6/1/2010 Pre-Market Commentary

There are definitely some more signs the global recovery is losing a bit of steam with Chinese manufacturing slumping. Very concerning for sure. Of course the BP mess doesn’t help with the crude correlative effect along with the continued sell-off in the Euro which “takes another rung” down after a multi-session range and the ripping bid in both the 10s and the 2s overnight. We may just have a perfect storm brewing here this morning. Also of note is that the institutions have had no interest in buying the recent rally and have led the selling overnight by a HUGE margin. Though volume is relatively light, big traders are nearly 40% favored to the short side. I doubt if the economic releases will change things much unless particularly negative which will most surely lead the break of the OL. We should see a real good ISM number and in a perfect world the construction spending will see follow through from the strong starts number last week. The carry trade very clearly shows some optimism creeping into the free money world. LOL. The EUR/JPY cross has been bid fairly significantly all morning with the 2s flattening and the Euro erasing maybe a third of the overnight losses. For whatever it is worth, the 73-74 handle is building some nice volume for a significant little support area. However, this makes the OL even more fragile if we should break through 72 or so and start trading lower. The OL is the toughest trade of the day for sure. If we do get the retest we may stand aside as it is that treacherous. But the breakout under is weak too as there is just not enough information in the selling tail down there until we reach the first real support at 55-56. We may have a waiting game on our hands on the short side. On the long side I don’t doubt at all that we see a probe up to the ever critical 78-79 handle but it is just as tricky as the OL with its wide range which really extends from maybe 76 or so all the way to 80ish. There is no telling where it turns though I’m sure it will for at least one full rotation. Maybe it is best to wait out that and the OL and trade one or more of the easier levels today. We shall see…