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Fri, Mar 12 2010, 22:25 GMT
by Carley Garner

DeCarley Trading | View company’s profile

The day’s economic data was mixed, the volume was light and the market was directionless. According to our sources on the CME floor, most of the locals had left for the day by mid-session and this made for extremely quiet market conditions.

The S&P has never settled higher 11 days in a row (cash or futures) but came close to doing so today. The cash S&P 500 index settled down a quarter, just under positive territory. The June futures contract traded sideways into the close but eventually settled in the green. It wasn’t glamorous (flossy, flossy) but it was 11 consecutive positive closes for the first time.

There was some early morning excitement over a stronger than expected retail sales report, but the rally quickly faded. A disappointing Michigan consumer sentiment reading prevented the market from recovering.

Where will the market go from here? We wish we knew. All we can say is that the odds are in favor of a pullback and what goes up usually goes down faster. Unfortunately, it is nearly impossible to pinpoint the price at which the short-covering will have run its course.

There continues to be a large amount of put (and put spread) buying in the indices as well as call (and call spread) buying in the VIX. This suggests that investors are looking to insure their portfolios and more likely speculators are looking for a pullback. However, this has been the case for over a week now and the market has relentlessly rallied anyway.

If you are a bear in this market, you had better be sure to get good entry prices and this means selling on rallies rather than selling weakness. Going into Monday we see resistance in the S&P near 1153 and then again near 1163, similar resistance in the NASDAQ will be 1940 and near 683 in the Russell.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track ‘n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.

S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade –

February 19 – Our clients were advised to sell the April 1165 calls for about $7.50, fills were coming in near $7.25 and a handful at $7.50.

March 5 – Clients with ample margin and guts, were recommended to add to this position by selling the 1165 calls for $9.50.

Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade –

March 9 – Sell 1 June mini Russell @ 682 OB

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.

NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade –

March 3 – Sell 1 e-mini NASDAQ at 1878 or better

Published on Fri, Mar 12 2010, 22:34 GMT

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Sat, Mar 13 2010, 00:43 GMT
by James Hyerczyk

ForexHound.com | View company’s profile

U.S. equity markets finished down on Friday and barely avoided a closing price reversal top which would have signaled the start of a possible retracement to the downside. The March E-mini S&P 500 and NASDAQ made new highs for the year while all three indices closed higher for the week. Friday saw the indices spike higher then break lower following a better than expected U.S. Retail Sales Report. As long as interest rates remain low, there is no other game in down. If the Dollar weakens next week versus the Euro, then look for the rally to continue.

Early Friday, demand for higher risk along with a friendly retail sales report pressured the June Treasury Bonds, but this market recovered when the U.S. equity markets weakened. Once again the inability to break the low of the week at 115′27 triggered a short-covering rally. Technically, this market formed a closing price reversal bottom which could lead to the start of a short-term retracement rally. Watch for a follow-through to the upside on Monday.

April Gold tried to rally after the Dollar opened weaker, but by the mid-session it was clear that the buyers had abandoned this precious metal. The current downside momentum is likely to trigger a further decline to the recent bottom at $1088.50. A break through this price will turn the main trend down so the bulls are likely to mount a strong defense following a test of this level. The strong stock market rally appears to be taking speculative money away from gold.

June Crude Oil posted both a daily and weekly closing price reversal top, setting up the possibility of a correction back to 77.28 over the near-term. Demand for higher risk assets appears to be drying up which is helping to trigger the sell-off. The daily chart indicates that this market has plenty of room to the downside.

Published on Sat, Mar 13 2010, 01:11 GMT

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Sat, Mar 13 2010, 11:02 GMT
by ecPulse.com analysis team

ecPulse.com | View company’s profile

Last week witnessed a number of major fundamentals from the Asian region which helped provide a clearer picture for the current situation across Asian economies. Asian stocks consolidated this week and gained slightly, but the sure thing is that shares moved according to investors’ confidence not on fundamentals.

Major fundamentals started with Japan; January’s current account surplus shrunk to 899.8 billion from the previous reported 900.8 billion yen. The trade surplus was also down to 197.2 billion yen from 631.2 billion yen.

Japan’s overseas shipments rose 8.8% in January to 5,835.0 billion yen from 4,925.2 billion yen in December. On a yearly basis, export climbed 40.2%, the highest since 1986, as demand from China, Japan’s main trade partner, rose to the highest since 1985, while shipments to the U.S inclined for the first time in two years.

On the other hand, machine orders in Japan declined 3.7% in February, and slipped 1.1% on the year; worth mentioning that machine orders is one of the main indices that measures capital spending. Analysts expect capital spending to take sometime to recover, while they explained the decline in machine orders as a correction after orders incline by the end of last year.

The Japanese economy ended this week’s fundamentals with the final GDP reading for the fourth quarter of 2009 showing the world’s second largest economy grew 0.9% easing from the preliminary reading of 1.1%. On the year, the economy expanded 3.8% revised lower from the preliminary 4.6%.

