Hello All,
Concerns over a default in Greece remains at the forefront of many investors minds as Moody's may cut various European bank ratings because of their Greek holdings. Surprisingly, investors are taking any positive rumor and running with it as the markets staged a late rally based on the fact that China may begin to purchase Italian bonds. This conveys the image that individual EU members have the ability to seek help from outside the so called euro zone. We continue to keep an eye on our own treasury yields as it will eventually be the last bubble to pop, although I do anticipate continued near-term strength at record low interest rates. With quadruple witching coming up on Friday we cannot give too much merit to action contained within the current range, so a move in either direction shouldn't be surprising given the amount of short open interest. We look back to Friday's action where we had currency option ex and the shorts pressed heavily; maybe we will get the same type of action on the S&P this Friday, which may gave Bernanke the ammo he needs to pull the trigger on QE3 next week. With respect to the Eurocurrency, my 1.35 level was reached a lot sooner than expected and that opens the door for lower numbers towards 1.30. Given the inherent weakness, we have to remain open to larger corrective rallies as 1.40 is now psychological resistance. It will all depend on whether the Asian markets will buy up the China/Italy story, and then again we do not know what other 'news' may break in the coming days. The same story bodes for the energy sector, as European health/demand drives current prices. A rising wedge pattern seems to be the most prevalent indicator to note for Crude, which can result in a large breakdown sometime over the next 5-7 trading sessions. I still remain in the bear camp, but will be sitting on the sidelines.
As a reminder, I will be travelling to Europe on Friday to conduct a couple seminars and will be returning the following Friday. I will not be releasing any overnight trades in preparation of my trip.
Best,
Arman Vahdatinia
President, Chief Market Strategist
1-877-338-EXPO [3976] ext. 25
*There is a substantial risk of loss trading futures and options. Past performance is not necessarily indicative of future results.
Comments