Jonathan A Parker's  Instablog

Jonathan A Parker
Send Message
  • Under The HEDGE - April 11, 2012 0 comments
    Apr 11, 2012 8:21 AM

    Uncertainty is beginning to saturate the market as people are pulling out of equities and into safer investments. The catalyst which has sparked this moderate reversal is mainly due in part by the less than stellar jobs number which came in at a little more than half of the analyst expectations last Friday. Spain is also getting some attention with their financial issues. With such a strong and rather quick advance in the major indexes so far this year will keep investors cautious as the "too much, too soon" mentality begins to sink in. In this issue of Under the hEDGE, we will list some proactive trades to profit from this impending downturn and maintain proper risk management if our predictions are wrong and the market continues forward on track.

    Commodity Chatter

    Commodities as a whole have been hit hard this week and might continue this run as the markets retrace a bit. There will always however be a couple diamonds in the rough, or should I say, gold. Gold is looking to be an attractive buy this week at its current level of 1657 with an imposed downside risk of 37 to 1620 with an upside potential of about 100 before any reconciliation at previous resistance levels. Gold has tumbled over previous weeks because the Fed hinted at not advancing QE3. Now, because of overall market retracements, gold is a looking to be a safe place to store your money and there are always hopes of more easing talks when things look sour. Nat gas has defied most logical fallacies and continues towards its 10 year low, and key support level of $2.00. We believe that it will maintain its historical footing and not sink any lower than that. To us, it is clear that the downside is protected while the upside has much more headroom to grow. Oil has trenched its way close to $100 and see a buy at the $100.50 mark. Despite the resolves and media disconnect from Iran, we feel that the oil cartel, OPEC will begin reducing production if prices decline further.

    Fed Fun in Fixed Finance

    Last week Dr.Bernanke put the hush hush on QE3, but has the last nail really been hammered into the coffin? Speculation is no and that he has basically pre-determined that he will, the unknown factor is when and what he believes will be the right time to unleash that weapon. Continuing from last week, we see that the yield curve between the US10YR and the US2YR is flattening which makes shorting the 10 and buying the 2 an attractive trade.

    Currency Corner

    Foreign Exchange has been modestly impacted throughout on the notes of missed job growth from the US, China's trade surplus in March and the seemingly slow decline in industrial metals, further suppressing the AUD to its lowest level in 12 weeks due to metal exports making up majority of their GDP. The Swiss USDCHF currency pair is showing a bit of strength as gold perks up on the lingering hopes of more cash injection through monetary easing policy. To us, the EURCHF is a buy at 1.2015 because of the imposed 1.20 floor set by the Swiss bank limits the downside while the upside, albeit minimal is targeted. The AUDUSD is a hold at the moment with the possibility of it catching a bounce at the support of 1.03. If we see positive numbers in earnings, we expect possible USD declines, if numbers are bad, we expect strength in the USD.

    Equities Evolution

    This coming week sparks the beginning of the much awaited and rather exciting, quarter 2 earnings reports. These numbers will either support the elevated prices with a truly outstanding comeback, or bring valuation to reality and knock things back a bit. We believe in the latter. Because of the anticipation of misses and a downtrend of unknown proportions, it is time to play defensively. Our defensive strategy is to buy equities in sectors which will often outperform in a down market, particularly, technology, retail and healthcare. Healthcare is a high cash dividend play that shines in a down market, technology is a rampant growth story which will likely be minimally affected by any wide-area declines and retail is a strong staple that can hold its footings in a bear market. HPQ is still a buy in our book and a double bounce at $23 supports it from continued declines. Bottom line though, we are sitting patiently until the right trade becomes apparent.

    Action Alley

    Commodities

     

     

    WTI Crude

    101.21

    No position

    Brent Oil

    119.90

    No position

    Nat. Gas

    2.032

    Nat Gas is a buy at 2.00 to 2.10

    Copper

    365.00

    No Position

    Gold

    1660.90

    We are long term long in GLD to 2200

    Silver

    31.70

    We are long term long SLV to 42

    Wheat

    650.25

    No position

    Corn

    634.75

    No position

    Currencies

     

     

    EUR/USD

    1.3074

    No position

    AUD/USD

    1.0253

    No position

    USD/JPY

    80.70

    Short JPY/USD to a target of 78

    EUR/CHF

    1.2014

    Floor is 1.20, So long EUR versus Swiss

    USD/CAD

    1.0037

    No Position

    USD/CHF

    .9189

    No Position

    Fixed Income

     

     

    3 Month

    .07%

    No Position

    2 Year

    .29%

    SELL 30's and 10's and Buy 2's

    10 Year

    1.98%

    SELL 30's and 10's and Buy 2's

    30 Year

    3.13%

    SELL 30's and 10's and Buy 2's

    Germany

    1.64%

    No Position

    Spain

    5.94%

    No Position

    Italy

    5.68%

    BUY Italian Bonds and Sell French Bonds

    France

    2.98%

    No position

    Greece

    21.04%

    No position

    We wish you a great trading week and we always value any thoughts of future updates. Please remember to only trade what you can afford to lose, and always think different.

Back To Jonathan A Parker's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • Looking at AA this week and knowing we will earn money for our partners. Check out our latest Instablog about how we hedged this week.
    Oct 9, 2011
  • Scooped CNBC by a week- HPQ is a STRONG BUY! http://bit.ly/obnYsn/. Jonathan Parker, MBAIF.OB Fund Manager Atlanta Capital Management
    Sep 16, 2011
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.