Market Report Friday 1st of July

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Daily Market Report for Friday 1st of July 2011
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The quarter ended with a good move to the upside in the S&P 500 futures once again as we tend to see toward quarter end. The S&P 500 was basically flat for the quarter (-0,39%) and is up 5,01% for the year. We have now rallied just more than 50 points in the S&P 500 futures since Friday, not bad. It does looks overbought now and it will be interesting to see if it can continue the rally and take out that falling key resistance from the yearly high, which is coming in at 1317, see chart of the S&P 500 emini futures below how that trend line is clear resistance now. I favor a move back to the 1292 support over the next 3 sessions.


Corn had a huge move lower today following the USDA acreage report, which totally caught the market on the wrong foot. We had no limit in the July contract and it closed down by 69 cents, 9,9%. That is just nuts. http://www.bloomberg.com/news/2011-06-30/wheat-plunges-to-11-month-low-corn-drops-after-u-s-reports-acreage-gains.html

I am considering setting up a trade (options) looking for somewhat of a retracement of yesterday's drop, but I first want to see that corn can stabilize a bit and not continue the melt down. Will come back to that over the next few sessions over Twitter, where I publish my trades in real time.
Another chart I found pretty interesting is the Crude oil chart. We have a strong bounce off that 89.69 low last week up to test the key resistance at 96. However it failed 2 consecutive days to get above the 96 level and I now fancy a move lower back to the 92.90 support. Take a look at the chart below and you see that 96 is the key pivot level, with both a prior daily high and a falling resistance line in that region.



I am a bit surprised to see gold and silver performing so weak over the last few days. When we see risk bid gold and silver seems to be lagging and not able to get any real momentum. Looking at the chart it shows the reason. We have taken out the interim support and broken to the downside of the triangle that we have been trading inside for the last 2 months. Looks like we can test 1464 next.
A key factor can be that interest rates have moved up along the curve, making it less attractive to hold gold and silver as they are not generating any cash flow, so when the interest rates rises it becomes more attractive to hold Treasuries compared to Gold. Looking at the correlation between gold and US 10 year Treasury futures the prices are pretty correlated, meaning lower interest rates is bullish for gold and vice versa. But who really cares about the reason for moving lower? Price action is always the king.



Looking at a few interesting points in the markets trading wise:
- Key resistance 1317 in the S&P futures and I am looking for move back to 1292 support over the next 3 sessions.
- We have Independence Day in the US on Monday, meaning the US market is closed.
- Crude failed at 96 for the second consecutive day yesterday; expect a dip towards 92.90 support.
- Silver is approaching the lower end of the last month’s range, range 32.75 to 38.76.
- Gold has broken to the downside and looking for a test of the May low at 1464 next.
- Euro is looking overbought; I fancy a move back to the 55 exponential moving average at 1.4330 near term.

Today’s calendar:
15:55 US Michigan Sentiment
16:00 US Construction Spending
16:00 US ISM PMI

Over the weekend, the EU and IMF will meet to decide on the 5th loan tranche to Greece.
Interesting headlines:
State is now dominant force in US capital markets - The FT -
http://www.ft.com/intl/cms/s/0/638185f8-a303-11e0-a9a4-00144feabdc0.html#axzz1QQh2MtL3


Greece approves second part of controversial austerity bill - The Telegraph -
http://www.telegraph.co.uk/finance/financialcrisis/8609534/Greece-approves-second-part-of-controversial-austerity-bill.html
Emerging markets could be the new safe haven for investors - The Telegraph -
http://www.telegraph.co.uk/finance/economics/gilts/8606635/Emerging-markets-could-be-the-new-safe-haven-for-investors.html
German Banks Agree to Greek Aid Deal - The WSJ -
http://online.wsj.com/article/SB10001424052702304584004576417252315650580.html?mod=WSJEurope_hpp_LEFTTopStories
Belgium: Give Greece More Money - The WSJ -
http://online.wsj.com/article/SB10001424052702304584004576417752396628850.html?mod=WSJEUROPE_hps_LEFTTopWhatNews
Trichet Against Non-Voluntary 'Debt Action' - The WSJ -
http://online.wsj.com/article/SB10001424052702304584004576417161986363634.html?mod=WSJEUROPE_hps_LEFTTopWhatNews
QE2′s Winners and Losers - The WSJ -
http://blogs.wsj.com/marketbeat/2011/06/30/qe2s-winners-and-losers/
Senate Democrats Invite Obama for Debt Talks - The WSJ -
http://online.wsj.com/article/SB10001424052702304584004576417650015732130.html?mod=WSJEUROPE_hps_sections_news
A Case When Buying Time Worsens the Burden - The WSJ -
http://online.wsj.com/article/SB10001424052702304450604576417921818436698.html
Greece can be saved – here’s how to do it - The FT -
http://blogs.ft.com/the-a-list/2011/06/30/greece-can-be-saved-heres-how-to-do-it/#axzz1Qo3dyAOj
Geithner talks of quitting US Treasury - The FT -
http://www.ft.com/intl/cms/s/0/b7c0038a-a342-11e0-8d6d-00144feabdc0.html#axzz1QQh2MtL3
Japan’s Tankan Deteriorates to Worse-Than-Expected Minus 9 on Quake Impact - Bloomberg -
http://www.bloomberg.com/news/2011-06-30/japan-s-tankan-deteriorates-to-worse-than-expected-minus-9-on-quake-impact.html

Technical’s and comments

Euro: I expect the falling resistance to hold and a move back into the range, targeting the 55 EMA at 1,4330. Might be interesting to look at some downside option plays?
Cable: Looks like a better choice to short GBP than Euro at the moment as we have broken above the key resistance level at 0.90 in EURGBP. First upside level to get short I figures is around the 1.61 level and stop above 1.6150 or so.
USDJPY: Very tight range over the last sessions. I remain longer term bearish on the JPY as the fundamental factors in Japan looks ugly, with huge public debt and unfavorable demographics going forward. However the risk off over the last days has taken us below 80 again. Not sure if we see any intervention unless the move picks up in speed and magnitude. Buy on dips for the brave.
Swissy: Strong move higher in the EURCHF as we are once again above the 1.2250 level. Expect gains in the EURCHF to be much slower going forward. Given that I think we see a move lower in the S&P next it could be interesting to look at a downside play in USCHF near term. Have resistance at 0.85 at the moment.
AUDUSD: We have strong resistance around the 1.0750 level, so would not chase the price action above that level.
USDCAD: Rapid move lower and I think it makes sense to wait for a rally back up towards 0.9730 or to get short again.
S&P Future (ES): Ended yesterday higher as I expected, although a bit higher then I had anticipated. Have key falling resistance from the yearly highs coming in at 1317. Expect a move lower to 1292 support over the next 3 sessions.
Gold: Broken to the downside technically and next downside target is 1464. I would not go short at current levels as we have seen plenty of bounces in this region. If long I would prefer to use options or possibly long futures and sell some calls against the long futures to give a bit more flexibility.
Crude oil: Failed at 96 resistance for the 2nd consecutive day yesterday. I now look for a move down towards 92.90 support.



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