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.

Outside Edge

Last week we were stopped out once more, in this relenless rally. The market has now reached the extreme for this quarter and so we will try once more a short position. We will put a market order in at open (1550.5) to sell 5 contracts with a stop loss at 1566. Should the market fall we will take profits on 3 contracts at any price below 1520.

Return of Risk

A hung Italian parliament provided the impetus for a sharp drop last Monday, and provided us with our first profits this calendar year. This could well be the precursor for the return of volatility we have been looking for, after the last 2 months of consistently rising prices. It was only a Ben Bernanke speech on Tuesday that rallied the market, although tellingly, not to the previous recent peak of 1533. We will re-enter our short position this week with an order to sell 3 contracts at the market open of 1517.5, should the market rally past 1522, we will short a further 2 contracts and set a stop-loss at 1535 for all 5 contracts. Our target this week will be prices below 1483 where we take profits.

Stumble

As we suspected last week, the market finally succumbed to gravity with it's largest two day fall in nearly two months. Unfortunately we were stopped out, once more, the day previously. This has been an awful start to the year, the only positive we can take from this is that the maximum upward incline rate for the whole year should now been set and if so, we will be able to use this as our guide for main inflexion points for the rest of this calendar year. Friday's rally may well have provided us with a small opportunity for weakness into the end of the month. We will short a small position of 3 contracts at any price above 1520, with a stop-loss set at 1537. Should the market fall below 1490, we will take our profits.

Seventh Heaven

Oh to be an unabashed Bull in this problem free world ! Except it is not problem free, just money free if you happen to be a banker !! This free money has been trying to find a home and in the process pushed the market up 7 weeks in a row. However this rally is beginning to look tired in it's very linear ascent. Each of the last 3 weeks has shown a decreasing gain, even with a sudden surge in M & A activity. We hold a full short position to take advantage of any profit-taking here, maintaining a stop-loss at 1528 and a target price of 1482.

Another Week, Another Rally

Despite an overbought finish for the market in January, the first full week in February produced yet another gain, albeit all on the last day.We see strong resistance at 1520, that could even prove to be the high for the year. We will short a further 5 contracts on any move above this level, with a stop for all the position at 1528.

Insatiable

Despite running overbought for the best part of 3 weeks, last week the market continued reaching for the skies and in so doing stopped our position out once more. It may well be that no-one wanted to step in front of the January rally and we may now see more normal conditions re-assert themselves. We continue to think a major pull-back is due, but until we see a down or at least unchanged week, we can not risk further losses. Today (Monday) is seeing a correction and may portend a change in sentiment. Should the market rally back up to the 1514 level, we will sell 3 contracts with a tight stop of 1524.

Over, Over, Over-bought

Despite being over-bought for the last two weeks, this week the market also went over-bought on a monthly basis. Unfortunately, in so doing, we were stopped out @ 1498. At the risk of ignoring the market action, we still see a sharp set-back at any time and so are placing a sell order for 5 contracts at 1500 on the market open, we will then sell a further 3 if the market hits 1509. We will set a very tight stop @ 1512.5 for all the 8 contracts and run the position until 1450, where we will take profits.

Weight of Money

This week did indeed see volume pick-up as money flowed into the market, threatening a sharp break-out. We still view this event as unlikely at this particular time. The market is currently on trend for an approx 30%+ appreciation for the full calender year, even with the vast money printing, we find it hard to believe the market could break into a steeper rate of growth. However, we cannot ignore the market action that relentlessly presses up every day. Our position now amounts to 13 contracts on the short side. If the market does indeed rally above 1488 we will reduce by 5 contracts and then place a final stop at 1498. We are also   altering our target price to any price below 1440, where we will take full profits.

Earnings in Earnest

Despite the market's overbought situation, it managed a small gain that does nothing to change our view point from last week. Indeed, it allowed us to fill our advised sell order from last week. This upcoming week the earnings season comes into full effect, we expect a lacklustre picture with guarded guidance going forward. With the last two weeks gains we see profit-taking as a slow growth picture emerges. We are maintaining our down position, and will add a further 3 'sell' contracts if the market hits 1483. We will also adjust the stop-loss to 1487, but maintain our profit-taking level @ 1422-30.

Mind the Gap

Fiscal Cliff averted !! We think not. If the US were a family household they would have an income of $22,000, they would be spending annually $38,000 and have a credit card balance of $143,000. The measures put in place in this latest deal will pay off $100 of the debt ! Hardly averted !! The market rallied strongly on reports of a wall of money moving from the bond market into the stock market, a tad fanciful, as volume for this last week was the fifth lowest for the past year ! By rallying so strongly the market has left a 'gap' down to 1431 and also moved sharply into overbought territory. We will therefore put an order in to sell 7 contracts at the open @ 1463. Should the market rally above 1475, we will sell a further 3 contracts and then place a stop for all contracts @ 1485. The target price where we will take profits on all contracts is @1422-1430.