Good Morning Traders,

I will be in and out of the office this week, so keeping today’s comments a little shorter than usual.  In general, there are 4 macro themes I am watching this week.

• Interest rate futures (10 and 30 year) have a pretty good longer-term sell setup.  This is an outright directional play, but also has implications for the curve.  Worth keeping an eye on because these markets tend to be fairly “smart predictors”.  Good downside momentum in either the 10 or 30 years this week would be confirmation of  last week’s break.  (Again, ETF’s like TLT are very very poor substitutes.  Do not do longer term technical work on these ETFs and I would ignore anyone who does.)
• The picture in the broad US market is fairly clear:  Arguably overextended, no real momentum at new highs, but also a very difficult time to be leaning short.  Personally, I think the bulls deserve the benefit of the doubt until proven wrong in this case, as it is possible we can just bleed upwards a lot further and longer than anyone would expect.  In addition, and real break is probably a good long entry for swings, so be careful of getting too negative on the market.  It is also important to keep in mind that everything I started this paragraph with is true… and it does add up to a market that could potentially be vulnerable to a sharp break.  Daytraders find themselves in a difficult environment:  currently no followthrough and lots of chop, but you have to be prepared to hit from either side of the plate on a moment’s notice.  Swing traders with a 3+ week horizon need to play some defense but keep leaning long.
• Precious metals are a mess.  (Yes, I think that’s actually a theme.)  Platinum and Palladium both point up, while Gold and Silver seem to be set for a breakdown.  Careful of committing to either side without a lot of confirmation.  Most moves will probably be fakeouts, so, if you’re going to play this game, be very quick to admit when you’re wrong.  I’m taking a step back and avoiding the whole complex until something changes.  (Note that Copper is trading cleanly at new highs.)
• Grains, in particular Wheat, are set up to be strong.

<previous comments were written over the weekend.  morning update follows.>

• This morning, traders arrive at their desks to find world equity markets generally higher to strongly higher.  Asia is up roughly a percent, with South Korea up nearly 2% and putting in a new 52 week high.  Europe is up across the board, averaging a little less than a percent, with the UK leading at 1.2% (and also making a new 52 week high).  Middle Eastern markets (Israel, Dubai, etc) are getting a little bounce after the reaction the the Egypt crisis, but enough technical damage has been done in those markets to suggest further downside.
• No large moves in currencies, but general themes are EUR weakness against AUD / NZD strength.  Net impact to the US Dollar index (which is heavily weighted toward EUR) is slightly positive.
• Copper continues to press to new highs overnight.  Precious metals are flat.
• More strength in the Crack this morning with WTI crude down and distillates up.  Natural Gas futures are off rather strongly at 1.5% in early trading.
• Strength in foods seems to be an early theme this Monday morning:  all NYBOT softs, ex Cocoa, and CBOT grains are up to strongly up.
• Today, we have less earnings stocks to watch, but perhaps a cleaner setup on the overall market.  24 hour futures show a clean bullflag that should be good for at least a retest of the overnight highs.  Everyone short-term trading index products has to realize that there has not been much followthrough (paying breakouts or hitting breakdowns has been a fairly consistently losing strategy), but the market is at a potential “tipping point”.  Strong momentum, either up or down, could lead to a move that has some multiday followthrough, so keep an eye out for this and plan accordingly.
• Still looking for leadership in Energy and Industrials.  If the market fails and turns back down, probably good opportunities on the short side in Consumer stocks and Financials.