Well not the start I had looked for this week. I thought we had a nice looking trade with this one when we got stopped in and made the move lower. But then those big green bars decide to come pushing in and take us the other way. Looks like the market wants to go higher.
Out @ 4.914
Monday, February 22, 2010
RUT Credit Spreads
I know I don't have the doc up yet but I have two GTC working orders.
Sell 2 April 700/710 call spreads for a limit of $0.50 credit
Sell 2 April 530/520 put spreads for a limit of $0.50 credit.
Sell 2 April 700/710 call spreads for a limit of $0.50 credit
Sell 2 April 530/520 put spreads for a limit of $0.50 credit.
NG Short Entry
Symbol: NQ
Chart: 5m
Entry: Sell Stop @ 4.880
Stop: 4.914
Target 1: 4.871
Target 2: 4.845
Target 3: 4.803
Crude moved higher but we have a similar setup with nat gas.
Chart: 5m
Entry: Sell Stop @ 4.880
Stop: 4.914
Target 1: 4.871
Target 2: 4.845
Target 3: 4.803
Crude moved higher but we have a similar setup with nat gas.
Watching Crude
Crude rolled over and is now testing the uder side of the 5m 50sma. So we will look for a short play on a move back to the downside. As we did with Nat Gas last week I'm going to switch to the full Crude Oil future contract going forward. Symbol is CL. I will get the info docs updated later today. I market has had a very chopy start this week so all this plays are going to have to prove to me we are headed in that direction. Crude now peaking over the 50sma so we might not get a setup.
New Department Launch
We will be launching a new trading department this week. It will involve trading credit spreads on the Russell 2000 Index (RUT). I will be posting up more info soon in the document section. So far paper testing as shown good results so we will be taking this live with small size and try and build on it each month.
Crude Long Entry
Symbol: QM
Chart: 30m
Entry: Buy Stop @ 80.550
Stop: 79.850
Target 1: 80.775
Target 2: 81.325
Target 3: 82.225
Chart: 30m
Entry: Buy Stop @ 80.550
Stop: 79.850
Target 1: 80.775
Target 2: 81.325
Target 3: 82.225
Today’s Market Guidance
Financial Overview:
Stock prices come into the action today on a slightly positive tilt, with the gains seemingly the result of rumors that the EU will ultimately offer Greece a $34 billion bailout package. However, some bulls think that the rally today is merely a balancing of stock prices in the wake of last week's overreaction to the Fed's move Discount rate move. Other players are suggesting that a continuation of the EU debt crisis is set to rekindle reserve currency status in the US Dollar again and that in turn is thought to be capable of providing the US equity market with a positive lift. A well known currency trader/fund manager overnight is suggesting that despite a possible Greek bailout plan from the EU, the Euro will remain vulnerable to re-valuation and that type of dialogue means that some economic anxiety is destined to remain in place in the Euro zone. While it is also possible that the market is buying into the promises from the Fed, that a rate hike cycle hasn't begun yet, we wouldn't expect that type of view to consistently support equity prices to higher levels. In fact, given the ongoing pattern of gains in US equities, from the early February lows, we would suggest that the bull camp needs fairly constant support from the scheduled US data flows to extend on the upside.
DOW:
One can't argue with more minor hard fought gains in the Mini Dow today. However, the bull case is rather thin and the outlook for the US economy remains suspect. Perhaps the markets will garner some minor support from a Senate vote on a narrower jobs bills, but only if that action is passed. The Commitments of Traders Futures and Options report as of February 16th for Dow Jones Index $5 showed Non-Commercial traders were net long 4,637 contracts (-5,431). The Non-reportable traders were net long 903 contracts (-124). Non-Commercial and Non-reportable combined traders held a net long position of 5,540 contracts. This represents a 5,555 contract decrease in the net long position held by these traders. As can be seen from the COT positioning reports, the Mini Dow held a modest net spec long position and that means the market could see some upside action without overextending technically.
Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 10528. The next area of resistance is around 10492 and 10528, while 1st support hits today at 10348 and below there at 10241.
