Posts by: hadesresearch
US data has started to look a little better over the past week, at least from the activity side, with stronger than expected May durable goods orders (0.4% over mkt estimates @ 1.9%), a very solid June Chicago PMI (61.1 vs. 54.0 median) and Milwaukee NAPM (59.3, mkt 59.0) while last months ISM manufacturing also showed a solid pick-up (55.3 vs. 52.0 consensus). Confidence surveys appear a little more fragile still but we’d expect these will follow suit over the summer.The stock market reaction to Friday’s ISM number in particular suggests the market also buys into this ethos at the moment with the S&P, already through the 1,315 area which was our first objective, jumping towards 1,325. Bulls should be able to hold the market above 1,301 now and only sub 1,293 would shorts begin to look viable again. The aim is to drive the market towards 1,347.5 where the June reversal began and from here, after some consolidation, mount a push through 1,400. We’d note that even after the recent bounce the market is not overbought. Buying weakness should be the specs game.
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- Score One Point for the Bulls. Literally, One Point. (blogs.wsj.com)
Nymex crude (CL1) has had a nice move up today with a 2.2% gain. However this merely brings prices to the top of the current trading range and critically resistance at $96.11/$96.26 is still untroubled. Any further headway towards these markers should see spec shorts tempted back, with the current bear trend needing a push through $97.10/30 to suggest we’ve seen a more damaging setback – and in turn shifting the s/t target to $100. Below $100 downside targets remain the the real draw for the bigger accounts.
Indeed, we feel fading rallies in the $95.00-$100.00 zone offers good risk/return dynamics aiming ultimately for the mid $80.00’s. A move back through $92.77/80 is the first objective and should see shorts begin to add to positions again, looking for a test and eventual break of the $89.60/70 June lows. Once this area is cleared a push towards more important mid-term support, which lies at $83.34 (38.2% Fib of the Dec ‘08/May ’11 rally) and $83.85 (the Feb low) would be on the cards.
S&P500 has managed to string together a couple of good days and more importantly Tuesday’s finish pushes the market through recent intra-day tops to leave us at the highest closing level since June 3rd (based on ES1). Equally interesting is how solid support now looks with that 200-DMA (@ 1,263) proving a very good floor which leaves us with attractive risk reward levels. Working from a long base and looking to add on any short-term dip mid range leaning on this marker on a closing basis (or perhaps an intra-day stop @ 1,257 if you’re wanting to reverse if this zone breaks) looks sensible. 1,315 is the first target area on the topside and if this area can be cracked 1,350 would be the draw.
Given how US macro data has been printing you have to think a lot of bad news is now priced and assuming the Greeks can push their next (not last) fiscal plan through to keep bailout funds flowing another ‘risk on’ phase looks probable. Such an environment should really have the potential to attack the Bid Laden bounce highs (1,375ish) and potentially lift the market towards the 1,400/1,430 area over the rest of the summer. Given how things have been moving this probably rules out any extension of the dollar bounce from the early June low and favours plying EUR/USD from a long base again (entering sub 1.43).
We still like the Bund chart mid-term but it could also set back the bull move here where there is still a half point of P&L despite the 1pt pullback of the last two days on the table.
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- FX Update: US dollar dead cat? (tradingfloor.com)
Fears the Greek debt crisis is snowballing out of control have hit asset markets in recent days, underlined most clearly on the currency side by the slide in EUR/USD from the 1.4697 high trade on June 7th back down to the 1.4100 area. But for the moment it doesn’t appear to be a significant breakdown on the EUR chart with very solid support so far untroubled at 1.4000. In fact we’d probably need to see the 1.3770 and 1.3820~ area (200-DMA) fail to suggest that we’re on for a more prolonged decline from here. Note at the onset of the European debt crisis this pair traded down to 1.1877. Being short prior to such a break risks leaving one exposed to politics – which ultimately the whole EUR project is. It’s worth keeping an eye on the dollar index (DXY) – where the EUR obviously carries a significant weight – which looks slightly more constructive on the chart and would be better placed to benefit from any stabilisation/improvement in US data in the coming weeks while still offering exposure to the Greek tragedy/bearish EUR theme.
