Air Pocket

Last week the market hit a significant air pocket. Our analysis has a year maximum of between 1670 and 1700 ( with a 'shadow' of 1730 ). The recent top could well signal a reversal in the coming months. We would like to see a re-test of the 1680 level without a significant break above 1690, to confirm such a scenario. We will go short above 1680 with 3 contracts, setting a stop-loss at 1693.

Blow Off

Friday's unemployment report was the excuse for a gap up and strong rally to make further all time records. We were stopped out to limit some of the damage, but overall the first third of the year is one we would rather forget ! We are concerned that the market may now begin a hyper-inflation run, but are prepared to risk one more short, until further confirmation has been shown. We will short 5 contracts at the open of 1613, with a stop of 1623 and a target of 1575 where we will take profits.

Lower Highs

The markets dramatic rise this week was in complete contradiction to last weeks falls, and possibly had something to do with an RBS report, showing central bankers were planning to hold a greater percentage of  equities as part of their asset allocation mix. However, despite the rally, the market made lower highs on both the intra-week and closing weekly prices than it's recent highs. A signal of a medium term peak in the market. We will short a further 2 contracts at the open, again setting a stop-loss for all 8 contracts at 1601 and a target price of 1535 where will take profits on all 8 contracts and buy 2 contracts on a closing price below 1535.

Finally

With the onset of earnings season and consistent misses of top line growth, the market finally swooned from its 13th overbought week. A salutary lesson in just how long 'free' manufactured money can trump real economics. The world is quite obviously contracting economically or de-leveraging  from it's grossly over indebted state. This will be a long drawn out process should governments continually interfere, although we could now have reached the 'pushing-on-a-piece-of-string' moment. Such was the dramatic fall last Monday, our target for the week was hit. Should the market rally this week above 1568 we will re-enter our short position up to a total of 6 contracts with a stop of 1601. Should the market fall below 1530 we will reverse our remaining 3 contracts and add a 4th, with a stop loss of 1501. In a fragile and 'fast' market such as this, it often pays to wait for the day closing price before trades are made.

Earnings on Deck

We were stopped out again once more in this frustrating 'melt-up'. The market is patently ignoring all bad news as the huge injections from the Fed find a home in stocks. However the last quarter ended significantly overbought and due for pull-back. With this in mind, we shall sell 7 contracts at the market open this week at 1586.8, and a further 2 at 1593.5, setting a stop-loss of 1601. We will take profits on 4 contracts should the market below 1555.

Cyprus Trust

Whatever happens in Cyprus this week-end, it can not end well. There is all but guaranteed a bank run this week, which will erode further the confidence in all 'shadowy' European financial institutions. As usual markets seem to find more and more inventive ways to explain away bad news, but the piper will have to be paid at some point. We our holding our down position for what may prove to be a pivotal and final week of the quarter.

Extremes

We believe that any close this quarter above a level of 1530, will presage a major pull-back over the 2nd quarter in the region of at least 10%. We managed to avoid being stopped out once more this week, albeit by only 1.5 pts. With this in mind we will adjust our stop-loss to 1569, and set our target to any price below 1530, where we will take profits on 3 contracts.