S&P:
At least in the early going today, the March S&P has failed to manage a fresh new high for the move, but prices seem to remain within close proximity to the recent highs. The Commitments of Traders Futures and Options report as of February 16th for S&P 500 Stock Index showed Non-Commercial traders were net short 64,442 contracts (-4,981). The Non-reportable traders were net long 49,227 contracts (-4,476). Non-Commercial and Non-reportable combined traders held a net short position of 15,215 contracts. This represents a 9,457 contract increase in the net short position held by these traders. While we can't argue against more minor gains ahead, we get the sense that the S&P has the less upside momentum than either the Mini Dow or the Nasdaq but it should be noted that the COT positioning would seem to leave the S&P in the best technical buying positive. However, the failure to hold above 1105.60 today could signal a quasi technical failure on the S&P charts.
The cross over and close above the 40-day moving average is an indication the longer-term trend has turned positive. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1122.50. The next area of resistance is around 1115.50 and 1122.50, while 1st support hits today at 1097.00 and below there at 1085.50.
NASDAQ:
While the Nasdaq didn't initially manage a fresh new high for the move this morning, the path of least resistance appears to be pointing upward. In fact, some fresh buyout news overnight seems to give the bull camp an added lift into the early US trading action. The Commitments of Traders Futures and Options report as of February 16th for Nasdaq Mini showed Non-Commercial traders were net long 18,075 contracts (+2,439). The Non-reportable traders were net short 6,789 contracts (-4,017). Non-Commercial and Non-reportable combined traders held a net long position of 11,286 contracts. This represents a 1,578 contract decrease in the net long position held by these traders. As in the Mini Dow, the Nasdaq remains only modestly net spec long and therefore one can't argue against more minor hard fought gains ahead.
US Dollar:
While concern remains in the air with respect to the Euro zone debt situation, the trade is clearly seeing a tempering of the flight to quality vibe in the Dollar. In fact, given comments from George Soros, that the Euro will remain vulnerable to re-valuation (even after a Greece bailout package is announced) that should have given the Dollar a fresh bid this morning. However, there also appears to be renewed talk about the reviving the Volcker Rule, which could end up pushing capital away from the US, as tight restrictions on US Banks trading has sunk the Dollar in the recent past. In the near term, up trend channel support in the March Dollar Index is seen down at 79.98 and it is possible that the Dollar is poised for a bit of weakness today. In fact, with the US expected to see a Senate vote, on a slimmed down jobs bill and the President promising to start another push on health care reform, it is possible that political anxiety will resurface again and sit on the back of the US Dollar. The Commitments of Traders Futures and Options report as of February 16th for US Dollar showed Non-Commercial traders were net long 37,495 contracts (-3,477). The Non-reportable traders were net long 3,474 contracts (-380). Non-Commercial and Non-reportable combined traders held a net long position of 40,969 contracts. This represents a 3,857 contract decrease in the net long position held by these traders and that could be a sign that the bulls are set to bank some profits in their long Dollar positions.
Gold:
After a lack of definitive direction from the Indian gold market overnight, the US gold trade was showing some minor early gains. Clearly a weaker US Dollar, higher equities and minimally higher energy prices w provided some spillover support for gold, but the bull camp would probably like to see the San Francisco Fed President later today reiterate the stance that the US Fed hasn't shifted into a cycle of higher interest rates. The Commitments of Traders Futures and Options report as of February 16th for Gold showed Non-Commercial traders were net long 193,345 contracts (+4,700). The Non-reportable traders were net long 32,086 contracts (-2,367). Non-Commercial and Non-reportable combined traders held a net long position of 225,431 contracts. This represents a 2,333 contract increase in the net long position held by these traders. The bull camp is probably emboldened by the fact that April gold managed to reach the highest level since January 20th early today, while the bear camp could also continue to point to the prospect of ongoing Euro zone debt issues as a possible fundamental cap on gold prices. At least in the near term, the direction of equity prices might become the primary swing factor for gold prices.
