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FOREX, COMMODITIES, STOCKS OUTLOOK April 27th:Cliff's 2 Minute Drill



Stocks: Prior day: Asia, Europe up, US down. Today: Asia, Europe Down as latest round of new German demands raise further doubts about Greece avoiding default, in May or at some point thereafter, fears of new Chinese efforts to cool its economy pressed Shanghai shares

- US Bonds: Down-10 year benchmark rates up Monday from 3.78% to 3.82%, foreign demand has been below average recently

- FX: Overall bias against safety currencies [JPY, USD, CHF in order of
safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GB in order of risk
appetite appeal], but many exceptions

- Main events: TUES: AUD PPI q/q, GBP CBI Realized Sales, USD: CB Consumer Confidence, Bernanke Speaks, CAD: BoC Gov. Carney Speaks, WED: JPY: Retail Sales, AUD CPI q/q, NZD: NBNZ Business Confidence, RBNZ Rate Statement USD: FOMC Statement and Rate, THURS: GBP Nationwide HPI m/m USD: Unemployment, BoC Gov. Carney speaks, FRI: BoJ Press Confr. CHF: SNB Chairman Hildebrand Speaks, KOF Economic Barometer, CAD GDP m/m, USD: Advance GDP q/q

- Earnings: Monday: Canon (NYSE:CAJ), Humana (NYSE:HUM) Tuesday: 3M Company (NYSE:MMM), BP Plc (NYSE:BP), Celanese Corp (NYSE:CE), Corn Products Int. (CPO) CTS Corp (NYSE:CTS), Daimler AG (DAI), Enterprise Products Partners LP (NYSE:EPD), Ford Motor Corp (NYSE:F), Kyocera (NYSE:KYO), Newmont Mining (NYSE:NEM), Office Depot (NYSE:ODP), UAL Corp (UAUA), United Parcel (NYSE:UPS), US Steel (NYSE:X), US Airways (LCC), Valero Energy (NYSE:VLO) Wednesday: AOL Inc (NYSE:AOL), Baidu (NASDAQ:BIDU), Barrick Gold (NYSE:ABX), Corning (NYSE:GLW), Honda Motor Co. (NYSE:HMC), JetBlue Airways (NASDAQ:JBLU), Dow Chemical (DOW), Visa Inc (NYSE:V) Thursday: Bristol Myers Squibb (NYSE:BMY), ConocoPhillips (COH), Dentsply Int’l Inc. (NASDAQ:XRAY), Dominion Resources (NYSE:D), Eastman Kodak (EK), ExxonMobil Corp (NYSE:XOM), France Telecom (FTE), Metlife (NYSE:MET), Motorola (MOT), Seimans AG (SI), Weyerhauser (NYSE:WY) Friday: ITT Corp (NYSE:ITT)

Big Theme: Risk Appetite on again/off again: Long anticipated normal test of support after Friday’s big high volume drop is again ON the menu on pessimism from the latest round of German backtracking in the form of new demands in exchange for its participation in a Greek rescue. Asian markets have felt pressure from concerns about coming additional Chinese steps to cool its economy, which would slow global growth. Many believe China construction /housing bubble will burst within the next 3-18 months


US: Up Tight range trading ended with a weak finish and an overall modest loss.

US Bonds: Down- as yields on benchmark 10 year TBonds rise to 3.82 from 3.78. The at-record $11 billion 5-yr TIPS auction was met with a bid-to-cover ratio of 3.2, which is slightly above that of the prior auction, and an indirect bidder participation rate of 23.1%, which is below the rate of 47.8% from the prior average. Results from an auction of 2-year Notes will be released today at 1:00 PM EST.

European Bonds: There are intensified signs that the Greek sovereign crisis is spreading to peripheral European economies. Bond yields rising for Greece, Portugal, others.

Asia Stock Outlook: Down/mixed at the close Tuesday early GMT on EU contagion fears stemming from German comments suggesting that funding might not come to prevent Greek default. Nikkei up on Japanese earnings results.

European Stock Outlook: Down - European shares extended falls on Tuesday, led lower by banking stocks, with uncertainty lingering over financial aid for Greece as Germany demanded painful new austerity measures from Athens, casting doubt on whether Greece will avoid default in May or in the coming months after.

Commodities Outlook: In Monday and early Tuesday trade GMT: Down as new German conditions on Greek aid fanned new concerns about sovereign default and contagion.

