Unresolved

Over the last couple of weeks, the market did indeed fall close to our target price of 1320. Unfortunately and in spite of weak Chinese GDP data, Friday saw a rally in the market that managed to turn the index positive for the week. We feel this has left the market in an unresolved state to the downside, however following Friday's rally we are adjusting our target price upwards to 1330 or below where we will take profits.

Economic Reality

Up until Friday this week, the market was showing the signs of a 'wait and see' stance as predicted, awaiting the month and quarter end.  Was Friday's blow out rise a demonstration of the market's vain hope that the promise of ever-lasting central bank liquidity will trump the economic fundamentals ? We are of the view that Friday was nothing more than an engineered bout of short-covering, as the large market players sat it out on the sidelines. This has NOT left the market, on a quarterly basis, oversold and so we expect medium term pressure still to be on the downside, as it dawns on everyone that a severely slowing world economy can not be solved by adding yet more debt.
This forthcoming week we advocate a maximum position of £12 per point on the short side. We recommend selling an initial 5 contracts above 1361, selling a further 3 above 1368 and finally selling a further 4 contracts above 1383. We will set a stop-loss at 1395, and a target of any price below 1320 where we will take profits. For actual trades visit : Portfolio
   

Economic Slowdown

Despite weak economic news all week, the market rallied on Monday and Tuesday, allowing us to fill the majority of our short position. Finally on Thursday the S&P 500 succumbed to selling pressure, allowing us to pass the 'quintuple' level on the portfolio.
Due to this weeks early strength, it has technically raised our short-term target and so we take profits as soon as possible on Monday, between 1325-1335. With this week being the final one of the month and quarter, we will take a flat watching stance awaiting the final print. Once we have this number we will then be able to formulate a view going forward.

Crank The Presses

Another week, another round of promises to print more money ! After an initial jump last Monday morning, the market then collapsed all in the same trading day that effectively gave the range for the whole week. As we predicted not a week to trade. We expect this week to be just as volatile, but with a down bias as whatever the Greek result is, it can only highlight Europe's problems further. The market could move sharply again Monday morning, so we propose placing a sell order for 3 contracts at Friday's close of 1342.5, we will then sell a further 3 contracts at approx 1357 and a final 3 if the market jumps above 1364. We suggest a stop loss of 1377. Should the market fall, after we have opened our position, we will be taking profits in the 1290 -1300 area.

Grexit ?

The market rallied strongly this week, shaking off the fears from last week, on expectations of more central bank stimulation. Although there was no specifics given at the various central bank meetings and testimonies, the market continued to stay surprisingly strong into the end of the week. This week-end a resolution to the Spanish banking crisis appears at hand and may provide a fillip for the markets first thing on Monday. However, the problem for the markets this week is the up-coming Greek elections which are essentially a referendum for continued membership of the EU. We can not see new money being committed to the market ahead of this key event and so are advocating a flat position. We will take profits early this week, in light of the bigger than expected gains and watch developments from the sidelines.

June Volatility

In terms of economic news Friday's unemployment figures probably did more to shatter the illusion of economic growth than any others. Coupled with the dire European situation, we feel this will be the catalyst for the next round of Quantative Easing, possibly as early as this week from the Bank of England. The US will very probably follow, citing their dual mandate responsibilities, but in reality due to political pressure before this years presidential election. The severity of Friday's drop, pushed the market once again into oversold territory to create a buying opportunity. Any price below 1287 is acceptable with a small position, adding more at or below 1275, with a last entry point at 1257. A maximum position of 6 contracts is recommended, running a stop-loss in the 1240 area. For actual trades view the portfolio blog.

May Performance Statistics

S&P500 fund Monthly gain = 89.6%


S&P500 fund Year to date gain = 175%
S&P500        Year to date gain = 1.6%


To view trade breakdown of prices and dates, visit the trading blog at Speculation Strategy Portfolio