Silver:
Like the gold market, May silver has managed a fresh new high for the move in the early action today, but unfortunately for the bull camp, silver also seemed to fall back from that early attempt to rally. One almost comes away from the recent action with the view, that silver sees the Fed's surprise move on the discount rate late week as a sign that inflation might be presenting itself, but that view is certainly being countervailed by Fed dialogue to the contrary. The Commitments of Traders Futures and Options report as of February 16th for Silver showed Non-Commercial traders were net long 26,228 contracts (+2,100). The Non-reportable traders were net long 14,407 contracts (-1,642). Non-Commercial and Non-reportable combined traders held a net long position of 40,635 contracts. This represents a 458 contract increase in the net long position held by these traders. Initial weakness in the Dollar and slightly higher US equity market action would seem to leave part of the outside market forces in the favor of the silver bulls this morning, but the silver bears might hold out hope that renewed wrangling in Washington will rekindle uncertainty again, which in the past has undermined physical commodity markets.
Crude Oil:
April pushed to a new high for the move overnight following last week's sharp gains with price support still coming from a better macro economic view improving the demand outlook for oil along with strike related supply side concerns and Iranian geopolitical risk uncertainty. Although crude oil still appears to have a strong upward bias, trading today could become more two sided and volatile, but price dips will likely end up being buying opportunities. April crude oil was initially pushed to a five week high in the early overnight action with price support coming from an extended labor strike at Total refineries in France. The threat that refinery strikes could spread to other oil companies and further threaten supplies has been a key factor behind part of the oil market rally over the past week. Therefore, any fresh news relating to the strike issue will have the potential of pushing oil prices in both directions since once the strike is resolved, a portion of the supply risk premium is likely to be extracted. But if a pull back in oil is tied to the French refinery strike, it may end up being short lived since a part of the strength in the oil market has been due to a much better macro economic view taking hold last week off the economic news. In fact, even the Fed's discount rate hike was seen as a sign that economic conditions are improving. In fact, positive oil demand sentiment was further supported by news that Chinese refiners processed 29% more crude oil in January than a year ago. Fed chairman Bernanke speaks today and if he gives a more positive economic view but also leaves the market with the impression that key US rates are still likely to stay low even as the Fed drains excess liquidity, then we suspect April crude oil could retest overnight highs. But the oil markets will still be influenced by the action in the Dollar and the currency's reaction to Bernanke's comments are likely to have a spill over effect on the direction in oil this session. An article in a German newspaper has also given financial markets the impression that a European bailout plan for Greece may be close at hand, and if this sentiment gains traction, it could support oil by weakening the dollar. Last week the International Atomic energy Agency warned that Iran could be developing a nuclear weapon and this uncertainly will remain a bullish wildcard in the oil market. The expiration of the March contract today could also turn the price action in crude oil more two sided. Daily indicators are starting to approach short-term overbought levels in April crude oil following a nearly $11 per barrel price rise from the February low. But there has also been a clear shift in sentiment back to the bull camp mostly based on a low refinery operating rate and improving economic conditions to result in a tighter fuel supply/demand setup this spring. Positive price sentiment has been further supported by a major investment banking firm who is a big player in the energy sector predicting oil prices to rise as high as $95 per barrel this year. The latest traders report also shows funds becoming aggressive buyers of oil over the last week. The February 16th Commitments of Traders report with options for crude oil showed non-commercial traders increasing their net long position by nearly 19,000 contracts to 148,182 contracts while Nonreportable traders shifted to a net short position of 1,845 contracts after being net long the previous week which is a bullish setup since small traders may be forced to short cover if resistance levels fail to hold. While crude oil may encounter some profit taking this session, the market's price bias is up and it is clear by the price action that the bull camp has regained control of sentiment. Therefore, profit taking dips in April crude oil back to support levels should be considered a buying opportunity.
