Safe Trading Blog

Yen has tested a major resistance last week @ 100 for $XJY… It is nothing else that a 13y record: good shot! and for those who follow our blog, it is not a surprise as “carry-trade” is part of this big party that finance has now to pay back.

 This is obvisouly not good for stocks, especially for NIKKEI…

[M. Fiorentino] RUBRIQUE : Edito du jour
17/03/2008 07:24

La semaine qui s’ouvre va être riche en événements , est ce que c’est la semaine de tous les dangers
C’est une semaine clé. La semaine du “ça passe ou ça casse”. La reprise à la casse de Bears Stearns juste avant l’ouverture des marchés n’a pas réussi à rassurer les marchés qui en Asie sont au plus bas. C’est cette semaine que va se jouer le sort des marchés pour les mois à venir. D’abord parce qu’elle sera courte du fait du week end de Paques qui commence jeudi soir à Londres et à New York. Et qui dit week end prolongé, dit liquidation de positions. Or, toutes les positions aujourd’hui ou presque sont à la baisse. Tous les investisseurs et tous les stratéges, même les plus optimistes, ont capitulé. C’est généralement à ce moment que les marchés rebondissent brutalement. Un rebond qui pourra se produire demain ou mercredi et qui va prendre les marchés par surprise
Qu’est ce qui pourra provoquer ce rebond ?
La FED pour commencer qui va devoir baisser ses taux demain, peut être de 0.75%. Mais pas seulement. Contrairement aux apparences, la situation est en train de se stabiliser. Grâce à une gestion impeccable de la situation par les banques centrales en général et la FED en particulier. Les banques centrales sont sur le pont et agissent avec une rapidité déconcertante. Injection de liquidité, solutions de places pour les établissements en difficulté et probables interventions à venir sur le marché des changes. Elles n’ont jamais aussi bien manoeuvré en temps de crise
On parle pourtant d’autres difficultés de banques, le nom de Lehman a été cité.
C’est normal. On parle de Lehman. On parle d’UBS. On parle de Citigroup. Tout peut arriver mais ce qu’on sait c’est que même quand le pire se produit, les solutions sont immédiates. Je crois vraiment que nous assistons à la dernière vague de purges avant une hausse des marchés. Une hausse purement technique pas un renversement de tendance mais une hausse qui peut ramener le CAC au dessus de 5000

FED has lent 200 billions Treasuries to banks for 28 days… In fact, it is not at all a liquidity injection as it seems at first glance and often said! More a kind of exchange of high quality US Treasuries versus low quality debts from financial intitutions, with the hope that it may help their balance?!

This said, the release of the FED indicates that it is 200 bUSD over 900 bUSD in its balance: 200 bUSD is not nothing! Yes, it is a rescue plan but a quite dangerous one… What is the risk? the FED is just taking the credit risk in its own book… Can you imagine? A central bank with a credit risk. It means that the sovereign debt of the US is likely to be downgraded if the crisis is not contained rapidly. Then, US bonds would be less attractive etc. (you know this kind of scenario).

Only those written here: http://www.safetradingblog.com/stock-code-trading/todays-action.html

We book all profits now (+4%) as XLF (our strength trigger) is turning down!

We keep the short on CAT (from 76.3$) which seems to be reasonnable for today… out @ 75.8$…

We are preparing some shorts on commodity ETFs -see previous post- (but just at the analysis analysis level at this moment)….

To hedge our longs on financials, materials from last days, we get ready to initiate a short on CAT @ 76.5$ on a dble top (intraday technical):

Clearly in overbought territory, start considering shorts on the 2 following ETFs… We also expect some rotations between sectors from recent outperformers to laggards… of course, only on a short term perspective. Analysis still on going, no action yet…

Nothing more to say compared to yesterday… We follow what the market gives: since a few days, we have been ready to enter long positions on a positive signs from the financial sectors… We keep on, till we reach the SMA50 on SPX as a first target. Also, we are checking with care also the ratio XLF:SPX to identify the strength of the move… As you can observe now, we are facing a strong newborn upside! Keep on the trades of yesterday… We expect a 4 to 5% return within the next 2 days…

Remember: till proven otherwise, the global trend is still down & the target is the blue line below…

CHICAGO, March 11 (Reuters) - Option investors on Tuesday appeared to be betting on a decline in the price of oil in an exchange traded fund linked to the commodity even as U.S. crude oil prices surged to another record.

On the New York Mercantile Exchange, April crude CLJ8 settled at a record $108.75 a barrel, up 0.79 percent, trading from $106.61 to a new intraday high of $109.72, exceeding Monday’s $108.21 peak.

NYMEX crude has settled at a record above $100 eight times since Feb. 19 and option traders may be positioning protectively for a slowdown in this momentum reflected by the spike in put volume in the United States Oil Fund USO.A, a fund designed to track the price of crude oil.

According to option analytics firm Trade Alert, a total of 52,000 puts compared with 9,138 calls changed hands in the ETF, three times the normal volume.

“There is weekly inventory data due out tomorrow, which could affect oil prices,” said independent options trader Frederic Ruffy. “Some players might be looking to protect profits by purchasing puts on the USO ahead of the news.”

In a previous post on 7/03

http://www.safetradingblog.com/stock-code-trading/201.html

we were writing:

“Indeed, a bounce on the XLF would directly impact the market on a short term basis (at least): XLF above 25 would be a good trigger (but not today)!”

Check the XLF graph today: that’s not so bad… (from the bull point). Be careful, the trend is still down and we have to keep the bear thinking, till proven otherwise… Which means sell the few days rallies. In practice, we are doing a bit differently with a long/short porfolio, see http://www.safetradingblog.com/stock-code-trading/todays-action.html

More later… Note also a key element today, usd rallied against the yen! We had almost forgotten that it was a possible move :))

but commodity markets has kept his road on the upside…