Tug of War

As expected, volatility was the name of the game last week. Fortunately Apples' weaker than expected numbers on Tuesday gave us the opportunity to realise our profits at our target price of 1330. The market is currently being pulled between the two conflicting forces of slower economic growth on one hand and the injection of new liquidity by the world's central bankers on the other. Thursday and Friday's rally has left the market still in an unresolved state to the downside, so for the forthcoming week we will re-enter our short position, recommending an immediate sale £6 per point first thing Monday, we will sell a further £4 per point at 1397 and a final £6 per point should the market rally up to 1413. A stop loss should be set at 1427. Our target price this week is 1334.

Viva La Espana ?

Despite the majority of economic data being poor, the market continued to focus on expectations of yet more QE. What was surprising was how the market held up after Chairman Bernanke's testimony, when no new money was added, just more vague promises. Could it be that the Federal Reserve now realises the   debt outstanding is now so large that the effects of printing more will be minimal, and so talking about it is one of the few tools left ?
This leaves the market in a continued vulnerable state, that was aptly demonstrated on Friday, when the Spanish region of Valencia made it known they were running out of money. Over this week-end we hear that another region, Catalonia, is also in trouble. We therefore expect weakness this week and our current short position still stands with a target price of 1330. We will of course be watching Apple's results on Tuesday, and with a raft of other technology companies reporting, it could be a volatile week.

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.