Natural Gas:
April natural gas fell below the $5.00 price level in the overnight trade for the first time since December as a milder temperature outlook and expectations for supplies to rebuild this spring weigh on prices. Natural gas prices fell as some private forecasters are predicting mostly 40 degree temperatures in the key Northeast locations into early March, although the Midwest still looks to stay mostly below normal over the next two weeks. With the winter season coming to a close, natural gas is being pressured by expectations that storage declines tied to winter heating demand have likely peaked for the season. Market sentiment has turned bearish since industrial fuel demand still appears to be weak, despite signs of improving economic conditions while there are growing concerns that fuel storage could quickly rebuild since natural gas production has been rising since last July. Last week's report showed the number of working natural gas rigs in operation to be at an 11 1/2 month high. As a result, it looks as if April natural gas is on course to be pressured back towards the December low. The February 16th COT report with options for natural gas showed managed money funds increasing their net short position by 3,830 contracts. With non-commercials increasing their net short position in natural gas to 68,764 contract and nonreportable traders still net long 34,578 contracts as of early last week leaves the market vulnerable to small spec liquidation if support levels fail to hold. In fact, with April natural gas falling below $4.9710 it leaves a lack of support until $4.858. Bernanke speaks today and that may provide some temporary price support to natural gas if he gives a positive economic outlook. But given the bearish supply outlook, rally attempts in natural gas should end up being selling opportunities.
Stock prices come into the action today on a slightly positive tilt, with the gains seemingly the result of rumors that the EU will ultimately offer Greece a $34 billion bailout package. However, some bulls think that the rally today is merely a balancing of stock prices in the wake of last week's overreaction to the Fed's move Discount rate move. Other players are suggesting that a continuation of the EU debt crisis is set to rekindle reserve currency status in the US Dollar again and that in turn is thought to be capable of providing the US equity market with a positive lift. A well known currency trader/fund manager overnight is suggesting that despite a possible Greek bailout plan from the EU, the Euro will remain vulnerable to re-valuation and that type of dialogue means that some economic anxiety is destined to remain in place in the Euro zone. While it is also possible that the market is buying into the promises from the Fed, that a rate hike cycle hasn't begun yet, we wouldn't expect that type of view to consistently support equity prices to higher levels. In fact, given the ongoing pattern of gains in US equities, from the early February lows, we would suggest that the bull camp needs fairly constant support from the scheduled US data flows to extend on the upside.
DOW:
One can't argue with more minor hard fought gains in the Mini Dow today. However, the bull case is rather thin and the outlook for the US economy remains suspect. Perhaps the markets will garner some minor support from a Senate vote on a narrower jobs bills, but only if that action is passed. The Commitments of Traders Futures and Options report as of February 16th for Dow Jones Index $5 showed Non-Commercial traders were net long 4,637 contracts (-5,431). The Non-reportable traders were net long 903 contracts (-124). Non-Commercial and Non-reportable combined traders held a net long position of 5,540 contracts. This represents a 5,555 contract decrease in the net long position held by these traders. As can be seen from the COT positioning reports, the Mini Dow held a modest net spec long position and that means the market could see some upside action without overextending technically.
Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 10528. The next area of resistance is around 10492 and 10528, while 1st support hits today at 10348 and below there at 10241.
S&P:
At least in the early going today, the March S&P has failed to manage a fresh new high for the move, but prices seem to remain within close proximity to the recent highs. The Commitments of Traders Futures and Options report as of February 16th for S&P 500 Stock Index showed Non-Commercial traders were net short 64,442 contracts (-4,981). The Non-reportable traders were net long 49,227 contracts (-4,476). Non-Commercial and Non-reportable combined traders held a net short position of 15,215 contracts. This represents a 9,457 contract increase in the net short position held by these traders. While we can't argue against more minor gains ahead, we get the sense that the S&P has the less upside momentum than either the Mini Dow or the Nasdaq but it should be noted that the COT positioning would seem to leave the S&P in the best technical buying positive. However, the failure to hold above 1105.60 today could signal a quasi technical failure on the S&P charts.
The cross over and close above the 40-day moving average is an indication the longer-term trend has turned positive. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1122.50. The next area of resistance is around 1115.50 and 1122.50, while 1st support hits today at 1097.00 and below there at 1085.50.
