Monday, March 29, 2010

Weekly Outlook 3/29

This week is a shortened week as Friday is Good Friday and the market is closed. However, they will still release the jobs report that morning and I believe the futures market will be open for at least a few hours. It should be interesting to see how the market reacts having a few extra days to really digest the data. Otherwise this week is the end of the 1st quarter and early on we are likely to see some "window-dressing".

The SPX pulled back to the 8ema last week and seems to want to bounce off of it. Short term I think we can tag 1185 this week. We really have no choice but to be cautiously bullish above the 1150 level. Another thing to watch for will be whether the pullbacks last less than 4 days. So far they have. Those are normal pullbacks within a bull trend. I would not be surprised to see the jobs report mark some kind of an important short term to interim top going into April so be warned.

Currencies- The Euro bounced back a bit this morning to 1.35 and the GBP is back to 1.50. It still looks like this is a weak bounce within a bearish downtrend. I like the dollar and think the DXY is still headed higher after it reached my initial target of 82.50 last week. USD/JPY rallied hard last week reaching almost 93. The pair has based out for 6 months or more now and I think from looking at the weekly chart that we could have seen a major top on the yen and look for the dollar to appreciate towards 100/yen in the coming months. Aussie and CAD remain strong after pausing for a little bit to consolidate. Obey the trend there.

Commodities- Oil is still fighting the 82-83 level and I have really dont know what it wants to do. Either close above 84 to be bullish or under 79 to be bearish. Copper looks more bullish after just flagging out last week and now is challenging the 3.50 level which could very well signal a breakout to the upside. Gold and silver look strong once again as they just bounce around in these ranges lately. Until gold closes above 1140 I expect more rangebound trading.

Bonds- Interesting action in bonds last week. The 10 and 30 year sold off sharply and yields on the 10 year approached 3.9%. Any close above the 3.9 level signals a major long term shift in the bond market. I believe we are seeing the top in bond prices for the next decade if not longer. Yields will rise towards 7% in the coming years as more investors demand a higher return for the risk of holding our debt. This is my long term thought on the bonds and the way to play will be puts on TLT or calls on TBT if you cannot trade the futures. Short term the TLT is bouncing back a bit but any strength is made to sell.

Buy the dips>> TBT, BIDU, MGM, RF, NOG, FLR

Sell the rips>> CHL, LM, KALU