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The Week Ahead From Nic Lenoir

Tyler Durden's picture





 

Nic Lenoir of ICAP

The data calendar is very light this week. The most of important piece
of data is the Empire manufacturing survey which will or will not
confirm recent uptick in industrial production. Claims will be of note
as well after last week's uptick. We are still far from seeing a trend
confirming the job market is on stable footing. If this continues we
will end up with yet another disappointing NFP headline and lower
unemployment rate as the participation rate in the active population
keeps dropping.

Most of the focus will be on the international scene: food riots in Algeria and Tunisia where it led to the ousting of the president are not without reminding me of those observed in 2008. As I was in France over the weekend I did get much closer to the situation with Tunisian protesters creating havoc in Paris and gruesome scenes of violence. The level of public anger is scary and there is little doubt that this is something a lot of political leaders around the world should watch and reflect upon: it could happen to any of them faster than anyone thinks.

In 2008 like now inflation/peak oil was all the rage and the concern of financial observers. History showed us however that inflation driven by a weak USD is not sustainable in the face of a weak economic tissue. The USD is at levels that are not sustainable from an economic standpoint here. Interestingly after taking profit at 80.80 on our DXY longs the market tested Friday and this morning again the key support/buy level 78.80. As long as we do not have a daily close below that support longs initiated in the 78.80/79.00 should be held as I believe a bullish break-out would be the ultimate pain trade which Murphy's law tells us always materializes. Similarly watch for gold trading below 1,350. For now the precious metal is stuck on the 1,352/1,397 range, and a breakout either way should indicate the direction of the next big move.


Bunds have underperformed US treasuries as we expected and appear to be moving towards our 121.45 target. A break below 123.76 will confirm further acceleration. 10Y US treasury futures appear to still be shaping a bear flag. As long as 121-25 holds as resistance we keep a bearish preference.

2Y Swap spreads are getting close to support. If DXY holds support and since EURUSD has rejected the 38.2% retracement so far one cannot exclude that the latest round of European bail-out talks will spur anxiety in credit markets. So far Europe is offering nothing new and rolling out the same lame lipstick on a PIIG strategy for every country.

Little new to add on my end on the subject other than the problem is structural and will not be solved by the EFSF or any other joke of the sort. Entering swap spreads in the high teens would make sense here having played that trade successfully a few times already. With EDM1 approaching 99.60 put structures such as 99.62/99.37 put spreads are starting to be attractive again as well.

Watch VIX here. We had succesfully recommanded 17/16 January put spreads late in December, but here we are flirting dangerously with the lower Bollinger bands. This kind of excess usually leads to sharp reversals.

We would close out bearish structures and look for upside here.

Yesterday was a holiday but the Nasdaq posted a bearish key day reversal on the announcement of another medical leave for Steve Jobs. We have seemingly a 5-count bullish pattern completed since the lows in July also so a pull-back could be quite sizeable. Keep in mind that Apple represents 21% of the Nasdaq.

Good luck trading,

Nic

 


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Tue, 01/18/2011 - 09:30 | Link to Comment Orly
Orly's picture

Thanks, Nic.

:D

Tue, 01/18/2011 - 09:34 | Link to Comment Pants McPants
Pants McPants's picture

I'm a n00b when it comes to NASDAQ & stocks in general...but has a single stock ever comprised 21% of any index?

Tue, 01/18/2011 - 10:35 | Link to Comment A Man without Q...
A Man without Qualities's picture

I can't find the exact detail, but I think at one point, Nokia was about 40% of the main Helsinki index

Tue, 01/18/2011 - 09:34 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Cogent wrap up. Weak economic tissue. That was funny.

I'd be Risk-off, closed-out in this environment. Very much calm before stormy feeling.

12,014 DOW, then DOWn. Or so I was shown at any rate.

Could happen in a week or a month.

ORI

http://aadivaahan.wordpress.com/2010/10/18/an-opportunity-and-a-golden-w...

Tue, 01/18/2011 - 09:36 | Link to Comment anony
anony's picture

Data?? Good grief, man, Data doesn't matter to anyone but those lame fundamentalists.

Just, y'know', BTFD!

Tue, 01/18/2011 - 09:40 | Link to Comment plocequ1
plocequ1's picture

You have to love the charts. If they were animated, They would probaly go well with Dark side of the moon.

Tue, 01/18/2011 - 12:02 | Link to Comment Orly
Orly's picture

rememb'ring games

and daisy chains

and laughs

got to keep the lunas on the path

Tue, 01/18/2011 - 09:43 | Link to Comment virgilcaine
virgilcaine's picture

just keep moving the channel and the letters. ew adjusts perfectly to any scenario.

Tue, 01/18/2011 - 09:49 | Link to Comment JW n FL
JW n FL's picture

++++++++++++

Great job Nic, I would normally just rate 5... but I am always thankful for your posting(s).

 

Tue, 01/18/2011 - 09:59 | Link to Comment spartan117
spartan117's picture

Well, looks like that bullish call on the DXY got blown out.  Again.

Tue, 01/18/2011 - 12:14 | Link to Comment Ferg .
Ferg .'s picture

99er did you get short at 1.3450 today ? Very solid resistance/support level lately .

Tue, 01/18/2011 - 12:17 | Link to Comment HarryWanger
HarryWanger's picture

We have seemingly a 5-count bullish pattern completed since the lows in July also so a pull-back could be quite sizeable. Keep in mind that Apple represents 21% of the Nasdaq.

Nic, Nic, Nic...as I write the Naz is down 1 point. How many times have you called for a "pull-back that could be quite sizeable" in the past few months only to have it blown away by rally after rally?

Tue, 01/18/2011 - 16:19 | Link to Comment Tense INDIAN
Tense INDIAN's picture

GEOMETRY and MARKETS.....

 

the indian markets have been doing a BIG FUCKING EXPANDING DIAGONAL ....in the fifth wave..........and what GEOMETRY...who said that MATHEMATICS cant predict the markets.....its all FIBONACCI,.....

the amplitude of CD which ended yesterday is EXACTLY 1.62 times AB.....then again TIMEWISE ,if we start from  A wave and consider the TOP of A(end of A) to be 1 unit , the end of B is exactly 1.62 distance from the start of A.....this repeated for CD which ended yesterday......The MArkets after touching EXACTLY 1.62 times AB, D ended...a DOJI WAS FORMED...AND TODAY WE GOT gREEN DAY.......COMPLETING WHAT IS A morning Star........i think we will be UP from here onwards for 3 weeks.....now if we take last years high 6338 in NIFTY..to be the ultimate TOP( this was also the TOP in 2007 DEC after which NIFTY began huge fall starting new year 2008 just like this year)....then by these calculations and trend lines, we will reach the top again (DOUBLE TOP 6338) completing E ...this should happen by FEB 10-11-12, ....and then comes the final Downfall...a huge and DOOZIE it should..... again by using these calculations FALL should last  2 weeks starting from FEB 11 the NIFTY in a single stretch .....

 

Note :: Feb 10-12  is 144 days from sep 21 solstice

Tue, 01/18/2011 - 23:31 | Link to Comment jdrose1985
jdrose1985's picture

Feb 10-12 sounds like a Legatus date

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