Moreover, companies are still concerned about the recovery, especially after global stimulus measures waned and some major economies began to exit the nonstandard measures to avoid bubbles formation and inflationary pressures. Adding to that, the surging yen is affecting Japanese exports harshly as they lose their competitive advantage. Companies are still cautious about capital spending amid unstable and uncertain outlook which affected economic growth.

As for central banks, they had their share last week starting with the Reserve Bank of New Zealand (RBNZ) which kept interest rates steady at 2.5% meeting market forecasts. Governor Allan Bollard said the bank will maintain its policy till mid-2010, before it starts raising interest rates.

Weak capital spending alongside declining house prices, might affect recovery in New Zealand; forcing the RBNZ to keep rates steady at their lowest to support the economy, in addition to encouraging households to increase spending.

The Bank of Korea also kept the overnight cash target steady at 2.00%, ensuring that the bank will focus on supporting economic growth and stimulating internal investments to guarantee a solid recovery.

The Korean economy provided mixed data, growth slowed in the fourth quarter of last year, while unemployment rose in January. Exports are still recovering as they gained for the fourth straight month, and business confidence rose to a seven-year high. All this pressured the central bank to maintain its monetary policy till the economy determines its direction.

Ending our tour with China, retail sales rose 22.1% in February, while manufacturing output gained 12.8%, and consumer prices climbed 2.7% from 1.5%. Accelerating inflation may pressure monetary policy makers to withdraw stimulus measures to support recovery in the world’s third largest economy and pursue further monetary tightening.

The MSCI Asia Pacific Index ended Friday’s trading by rising 0.3%. Nikkei 225 ended Friday’s trading by rising 0.81% to close at 10751.26 points. The S&P/ASX 200 closed on Friday at 4818.10 after rising 0.08%. Hang Seng ended Friday’s trading down 0.09% to close at 21209.74 points.

Published on Sat, Mar 13 2010, 11:02 GMT

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Sat, Mar 13 2010, 11:03 GMT
by ecPulse.com analysis team

ecPulse.com | View company’s profile

A tranquil week from the lack of major economic data in the euro zone and the United Kingdom; while Switzerland grabbed the spot last week as they announced their three-month Libor target leaving them steady at 0.25% to continue prompting growth levels.

Switzerland expanded by 0.7% in the fourth quarter while the major sectors that boost growth levels have been improving. Leading economic indicators support continued recovery as exports gain ground, while manufacturing growth climbed for the 10th month in a row. The Swiss National Bank (SNB), in December, stopped the purchasing of corporate bonds program as economic conditions started to improve; taking the same step other major economies are taking.

Although in the United Kingdom, the BoE paused the APF program, yet the economy continues to struggle to shake off the worst recession since World War II. Earlier this week, we saw the UK trade deficit widen the most since August 2008 as a result of lower exports, led from lower sales of chemicals and other commodities.

The UK is not the only nation to suffer from lower exports, yet exports in Germany after we saw surge for four month, ended the gains unexpectedly as unemployment rates around the world resume their rise. High unemployment rates negatively impact consumer spending therefore weighed on demand levels, affecting trade between nations.

Trade around the world has been impaired from crippled consumer demand and the tightening of the financial and banking systems. Yet there are anticipations that Asian markets may support exports in Germany, as the International Monetary Fund in December stated that it expects growth of 10% while 7.7% in China and India respectively.

Since nations now are not depending on domestic demand, they are looking forward to exports boosting growth levels, especially Germany which accounts on exports heavily for economic growth, while it is considered the main contributor to the euro zone’s GDP.

The euro zone expanded by 0.1% in the fourth quarter after toning down from 0.4% in the third quarter; in the past week the ECB released its monthly report stating that the current interest rates of 1.00% are appropriate in regarding to the current economic conditions. Reiterating the statements Trichet provided in the press conference following the decision.

The expected outlook for economic growth is that the euro zone will grow at a moderate pace this year yet there as uncertainties remain; while inflation is projected to remain firmly anchored over the medium term.

The ECB will continue existing stimulus measures gradually; in April, the three-month loan will reverse to variable rate instead of the current fixed rate. Also, banks will be granted unlimited funds in one week and 30-day loans in the special term operations (SMOs) for as long as needed until at least October 12, 2010.

As liquidity in economies remains tight, impacting industrial and manufacturing production as in the United Kingdom. We saw that production output declined heavily. Manufacturing production fell for the first time since August, hinting that conditions in the nation remain unstable while now the talks of the economy are on the governmental election coming up in June.

There are doubts if the new government will be able to narrow the swelling budget deficit, which is not only in the UK, but has center stage in Europe. Around Europe finance minister are worried that this might be the next economic bubble, crippling nations borrowing capabilities and complicating the recovery further.

Although manufacturing and industrial production fell in the UK surprising markets, in the euro zone, we saw that the story differs as their industrial production for the year ending in February climbed the most in more than 20 years; this gives evidence that the manufacturing sector continues its expansion.

Last week was mainly about confidence buildup in the wake of the meetings Greece’s Prime Minister held in Germany, France and the United States; woes eased over the Greek debt crisis and default worries subsided. This week the EU is preparing for the meeting to be held and Finance Ministers will discuss the Greek bailout needs as they submit Progress Report to on their Deficit-Cutting plan.

