Hello All,
Most markets broke out on schedule, now it is a matter of holding support levels to shift into a new phase pattern. It seems as though we have seen temporary lows for many markets and we should begin a gradual climb in commodity prices through the next 4-5 weeks. I suspect the S&P should stairstep up to 1180 over the next few weeks, barring a break below 1130. The Euro has confirmed a low now that it crossed above 1.45, but we may get a retest of the 1.43-1.44 region over the next week before heading higher towards 1.50. The wild card of the bunch is crude oil faltering just under $84, and Tuesdays are typically dull days prior to inventory data. But I believe the main factor at play with respect to Crude is the fact that we have a crop report tomorrow. Lower crude pushes grain prices lower, and that may just throw everyone for a loop in anticipation of the report. Ideally I would like oil to rise the next couple of days along with the S&P and Euro, but we'll see how much tomorrows crop report has an effect on oil prices.
1) Buy Mar. Emini S&P at 1136.50, with a 1127.75 stop. Exit 1160. Lets see if we can get a position trade on. For Nov. and much of Dec. the 1115 region proved to be somewhat of a resistance level, and the previous low of 1020 at the beginning of Nov, gives me a 95 pt region to base extensions off. Todays 1148 high is a 38% extension of the 95 pt range, and a 50% extension would coincide with 1160. We'll place our stop just below the 24% retracement off the range from the Thanksgivings low.
2) Buy Mar. Euro at 1.4428, with a 1.4377 stop. Exit 1.4635. We've finally confirmed a low by closing above 1.45, but I have a feeling they'll try to do a semi-washout for the early longs. A 38% retracement off the low drops us down to 1.4425, and the 200 hour moving average crosses just below 1.44 along with the 50% retracement level at 1.4385. And a 24% extension off the true range would bring us to 1.4638.
3) Buy Feb. Crude Oil at the market (81.93), with a 80.78 stop. Exit 85.50. I think the institutions first round of profit taking began today. No other market had such a correction, and if I had accumulated longs from the low 70's and was nearing the Feb contracts expiration, this would be as great a place as any to start taking some off the board. Ultimately, my target of 84.50 was never reached, but if we begin to trend back up we have a chance of 85.50. What this new high will do is attract new buyers to offset the rest of the institution longs which will then allow us to correct to $78-80 before trending back up. If I'm wrong, we may already be starting the correction for 78 and then eventually head higher, but it just seems too soon.
Best,
Arman Vahdatinia
Futures & Options Strategist
Comments