Bill Cara’s Blog for Jun 29, 2012
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
Bailout for the banks of Spain and Italy is the news of the morning, pushing the Euro, commodities, precious metals and equities higher across the board, but especially in the Banks. How long it remains a green day depends on trader confidence that Europe’s financial system can stabilize.
Only Barclays Bank (LSE:BARC) is in the red this morning, and rightfully so. The stock is down over -35% in about 100 days as regulators and traders are concerned about their bad behavior, which executive management is trying to pin on a few bad apples. Same old, same old.
Good morning, Geoff here.
Yesterday’s last hour ramp in the S&P should have told us that something positive was happening in the markets and that the news was leaked.
Apparently, work was actually done at the summit as an agreement was made to rescue troubled banks as Merkel bowed to market pressure. I say “apparently” because I am reading some conflicting statements following the news release that puts doubt into an actual deal. Yes, we have expected this all along, but until documents are signed there may still be grumbling from Germany and doubt that the steps will be taken. Regardless, these steps are simply short-term measures to keep the contagion from spreading into the global banking system. These short-term deals are like putting a band aid on a hemophiliac’s cut – eventually, the real problem will become obvious again and without going to the hospital and taking ALL of the corrective medicine, death will occur.
The global financial system is in real trouble and the only way out that is politically palatable is for global central bankers to provide whatever liquidity is needed. That is why we are bullish gold and other commodities long-term. The same inflationary pressures that will move commodities higher will also flow into equities with the more fundamentally strong stocks performing best.
The problem with these short-term measures is that they don’t fix the real problem. Yes, we are going to make money during this next move higher, but that doesn’t mean that the real problems have been fixed and eventually, the market will catch on to that fact and worry will enter again. The massive pile of debt needs to be worked off, not added to, but that is a long term issue.
For the moment, it looks like what we wrote yesterday is occurring with the US Dollar topping and commodities finding support amidst the negative sentiment. I have been stressing energy stocks for a week or so and they will get going today as Crude is up about 3.5% right now and the S&P is up almost 2% as shorts are exiting positions.
Here are very overweight energy and material stocks right now. Here are two current holdings:
We shall see if this “risk-on” environment can last more than a few days – news can and probably will come out of Europe this weekend so don’t get too bullish just yet, but fingers are crossed.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||43.57 (2.31%)||Components, Chart, More|
||37.80 (1.77%)||Components, Chart, More|
||84.98 (2.78%)||Components, Chart, More|
||148.02 (2.41%)||Components, Chart, More|
|^AEX||AEX General||N/A||0.00 (0.00%)||Chart, More|
|^OSEAX||OSE All Share||452.90
||8.36 (1.88%)||Components, Chart, More|
||7.38 (2.43%)||Components, Chart, More|
||58.55 (0.98%)||Components, Chart, More|
||71.35 (1.30%)||Components, Chart, More|
||12.20 (1.39%)||Chart, More|
||35.41 (2.64%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||610.64
||32.33 (5.59%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara 100 Company research notes from brokers
Vad’s Catch of the Day
Kaimu’s Sound Money
Deron’s Daily ETF Analysis
A quick technical analysis review of the S&P 500 and Nasdaq Composite should provide a compelling visual as to the strength of yesterday’s reversal, which broadly carried msot ETFs with hit.
In the first half of the trading session, the S&P 500 quickly lost support of its 20-day exponential moving average (EMA) yesterday, and appeared ready to test key near-term support of its four-day low. However, after setting the intraday low near the 2:30 pm reversal period, the S&P rallied in the final hour of trading to close near the day’s high. This formed a bullish “reversal bar” candlestick on the daily chart, but with little relevance given the choppy, indecisive trading range of late. From here, the next near-term resistance levels for the index will be found at the two-day high of 1,334, followed by resistance of the 50-day moving average (MA) at the 1,340 area and June “swing high” around 1,364.
The Nasdaq Composite also recovered strongly yesterday. Initially, the Nasdaq appeared to be in big trouble when it fell through key support of its four-day low. However, the tech-rich index also turned tail to close near session highs. The Nasdaq should now find resistance at its 20-day EMA (the 2,862 area), the two-day high (2,882), and 50-day EMA (2,897) and the June 20th “swing high” of 2,942.
As the charts above illustrate, both the Nasdaq and the S&P 500 still face formidable overhead resistance and price supply to contend with. Nevertheless, yesterday’s price action suggests to us that market bears may be on the verge of ceding control…at least for a while. Overall, recent weeks can be summarized as a tug-of-war between the bull bears, with neither team showing convincing dominance. Obviously, this has made it challenging to allow solid technical swing trade setups to follow through in either direction for more than a day or two. Nevertheless, we have been riding the volatility pretty well, eeking out small profits on both sides of the market, while keeping a primary focus on capital preservation. We simply must take what the market gives us…and lately, that hasn’t been much (at least for technical swing traders). Although the timing model is on a sell signal we are simply one “follow through-day” away from generating a buy signal. With this in mind, we are willing to establish a few long positions with reduced share size, risking about $200 per trade (based on our $50,000 model trading account).
Yesterday provides an excellent case for why we ignore the news. Early in the session, the “talking heads” were clamoring that the market was sinking due to “the Supreme Court’s decision on health care reform.” However, by the closing bell, the market had staged an impressive bullish reversal. Was this reversal also a result of the Supreme Court’s decision on health care reform? News doesn’t drive the market, the market drives the news. The news media merely observe what happens in the market and then create a story in an attempt to provide an explanation. Why does there have to be an explanation? That’s why we just follow the tape.
The commentary above is an excerpt from The Wagner Daily newsletter, which we have been publishing since 2002. Subscribers to the full version receive our exact entry and exit prices for swing trades of the top ETF and stock picks, access to our market timing model, and more. To get started today, sign up for your 30-day risk-free trial to our Wagner Daily trading newsletter or visit our trading blog to learn more about our proven technical trading strategy.
Cara on the Metalminers
Cara on the International Markets
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report