NASDAQ:
While the Nasdaq didn't initially manage a fresh new high for the move this morning, the path of least resistance appears to be pointing upward. In fact, some fresh buyout news overnight seems to give the bull camp an added lift into the early US trading action. The Commitments of Traders Futures and Options report as of February 16th for Nasdaq Mini showed Non-Commercial traders were net long 18,075 contracts (+2,439). The Non-reportable traders were net short 6,789 contracts (-4,017). Non-Commercial and Non-reportable combined traders held a net long position of 11,286 contracts. This represents a 1,578 contract decrease in the net long position held by these traders. As in the Mini Dow, the Nasdaq remains only modestly net spec long and therefore one can't argue against more minor hard fought gains ahead.
US Dollar:
While concern remains in the air with respect to the Euro zone debt situation, the trade is clearly seeing a tempering of the flight to quality vibe in the Dollar. In fact, given comments from George Soros, that the Euro will remain vulnerable to re-valuation (even after a Greece bailout package is announced) that should have given the Dollar a fresh bid this morning. However, there also appears to be renewed talk about the reviving the Volcker Rule, which could end up pushing capital away from the US, as tight restrictions on US Banks trading has sunk the Dollar in the recent past. In the near term, up trend channel support in the March Dollar Index is seen down at 79.98 and it is possible that the Dollar is poised for a bit of weakness today. In fact, with the US expected to see a Senate vote, on a slimmed down jobs bill and the President promising to start another push on health care reform, it is possible that political anxiety will resurface again and sit on the back of the US Dollar. The Commitments of Traders Futures and Options report as of February 16th for US Dollar showed Non-Commercial traders were net long 37,495 contracts (-3,477). The Non-reportable traders were net long 3,474 contracts (-380). Non-Commercial and Non-reportable combined traders held a net long position of 40,969 contracts. This represents a 3,857 contract decrease in the net long position held by these traders and that could be a sign that the bulls are set to bank some profits in their long Dollar positions.
Gold:
After a lack of definitive direction from the Indian gold market overnight, the US gold trade was showing some minor early gains. Clearly a weaker US Dollar, higher equities and minimally higher energy prices w provided some spillover support for gold, but the bull camp would probably like to see the San Francisco Fed President later today reiterate the stance that the US Fed hasn't shifted into a cycle of higher interest rates. The Commitments of Traders Futures and Options report as of February 16th for Gold showed Non-Commercial traders were net long 193,345 contracts (+4,700). The Non-reportable traders were net long 32,086 contracts (-2,367). Non-Commercial and Non-reportable combined traders held a net long position of 225,431 contracts. This represents a 2,333 contract increase in the net long position held by these traders. The bull camp is probably emboldened by the fact that April gold managed to reach the highest level since January 20th early today, while the bear camp could also continue to point to the prospect of ongoing Euro zone debt issues as a possible fundamental cap on gold prices. At least in the near term, the direction of equity prices might become the primary swing factor for gold prices.
Silver:
Like the gold market, May silver has managed a fresh new high for the move in the early action today, but unfortunately for the bull camp, silver also seemed to fall back from that early attempt to rally. One almost comes away from the recent action with the view, that silver sees the Fed's surprise move on the discount rate late week as a sign that inflation might be presenting itself, but that view is certainly being countervailed by Fed dialogue to the contrary. The Commitments of Traders Futures and Options report as of February 16th for Silver showed Non-Commercial traders were net long 26,228 contracts (+2,100). The Non-reportable traders were net long 14,407 contracts (-1,642). Non-Commercial and Non-reportable combined traders held a net long position of 40,635 contracts. This represents a 458 contract increase in the net long position held by these traders. Initial weakness in the Dollar and slightly higher US equity market action would seem to leave part of the outside market forces in the favor of the silver bulls this morning, but the silver bears might hold out hope that renewed wrangling in Washington will rekindle uncertainty again, which in the past has undermined physical commodity markets.
