Submitted by Nic Lenoir of ICAP
The day started with risk being sold, as Greece's bonds were under pressure, and so were european equities taking US markets with them. However, positive news on AAPL front and the Federal Reserve announcement turned the tables around. We had highlighted that we expected a rebound in S&P between 1,105 and 1,108, and it is worth noting that even with the turmoil this AM we barely made new lows, clearly showing there is a decent amount of bullish divergence. We would wait for the rebound to reach 1,108 to consider selling again, especially since we came close to channel support as well as highlighted on the daily chart.
With risk under pressure, the USD was strong and commodities were weak. Copper seems to have broken the bullish channel in place since March 2009. However, Gold is coming relatively close to support here, and EURUSD is showing some bullish divergence. We also have met the target at 1.4008, so we would expect a rebound to test the 50DMA which was our sell trigger back at 1.4870. We would trim positions or close shorts here waiting for the bounce to reinitiate. There were conflicted reports of stops and bids below 1.40, but sofar the market has held. It will be interesting to see how Copper evolves given that it paints a more bearish picture than Gold and EURUSD.
Finally a word on rates, our resistance in 10Y futures at 118-10 has been respected and we would expect to at least retest 117 on the downside here. We saw some flow in mid-curve Eurodollar options as traders took positions to benefit from a sell-off in Fixed Income.
Good luck trading,