Good Morning Traders,

Most markets we watch are relatively unchanged this morning.  Not a lot of interesting price action in early trading anywhere.

Asia is flat, with all indexes between -0.5% and +0.5%.  Europe is slightly higher, with European Broad Market index at 0.4%.  South Pacific stocks are also flat/mixed.

In currencies, the British Pound is strong (especially against Asian currencies: GBPJPY, GBPAUD, GPBNZD).  US Dollar index is down very slightly at -0.2%, mostly due to the EURUSD being +0.3%.

Treasury Futures are quite a bit weaker this morning, and I believe there is tremendous downside potential in the 10 and 30 years.  I will post a blog later this morning on the difference between price structures in futures and ETF products, but the summary is that you cannot use TLT et al for the big picture in these markets.

Precious metals are strong and pressing to new highs as I write this.  On a volatility-adjusted basis, the move in Gold is significant, so it might make sense to devote some attention to metals today.

Cotton and Coffee are up strongly, with Coffee futures at new 52 week highs.  (A lot of potential in long Coffee over the next few months, but do not assume that even a fairly large move here will have a logical impact on stocks such as SBUX, GMCR.  The actual cost of the commodity is 1) very well hedged and 2) not that significant in the big picture for most of these companies.  Avoid naive, narrative interpretation of fundamentals.)

Chicago Grains are weak this morning, but overall remain very strong.

Watching 1325 on the S&P futures as key inflection point this morning.  I know I sound like a broken record, but be wary of the short side.  Yes, every dip is being bought in a predictable pattern.  Yes, a sense of complacency has probably set in and yes, the market is probably vulnerable to an oversized pullback, but if you are racking up small losses on shorts it’s probably better to wait until the market clearly shows you a different pattern.  If, and only if 1325 is decisively (key word) violated (ideal pattern would be sharp momentum move below the level and then a pullback holding lower), there are probably 25 fairly easy handles to the downside (=2.50 on SPY).  Until that time, assume that the current pattern is intact, focus on longs, and avoid getting chopped up in low-volume, tight ranges.

Lastly, remember that any weakness is probably to be bought for a bigger picture swing trade.  This is a strong market and the bulls deserve the benefit of the doubt for the foreseeable future.