Published on Sat, Mar 13 2010, 11:04 GMT

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Sat, Mar 13 2010, 11:04 GMT
by ecPulse.com analysis team

ecPulse.com | View company’s profile

The U.S. economy had little to share throughout this past week, where lack of fundamentals dominated this week, and accordingly the outlook for the world’s largest economy didn’t change, as the economy is still undergoing recovery from the worst recession since WWII.

The start was with the wholesale inventories for the month of January, where inventories dropped by 0.2% following the prior revised drop of 1.0%, inventories provided strong support to economic growth during the fourth quarter, as producers are gradually building their inventories, though the pace remains generally weak.

Meanwhile business inventories were flat in January following the prior revised drop of 0.3%, however, it’s rather clear that producers are still cautious in building inventory levels, since the outlook for demand remains somehow weak amid elevated unemployment and tightened credit conditions, and we should expect producers to take their time, before they start to produce over a strong pace.

Moreover, the U.S. monthly budget statement revealed a record deficit in February, as the U.S. government continues to support the economy through the fiscal stimulus, which indeed sent the budget deficit to unprecedented levels, and might have a drastic effect on the U.S. dollar over the long term.

Nevertheless, the U.S. dollar remained generally strong against its major counterparts, since the improvement witnessed in the U.S. economy is yet to be matched by other major economies around the world, and that is providing the U.S. dollar with strong momentum against other major currencies, and we should expect the U.S. dollar to extend its gains over the short term, however, the challenges provided by a widening deficit might indeed hammer the U.S. dollar over longer terms.

Moreover, the U.S. trade deficit narrowed in January according to the U.S. Commerce Department, however, despite the improvement in the trade balance, but investors were more concerned with the drop in exports, as that was seen as a major sign that global demand remains generally weak, and accordingly, it will take global growth more time to recover from the worst recession since WWII.

Meanwhile, consumer spending which accounts for nearly two thirds of U.S. economic activity is still improving though over a moderate pace, but given the ongoing weak conditions from elevated unemployment levels to tightened credit conditions, the rise in spending represents an encouraging sign over the outlook for the U.S. economy.

The retail sales index for the month of February proved that spending was still resilient to the ongoing weak conditions, since the huge snowstorms during February led analysts to lower their expectations for retail sales, yet retail sale managed to rise above expectations to provide hope that the U.S. economy will continue its recovery process and will eventually reach prosperity.

Meanwhile, consumer confidence remains somewhat weak, yet we shouldn’t deny that overall confidence continues to improve, at least this is what we witnessed over the past few months, however, as the pace of recovery seemed to have eased over the past period, confidence also retreated, where the University of Michigan signaled in its preliminary estimate for March that confidence declined to 72.5 from February’s estimate of 73.6 and also below median estimates.

The U.S. economy is emerging safely from the worst recession since WWII, however, the U.S. economy will also need some time before conditions reach full stability, and accordingly, we should expect activity to continue stabilizing during the first half of 2010, while the U.S. economy should start to grow over a stronger pace during the second half of 2010, before the economy can reach full stability probably in 2011…

Published on Sat, Mar 13 2010, 11:05 GMT

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Sat, Mar 13 2010, 00:48 GMT
by Ian Copsey

FX-Forecaster.com | View company’s profile

SUMMARY

The week provided a long period of consolidation that finally saw the Dollar break supports on Friday to extend losses. The outlook remains bearish in the short term and probably for a week or two at least. However, this is viewed more as a correction within the underlying uptrend and therefore the decline is expected to remain quite erratic and choppy. Care is therefore advised over this duration.

Please see the attached PDF file for details of the entire 9 currency pairs.

Good trading for the coming week.

Kind regards

Ian Copsey

AUDUSD

A double top just below the 0.9195 resistance that offered 20 pips. Overall the 0.9163-70 area proved to be pivotal over the day, first finding the broad area tough to overcome and then became the trough area for the double top. Once this broke price moved back down to bounce from the early morning low. Price is still hugging both hourly & 4-hour FX-f Equilibrium Clouds but finding the weekly Cloud tough to penetrate.

There are mixed signals here. There is a potential double top in the 4-hour/hourly charts and a weak looking bearish divergence in the 4-hour chart. The weekly FX-f Equilibrium Cloud also provides resistance still. If there is a pullback lower it is likely to be brief and given price is above the daily Cloud the emphasis overall remains higher.

Over the day the support & resistance in the majors were not too good and price patterns were few & far between. There were 4 trade set ups, all profitable, and provided up to 65 pips profit. Over the week the support & resistance identified 28 trade set ups of which 25 were profitable and provided a pool of 625 pips of opportunities. This has brought the monthly total to 1,160 pips.

Full details of the range of 9 currency pairs are available in the attached PDF file.

Have a great trading week.

Ian Copsey

• Weekly Indicator Review and Outlook 12th March 2010

Published on Sat, Mar 13 2010, 15:19 GMT