Opening Note:
Yesterday in my opening note I stated that the sectors to watch and trade were the metals and currencies. The market threw me a little loop in that the metals were bad, yet after Obama spoke the Euro rallied almost 100 ticks to make it back to a small up day. Meanwhile the energies that I believed were in a consolidation period broke hard and equities rolled over for a second straight day. I believe that this increase in volatility and uncertainty of the leading and lagging sectors is a sign that the market is changing directions but that as much as I am uncertain of the best way to play it, the market is figuring out which way and who is leading.
Buys to Watch:
Dollar Index- I accidently left this one out yesterday. The market clearly has two closes outside of the descending wedge consolidation. However, high volatility yesterday only yielded a close on the open and as of today is sitting at the same price. The two day rally out of the consolidation was large so the market has found temporary equilibrium but this is obviously a buy and not a sell for right now.
Sugar- The market continued to display volatility yesterday but to its detriment slightly in the end. This is the best looking physical commodity chart out there so it could be a nice bet hedge against shorting others. A slight pullback this morning but I would wait for the single prints in the market profile between 2825 and 2850 to take another shot at buying it as it failed to pullback to these levels the last two days.
Sells to Watch:
Euro- The worst looking individual chart going through a brief consolidation period after a significant breakout. Still no significant pullbacks but if you are concerned with selling it you can pair it with the yen for some protection. The Euro/Yen chart is near the bottom of its range over the last nine months as it has sat in a range for most of the market rally. A breakout of this chart to the downside is more probable now that many of the previously strong markets have experienced topping action.
Silver- I wrote about the daily gold head and shoulders yesterday but looking at weekly silver chart knowing that the gold has been set off already shows another head and shoulders that I believe looks more powerful. The neckline does not slope up as much and a weekly close below 1696 today would project to the low $14 range. I really like this one!
Put on the Radar:
Energies- It appears a lot of the long covering in the heating oil in relation to the other energies could be over but the crude oil looked to be in consolidation in front of the thursday stocks report that had been pushed back a day. This is clearly a sell but I still like the metals better.
Notes:
At different times over the last three weeks I have had the Yen and Bonds on my radar to buy list. The two charts look similar but bonds clearly look like a better buy. Caution currently as bonds approach a pullback high from Dec. 18th.
The Euro chart on it's own looks the worst of all of the currencies, yet over the last 3 days the Aussie and Canadian have proportionally performed worse. I believe this can be attributed to the fact that both the Aussie and Canuck looked on the precipice of breaking out of their tops so there has been more long covering in the initial stages of the break.
If the stock indexes close poorly today heading into the weekend I would not recommend being long anything over the off days.
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