Crude Oil:
April pushed to a new high for the move overnight following last week's sharp gains with price support still coming from a better macro economic view improving the demand outlook for oil along with strike related supply side concerns and Iranian geopolitical risk uncertainty. Although crude oil still appears to have a strong upward bias, trading today could become more two sided and volatile, but price dips will likely end up being buying opportunities. April crude oil was initially pushed to a five week high in the early overnight action with price support coming from an extended labor strike at Total refineries in France. The threat that refinery strikes could spread to other oil companies and further threaten supplies has been a key factor behind part of the oil market rally over the past week. Therefore, any fresh news relating to the strike issue will have the potential of pushing oil prices in both directions since once the strike is resolved, a portion of the supply risk premium is likely to be extracted. But if a pull back in oil is tied to the French refinery strike, it may end up being short lived since a part of the strength in the oil market has been due to a much better macro economic view taking hold last week off the economic news. In fact, even the Fed's discount rate hike was seen as a sign that economic conditions are improving. In fact, positive oil demand sentiment was further supported by news that Chinese refiners processed 29% more crude oil in January than a year ago. Fed chairman Bernanke speaks today and if he gives a more positive economic view but also leaves the market with the impression that key US rates are still likely to stay low even as the Fed drains excess liquidity, then we suspect April crude oil could retest overnight highs. But the oil markets will still be influenced by the action in the Dollar and the currency's reaction to Bernanke's comments are likely to have a spill over effect on the direction in oil this session. An article in a German newspaper has also given financial markets the impression that a European bailout plan for Greece may be close at hand, and if this sentiment gains traction, it could support oil by weakening the dollar. Last week the International Atomic energy Agency warned that Iran could be developing a nuclear weapon and this uncertainly will remain a bullish wildcard in the oil market. The expiration of the March contract today could also turn the price action in crude oil more two sided. Daily indicators are starting to approach short-term overbought levels in April crude oil following a nearly $11 per barrel price rise from the February low. But there has also been a clear shift in sentiment back to the bull camp mostly based on a low refinery operating rate and improving economic conditions to result in a tighter fuel supply/demand setup this spring. Positive price sentiment has been further supported by a major investment banking firm who is a big player in the energy sector predicting oil prices to rise as high as $95 per barrel this year. The latest traders report also shows funds becoming aggressive buyers of oil over the last week. The February 16th Commitments of Traders report with options for crude oil showed non-commercial traders increasing their net long position by nearly 19,000 contracts to 148,182 contracts while Nonreportable traders shifted to a net short position of 1,845 contracts after being net long the previous week which is a bullish setup since small traders may be forced to short cover if resistance levels fail to hold. While crude oil may encounter some profit taking this session, the market's price bias is up and it is clear by the price action that the bull camp has regained control of sentiment. Therefore, profit taking dips in April crude oil back to support levels should be considered a buying opportunity.
Natural Gas:
April natural gas fell below the $5.00 price level in the overnight trade for the first time since December as a milder temperature outlook and expectations for supplies to rebuild this spring weigh on prices. Natural gas prices fell as some private forecasters are predicting mostly 40 degree temperatures in the key Northeast locations into early March, although the Midwest still looks to stay mostly below normal over the next two weeks. With the winter season coming to a close, natural gas is being pressured by expectations that storage declines tied to winter heating demand have likely peaked for the season. Market sentiment has turned bearish since industrial fuel demand still appears to be weak, despite signs of improving economic conditions while there are growing concerns that fuel storage could quickly rebuild since natural gas production has been rising since last July. Last week's report showed the number of working natural gas rigs in operation to be at an 11 1/2 month high. As a result, it looks as if April natural gas is on course to be pressured back towards the December low. The February 16th COT report with options for natural gas showed managed money funds increasing their net short position by 3,830 contracts. With non-commercials increasing their net short position in natural gas to 68,764 contract and nonreportable traders still net long 34,578 contracts as of early last week leaves the market vulnerable to small spec liquidation if support levels fail to hold. In fact, with April natural gas falling below $4.9710 it leaves a lack of support until $4.858. Bernanke speaks today and that may provide some temporary price support to natural gas if he gives a positive economic outlook. But given the bearish supply outlook, rally attempts in natural gas should end up being selling opportunities.
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