this is in conjunction with riots.
1) Buy Mar. Emini S&P at 1117.75, with a 1110.50 stop. Exit 1134. The latest rally from mid Dec. provides a 24% retracement level of 1117, and a 38% retracement level of 1111.50. The Holiday to Holiday rally (the low on Thanksgiving to todays high) provides a 24% retracement level of 1111.50, which should provide key support. The upward trending channel bisects directly at 1111 at this point in time, and since the market is considerably higher afterhours, I would hope that the channel would bisect 1117.50 by tomorrow morning to provide a nice precise fill (in a perfect world).
2) Buy Mar. Euro at the market (1.4350), with a 1.4264 stop. Exit 1.4494. The market has fallen a bit afterhours and we are currently hovering around the 200 hour moving average. It's possible we could continue to tick lower prior to the open of the European markets but the 38% retracement is a proper area to be filled with respect to current fundamentals. If the market can takeout the 1.4420 area, first are of resistance would be the 1.4465 area, but ultimately 1.45 is the target.
3) Buy Feb Crude oil at the market (78.50), with a 77.50 stop. Exit 82.23. Technically speaking, the downward sloping resistance level is just above 79, and if the market can accelerate past todays high, the next 2 levels of resistance are 80.65, and 82.23. The 82.50 region would be making a double top, but if the market can push through, then 83.12, 84.08, and 85.27 would be the next targets. Fundamentally it seems as though these riots will not end as the Iranian people want an end to this 30 year regime. The U.S. is finally imposing additional sanctions on any country that is in direct trade with Iran. What does this mean? The Swiss are the main exporters of Gasoline to Iran. So essentially this new bill is a crackdown on the Swiss, where we must note the recent Credit Suisse $536 million fine over Iran sanctions. With 40% of Iran's gasoline being imported with the possibility of all this ending by next week if the Swiss comply, is a recipe for disaster.
4) Hold Feb Gold longs from 1180, with a 1195 stop. Exit 1120. If crude escalates, we will easily reach our target.
Best,
Arman Vahdatinia
Futures & Options Strategist
*There is a risk of loss when trading futures.
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