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.