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.