We Close The Week And The Move
Submitted by Nic Lenoir Of ICAP
Most of the reversal late in the day was short covering, as no one wants to be short over the weekend in case some resolution comes out of Europe. Trichet could not help saying there would be no special ECB meeting just to add a bit of fuel on the fire, but no short on her/his right mind was going to expose his P&L based on this very man's word.
The big question is how we open on Monday. We have a potential bullish hammer on the Nasdaq and on the S&P future. If we open Monday above today's open (no overlap of the bodies of the daily candles) it will be very tempting to get long equities. We are looking at this market from the short-side as we believe a major top could well be in, but a bullish open Monday would indicate the market will retrace up to 1,100/1,107 which will be massive resistance now. Following this view we believe we have completed today the first bearish impulse of the sell-off started in January and which would last if we are right well into the spring. We also saw our 5,389 target on the Dax, which served us well to indicate a possible extension lower past 1,051 on the S&P this morning. We are not bearish for the very short term.
Following our observation on the possible bullish hammer in equities, gold shaped a big reversal today. There is a slew of supports between 1,011 and 991 and we would have favored waiting to see those levels to recommend buying, but if we complete a morning star Monday there is a chance a medium term low is in place and this would open up the way for $100 of upside.
EURUSD has tested the channel support and held so it reinforces our other observations.
Bund almost saw the channel resistance on the daily chart at 124.64, and 10Y Treasury futures very very close to the big resistance at 119-03 at the highs today.
All main markets are therefore pointing to possible reversal in the short-term, fixed income (bund and Tnote) being the only 2 that did not "touch" resistance... but came aweful close to it! Still we will need stabilization of sovereign credit markets to see a rebound in risk appetite.
Good luck trading,