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OUTLOOK February 22nd : Cliff's Two Minute Drill


Stocks: Prior Day: Asia down, Europe, USA up Today: Asia up, Europe flat, OVERSOLD BOUNCE FED BY GREEK BAILOUT HOPES, Many Daily Charts near or penetrating Strong Support/Resistance as risk assets reverse higher.

- FX: bias to risk currencies [JPY, USD, CHF in order of safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite appeal], as risk assets' oversold bounce (as the S&P 500 has pulled away from its lower Bollinger Band) stalls

- Main events: Mon: Nothing: TUES: NZD: Inflation Expectations q/q, EUR: German If Business Climate, GBP: Inflation Report Hearings USD: CB Consumer Confidence: WED: EUR: Industrial New Orders m/m, USD Fed Chairman Bernanke Testifies**, New Home Sales, Treasury Sec. Either Speaks, THURS: AUD Private Capital Expenditure q/q, NZD: NBNZ Business Confidence….

- Big Theme: Awaiting Bernanke Testimony Thursday, EU Debt Crisis Updates, rumors of EU rescue for Greece


US: The Fed's decision to hike the discount rate after Thursday's close initially fooled markets into thinking this was an actual interest rate increase (that would be a Fed Funds rate increase), thus markets dumped stocks and other risk assets in pursuit of the dollar. The move reversed once the mostly irrelevant nature of the discount rate, the dollar drifted lower and stocks managed to recover and finish the week with their fourth straight gain

Asia: Up TOKYO, Feb 22 (Reuters) - Japan's Nikkei average rose 2.7 percent to its highest close in three weeks on Monday, led by exporters such as Canon Inc after investors on Wall Street took the Federal Reserve's discount rate hike as a sign the financial system is healing. Hong Kong, most of Asia rebounds, Shanghai flat

European Stock Outlook: Down LONDON, Feb 22 (Reuters) - European shares fell on Monday, snapping five consecutive days of gains, led by drug makers, on profit taking, Greece concerns.

Commodities Outlook: Up Friday and into early Monday on general risk asset rally

Crude Oil Daily Outlook: Up. prices rose above $80 a barrel on Monday, extending the previous session's gains, supported by a weaker U.S. dollar, refinery strikes in France and escalating tensions about Iran's nuclear programme. The Energy Department's Energy Information Administration is scheduled to announce its supply report later Thursday.

Gold Daily Outlook: SINGAPORE, Feb 22 (Reuters) - Gold jumped to its highest in a month on Monday as the U.S. dollar took a breather from a recent rally and fund buying picked up after the euro gained on talk about a speedy bailout for debt-ridden Greece.

"It looks like there's quite a solid support at $1,100 for the time being. We are waiting for Bernanke's speech this week and some data, and will then see what happens," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

FOREX Daily Outlook: Bias to risk FX as part of overall risk asset rally for the past 2 weeks, as even the Euro rises on reports of EU Bailout for Greece.

US Dollar Daily Outlook: Down Friday as part of risk asset rally, clarification that there really was no interest rate increase, low inflation data that relieves pressure on Fed to raise the Fed Funds rate, further reduces rate increase expectations steady/gaining early Monday on reaction bounce. Note, though, reports of EU bailout for Greece could lift the Euro, which would pressure the US Dollar. Daily charts indicate a bullish outlook for the dollar with the 55-day moving average pushing above the 200-day moving average, indicating a "golden cross" has been established.

Euro Daily Outlook: Friday into Early Monday: Up vs. USD, GBP, JPY, steady vs. CHF, AUD as it benefits from risk asset rally, reports of German plans for EU Greece bailout.

Yen Daily Outlook: Down Friday on risk asset rally, steady/gaining early Monday on reaction bounce.

British Pound Daily Outlook: Friday down vs. the USD, AUD, EUR, Up vs. the JPY, after disappointing retail sales data.

Steady early Monday. The pound was up 0.2 percent at $1.5494 but remained under pressure, hovering just above a nine-month low of $1.5345 struck on Friday after a surprisingly big fall in British retail sales.

Australian Dollar Daily Outlook: Friday: Up or steady vs. all fx on risk asset rally, early Monday steady to slightly down on slight reaction rebound lowerThe Aussie was strong at a 25-year high against the pound with the Australian dollar boosted at margin by talk of more rate hikes in coming months.

New Zealand Dollar Daily Outlook Friday: Up or steady vs. all fx on risk asset rally, early Monday steady to slightly down on slight reaction rebound lower

Canadian Dollar Daily Outlook: Up vs. the USD Friday along with the general rally in risk assets, aided by oil's rise. Holding gains, flat into early Monday.

Swiss Franc Daily Outlook: Up Friday w/ overall risk / anti-USD move, steady early Monday. Forms "Golden Cross as 50 day SMA crosses above 200 day SMA, suggesting rally has legs, more upside ahead.

CONCLUSIONS & Big Picture: Reported plans for EU Greek bailout may give the Euro, risk assets rally a further boost in the near term, though EU debt mess and improving relative economic fundamentals of the US vs. the EU and UK suggest the dollar rally (and pressure on its currency counterparts and commodities) is a longer term trend.

Note: Many Daily Charts near or penetrating Strong Support/Resistance as risk assets reverse higher

As always, watch the S&P 500 to gauge overall risk appetite and the EURUSD to measure USD and risk currency strength. Light Schedule of news events and bank holidays make for very light trade early this week, so much depends on how well markets are convince that PIIGS block debt woes are approaching resolution. Any disappointment or doubts on Greece, or concerns about the other PIIGS block members, are likely to send risk assets back down. Concrete steps could send the Euro and other risk assets into a strong oversold reaction bounce at least, though its durability would depend on how convinced markets are that all the PIIGS will be kept from default.

Short Term Risk Asset Bias Down/Neutral. With little scheduled risk events this week and continued Greek bailout rumors there is a good chance for either consolidation or at least short term oversold bounce in risk assets. Once the S&P 500 starts to pull away from its lower Bollinger Band, it tends to rise to the middle—upper range of these bands, between 1112 -1140. It's almost there already, and has crossed its 50 day SMA. Many believe the risk factors driving risk assets down will remain in place to pressure markets for much of 2010, and that a double dip/'W' shaped recovery cannot be ruled out for mid 2010, though most appear to believe we are bottoming. Much depends on whether market jitters on EU debt woes can be eased. See below for specifics on the S&P 500, and other charts we believe present trading opportunities themselves or are representatives of similar opportunities in stock indexes/risk appetite, commodities, and forex.

For trades we try to select only those trades with resistance/ profit targets that are 2-3 times farther away from the entry point than the stop loss, for a 2:1 or 3:1 reward/risk ratio.


DISCLOSURE: No positions