Jul 152010

Very interesting unfolding series of events. Mixed trading yesterday with even big traders totally split in directional opinions. Then overnight institutions priced in good numbers with HUGE positive deltas and moderate volume. That coupled with a rising Euro on the Spanish bond sales, Gold unchanged, bonds selling, the carry trade up and oil up was the perfect mix for a strong open. Then the news came and for once the market I think payed attention to what was important. We got a great claims number but of course we had a lot of big auto workers out of that picture so it was skewed and the actual number was probably a bit of a rise. PPI was very weak and the big headline was Empire State. Business conditions index at an 18 consensus drops to 5! I guess there isn’t much confidence in the core of the economy after all. But then of course we have a nice boost to the financial sector today with JP up 76% and reporting an ease in credit defaults and charge-offs. Put in in the blender and you get indecision which can be a fade trader’s dream. I doubt the up trend continues in any case as we have been reporting. We have had a good multi-day rally and it may be time for another retest at least of the developing support in the low 80s. In fact, I think you can pretty much bet on that. Does it hold? My guess is no and traders will want a test of the 70s again I’m sorry to say and the fade trading is VERY tricky with less than ideal clean levels from about 82 down to 73. The former and latter I think are great and should have some rotational activity but the few things in between are pretty weak and tough to call at best. As an important side note we are currently back in the center of the composite profile. The biggest HVN since the high in October 2007 through the 08-09 lows to present and the next major LVN center there is right around the 80 level. Generally we would think that if we crossed that center line there would be a relatively fast market down all the way to the next HVN which happens to be right around the 73 handle which is one of our “local” LVNs as well. Should be interesting today…

 Posted by at 9:04 am

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