Monday, June 14, 2010
Weekly Outlook 6/14
This week is triple witching options expiration and that is historically a positive week for the markets with about 71% of the last 17 occasions being in the green. Also last week we ended the week on a nice push higher into the weekend as shorts covered some positions. The markets are facing some overhead resistance near the 1095-1105 zone that we saw right before the jobs report slammed us a week ago.
With only a few weeks left to go in the 2nd quarter and June, we could see a bit of window dressing as managers buy the names that have been working throughout this correction. I think if we close above that 1105 level then we should see some continued decreasing volatility and more upside that could eventually lead us up to that 1150 resistance and form an interesting longer term head and shoulders top in the SPX.
Charts are starting to look more constructive than they have in the past month and strong individual names in the tech sector are my favorites this week. I still don't really like commodity stocks or energy related names. We could get a rebound rally in some of these beaten down oil stocks but I'd rather wait for the bounce and short it on a swing or intermediate term basis.
Currencies- The EUR/USD short covering has begun after hitting a low of 1.1876 last week it is now challenging 1.23 on Monday and I think has a clear path to 1.25 short term. This is going lower long term but for the next month or so can see a nice squeeze perhaps even up to 1.30 without much trouble. This should maintain the current levels in the stock market as well. EUR/JPY is a measure of risk appetite that is also bouncing back as fear comes off the table. EUR/JPY breaking above 113.5 could send it to the 50 day at 116.25. Commodity currencies are back with strength and AUD has made quite a move higher since last week. From 0.81 to 0.8666 in one week. That is an amazing move of 566 pips and has pushed oil and copper prices higher since the bottom last week. I am thinking the majority of the move has been made as the AUD is slamming into the 50 day ema at 0.87 and could actually retrace back to 0.85 before seeing a new leg higher to 0.89.
Commodities- As I said the price of oil and copper was helped by the huge move up in AUD/USD. Crude made it back to 75.50, just shy of the 50 day ema. I think odds favor a pullback or sideways move in crude this week. Perhaps a range between 68-76 is taking hold for now. Copper is still technically downtrending the past few months after topping at 3.68 and the 3.00 mark is a big level that copper is now retesting. The resistance is tough but if it breaks it could easily see 3.15 short term. Gold is pulling back to 1220 this morning and really has not traded well since retesting the highs at 1250 last week. I think gold is starting a sideways trading range into summer time.
Buy the dips>> CREE, NFLX, CMI, FXF, PANL, NENG, CMC, WYNN, BIDU, GMCR, VMW
Sell the rips>> BP, GS, GOOG, JEC, QCOM