S&P 500 (Dec 12) INTRADAY

S and P
Review Having pared most of last week’s gains in Friday’s session, the S&P 500 remained range-bound in yesterday’s trade, finishing the session with a gain of 0.4%. The latter part of yesterday’s trade saw the S&P challenge the long-term trendline support to the downside just to prompt strong defence of the lows ahead of the rally into the close preceding the presidential debate in the US. Although we were correct in aiming to position ourselves on the short side yesterday, our entry short at 1433.75 was not reached.
Strategy The S&P pared all of last night’s rally overnight and once again attempted to break the lows in the early morning trade. The sentiment this morning is relatively bearish, although no strong risk aversion has been observed so far, considering that European factors which are driving the downside are not new in nature. The Spanish treasury auctioned off 3- and 6- month bills this morning at higher bid/cover, yet with yield on the 3-month bills coming in higher than previous, most likely on concerns that Spanish fiscal situation might take a turn for the worst. Considering little macroeconomic data for the session ahead, we prefer to maintain our bearish stance for today and would prefer to position ourselves with an entry short at S1, targeting S2 and S3.
Alternative Scenario Headline risk and earnings might prompt defence of the lows.


EUR/USD Spot INTRADAY

EURUSD
Review The EUR/USD traded lower this morning to make new lows for the week following the breakout of the short-term pennant that I mentioned in our EU report this morning. The trading momentum in the currency space this morning has been more directional to the downside than the movement in equities and the extension lower in the EUR/USD has taken the currency pair to the 1.30 handle, which I pointed out as a target for the breakout of the short-term pennant. Our yesterday’s US strategy neutral entry long at 1.3037 was not reached.
Strategy Despite the bearish sentiment on the ground this morning, the session ahead is likely to amount to a quiet affair in terms of trading opportunities, with markets left to the realm of technical trading and reacting to any potential headline risks. As I pointed out this morning, European headline risk is still pertinent as a caveat to watch out on the intraday basis. However, it seems unlikely that any progress will be made on the Spanish front with regard to a bailout request while regional elections are on-going and the same old European rhetoric continues. For the session ahead we are looking for the continuation of the current trend and would prefer to position ourselves with an entry short at S1, targeting last Friday’s low and S2.
Alternative Scenario European headline risk and EU Consumer Confidence data later in the session might derail our bearish view for the day.


US 10Y T-Note (Dec 12) INTRADAY

US
Review Our entry point long in the Treasury market yesterday reflected the technical support that was due to come into play after a number of strong sessions of selling pressure. 131.290 did in fact come in perfectly to cap the downside to the Treasury market although unfortunately for us this was only seen during the overnight session rather than during trading hours in which we operate. This morning we have seen a substantial move lower in risk assets lead by a break in Gold of the 1714.00 level which has provided support since August earlier this year. Crude Oil followed suit breaking the 88 handle supporting safe haven assets as T-Notes now test target one from yesterday, 132.080.
Strategy The lacklustre earnings season has lead to concern building around global markets on how these firms are going to fare in the turbulent economic times foretasted ahead. Only recently were equities near multi year highs and the sell off in Treasuries looking like a clear bet. However now the picture is less clear. What is important to note is that during the substantial move across markets this morning bunds and Treasuries have remained relatively uninterested and perhaps reflect saturation of the topsy turvy market sentiment seen of late. We still believe Treasuries will sell lower in the medium term but for today we look to play the range set yesterday as the figure sheet again looks uneventful for the session ahead. Should the move lower in risk assets continue throughout the session we see the high on Friday 132.150 coming into view before a potential test of the 16th October low at 132.210.
Alternative Scenario A break of September's low could see a rapid test of the low this contract set in August, 131.025.


Crude Oil (Dec 12) INTRADAY

Crude Oil
Review The sell-off which commenced in the latter part of Friday’s trade continued throughout yesterday’s session and gathered further downside momentum this morning, helped along by the flight to safety into the dollar as part of the broad-based risk-off tone that is predominating in today’s European session. Although the lack of positive developments on the European front is not surprising, it is turning out to be one of the factors driving risk markets south and the current situation is likely to continue taking into account the lack of clues for the resolution of the current European situation and the light economic calendar for the session ahead. Our yesterday’s neutral entry long at 90.98 was stopped out as WTI failed at advancing beyond the 91.00 handle in yesterday’s session.
Strategy The economic data docket is empty for the session ahead. Save for a strongly disappointing print, we see very little probability of WTI reacting to EU Consumer Confidence data at 3PM today. API data, as usual, is scheduled for release later in the session. For today’s session we prefer to position ourselves with an entry short at 8th October low.
Alternative Scenario An overextension as part of the recovery move might compromise the integrity of our stop.