Monday, April 5, 2010

Weekly Outlook 4/5

As the first full week of April begins the market is still looking strong after the jobs report data last week. SPX hitting 1185 this morning and still looks like it has legs to the upside, much to the shock of the bears. This really does look like a melt up that will continue until every last short has thrown in the towel and bought. You can't really try to predict that so why bother? Follow the price action and it will tell you when it wants to turn and roll over. For now play the long the side and obey the order flow.

This week the FOMC minutes are released on Tues. and there are some bond auctions that could influence the market as the 10 year bond is now approaching 4% as I have been saying it will for weeks. Bond prices are headed much lower in my opinion and this is only the beginning of the move. The play on any pullback is long TBT or short TLT. Also, Bernanke has a speech on Wed and the BoE and ECB rate decisions are on Thursday morning.

Currencies- The commodity currencies will be the ones to watch this week as we have the Aussie and Canadian dollars still very strong and near the upper part of their ranges. These pairs track and even lead the price of copper and oil sometimes. Last week we finally got a close above 84 for crude and above 3.45 for copper which means that they are in breakout mode and they look bullish going forward. The Aussie is at 0.92 and could see 0.94 next. CAD is basically at parity with the US dollar and showing no signs of stopping. The yen continues to be weak and the weekly chart shows a breakout of the USD against the yen which should continue for several weeks or months. Finally, the euro and pound have become the quiet names lately as they consolidate back up. Euro really has to take out 1.37 to the upside to reverse any kind of downside momo.

Commodities- Like I said above, oil and copper are breaking out and that is powering most energy sector stocks higher as they have lagged the last few months. Also gold and silver are bullish now that they have moved above some key levels. I think this trend may continue this week and if you see gold above 1140 then you can really see a nice move to the upside. Also, bonds are a sell the rip candidate imo.

Buy the dips>> RGLD, APA, SLB, LVS, MGM, FSLR, KLAC, PCLN, ANR, VMC

Sell the rips>> TLT, NTES