Crude Oil Daily Outlook: Down- WTI crude oil price initially surged to 85.63 in early trading session but then reversed and ended the day at 84.20, down -1.08%. Price remains under pressure in Asian session today and remains near lows for the day in early European trade. On a bullish note, it remains in the lower parts of its rising channel on the daily charts. Future moves following risk appetite

Gold Daily Outlook: Down- Pulled back slightly yesterday, trading sideways today. Having hit a lower high last week, it may be setting up for a retest of support. That will probably depend on news regarding the EU debt crisis. See chart below for details.

FOREX Daily Outlook: In Monday and early Tuesday trade GMT: Bias to safer currencies as the #1 ranked safety currency JPY is the top gainer over the past 24 hours with the #2 ranked USD in second place, though there are exceptions

US Dollar Daily Outlook: Down vs. the JPY, up vs. the AUD, CHF, NZD, CAD, GBP, EUR. Consistent with its #2 safe haven ranking, the dollar gained against all except the #1 ranked Yen amid persistent concerns regarding the deployment of funds for Greece from the European Union and International Monetary Fund.

Euro Daily Outlook: Down vs. JPY, USD, NZD up vs. CHF, AUD, GBP, CAD. Euro pressured on round of German backtracking in the form of new German conditions attached to participation in Greece rescue, raising default and contagion risk, and sending Greek 2 year bond yields to 14.36%

Yen Daily Outlook: Up vs. all-the USD, NZD, CAD, CHF, GBP, EUR and AUD as risk appetite retreats in Europe on doubts about German commitment to Greece rescue, and that far larger aid packages are needed to keep all PIIGS out of default, and these may not be possible given the difficulties just with Greece.

British Pound Daily Outlook: Falling vs. all- the AUD, NZD, CAD, CHF, EUR, JPY, USD. House price data rose at the lowest rate in 3 months.

Australian Dollar Daily Outlook: Down vs. the CHF, JPY, NZD, CAD, USD, and EUR, up but losing almost all of Monday’s gains on Tuesday vs. the GBP,

New Zealand Dollar Daily Outlook: Up vs. all except the USD and JPY, as markets anticipate positive news on coming rate increases from the RBNZ on Wednesday

Canadian Dollar Daily Outlook: Down vs. the USD, JPY, EUR NZD, CHF, AUD, CHF pressed by falling risk appetite on EU debt concerns

Swiss Franc Daily Outlook: Down vs. the JPY, USD, EUR up vs. the AUD, GBP, CAD clearly benefitting from its #3 safe haven ranking

CONCLUSIONS & Big Picture: Trends continue to favor risk assets as stocks and other risk assets recovering this week after the S&P 500’s high volume drop Friday- however as noted in the Big Theme section above, correction risk is strong on both technical and fundamental bases. Technically: The S&P 500, our key risk asset barometer, like other major stocks, near 200 week moving average- key resistance. Near Term Bias remains bullish as trend remains in out Bollinger Bands Buy Zone (price is between the 1st and second standard deviation) though risk remains of the long awaited pullback, which should not be exceptional unless EU debt situation- the chief fundamental risk to the recovery- worsens significantly. A slowdown in China is also likely at some point, at least due to Chinese efforts to cool its economy, at worst from a collapse of Chinese real estate prices and construction demand that has fueled much of its growth.

Longer term, we are especially concerned about the latter part of 2010. In July, when 2 major events hit: Spain needs to sell about 30 bln euros in bonds AND a massive wave of US mortgage rate resets not seen since 2007 begins. The last time we saw this magnitude of rising mortgage rates markets stalled out and ultimately crashed. NB: Never fight the trend, no matter how irrational, as markets can stay irrational longer than you can stay solvent (Keynes). Therefore, as anyone who follows our trade recommendations knows, we stay long and always wait for some breach of key support/resistance as a signal to enter a short position as odds appear to be in our favor, and even then only when the likely target is more than 2x as far away as out stop loss (which we ALWAYS USE, RIGHT?) so that our winning trade profits exceed out losses by at least 2:1.

Near term the biggest market mover remains the latest news on the EU debt crisis. Coming additional attempts by Chinese authorities to cool their economy or a bursting of China’s construction and real estate bubble (anticipated by many in the coming 3-18 months) also a major threat.

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