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Futures Trade Desk- Push-Me Pull-You Market Outlooks

Client Note

Push-Me Pull-You Market Outlooks

Market chatter will focus on European debt issues (again) due to an increase (again) in the cost of insuring inter-bank debt. Certain Euro-zone 10-year bonds are now yielding over 7% (again) which reflects an impossible task in achieving economic austerity as most lending rates are set around the prevailing 10-year yield. 

As seen in recently, the allure of a high yield comes with the risk of the bond value being chopped when the Government is unable to meet its obligations. Holders of Greek and now Italian bonds will be expected to lose upwards of 70% of their initial value whenever austerity measures are agreed. 

It would seem that Spanish and French bond markets are in line to receive the same treatment, which is good enough reason for risk markets (equities, commodities, EUR) to be sold, or at best for upside moves to be on light volume and unable to sustain themselves. 

Once the bond vigilantly momentum has completed its work on the distressed Euro-zone interest rate markets, the focus of attention will turn to US municipal bonds and Treasury notes. Until then, the US dollar is viewed as a safe haven when equity markets are being sold, however contrarian that may seem. The USD role as the global Reserve currency allows it maintain a small slice of dignity in its retirement years. 


Near-term Outlook: 

Commodity Update-
Gold: Sup 1550 Res 1622 Neutral 1586. Silver: Sup 28.45 Res 30.40 Neutral 29.40. Oil: Sup 91.55 Res 96.00 Neutral 93.80. 

Equity/USD Update-
S&P500: Sup 1194 Res 1238 Neutral 1215. Dax: Sup 5580 Res 5870 Neutral 5725. DXY: Sup 79.75 Res 80.65. Neutral 80.20.

FX Update-
EUR: Sup 1.2940 Res 1.3120 Neutral 1.3030. GBP: Sup 1.5445 Res 1.5590 Neutral 1.5510. JPY: Sup 77.45 Res 78.15 Neutral 77.80.

The move into fiscal year-end will most likely be met with upside resistance, near-term downside support, and each session working in the shadow of a potential flash-crash. Not to be dramatic, and hopefully it will not transpose itself, but the pattern of trade over the last three years has left participants with the reality that in current market conditions anything can happen. 

Tenured traders may be switching attention to one and four-hour chart trends looking to then trade in-line with near-term momentum. Buying the low or selling the high of the previous session, and banking a high percentage of exposure before the next session completes will be a key factor in trade this week.