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Thursday 3rd of January Market Report

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Thursday 3rd of January 2013 as of 12:00 CET

The risk on rally is fading this morning following a huge run over the last 2 sessions, taking the S&P500 futures all the way from 1382 to high of 1458 last night. That is a massive 76 points rally over a very short period. The high from last year is at 1461.75, so we are not far away.

That looks a bit overdone given the fact that the debt deal was not all that great in my opinion and probably not enough spending cuts to avoid a rating downgrade for the US.  It will need to be more debt negotiations over the next few months to reach a full deal and it will probably cause more tensions for the markets. The 10 Year US Treasury yield was at 1.84, the highest level since October.

S&P500 future are trading at 1453, down 8 points from the high last night and Dax futures are down 17.50 points at 7760. Crude and Euro are all down by around 0.50%.

The focus will turn towards the US jobs market today as we have the Weekly Claims and ADP report released today, ahead of tomorrow’s key US Nonfarm Payrolls report.  The FOMC minutes from the last meeting will be released tonight at 20:00 CET and that could be a major market mover as well.

The market expectation for the US NFP report is at +135K at the moment.

We saw German unemployment rate out at 6.9% this morning, in line with expectations.

 

Asia equity markets closed higher with Shanghai up 1.73, Australia’s S&P/ASX 200 up 0.74% and Nikkei 225 up 0.70%.

 

Technicals

Market

S&P 500 emini (ES)

Dax

Crude

Corn

Eur/Usd

Res 3

1470

7850

95.17

735

1.3350

Res 2

1462

7805

94.99

723

1.3320

Res 1

1459

7780

93.87

709

1.3309

Sup1

1446

7720

91.47

687

1.3103

Sup 2

1426

7707

90.99

677

1.3047

Sup 3

1405

7604

89.90

659

1.3000

ATM calls Vols. nearby month

13.86

14.60

25.03

29.70

7.79

100 EMA

1399

7256

91.26

731

1.2934

200 EMA

1375

7016

95.75

708

1.2887

14 Day avg. Volume

1207K

62.8K

112K

71K

134K

 

VIX closed down 3.34 points at 14.68 last night and has dropped 8.55 points (36.8%) from the high on 28th of December, which is totally crazy. But it is still almost a point higher than what is was when the S&P500 traded at these levels last time.

SPY/TLT spread: 26.50 (widest level in weeks, which signals that the odds of a correction are increasing)

 

S&P 500 Emini futures – Closed just a few points within the high from last year (1461.75), but the huge up move the last couple of sessions is likely to take breather ahead of tomorrow’s NFP report. A strong NFP should be the next catalyst to break into new highs. It is important the previous resistance at 1446 now holds, to avoid a move lower. Keep in mind we have a big gap down to 1426 that is a worry for the bulls in the longer run, if we cannot break out cleanly in the next few sessions.

Dax futures – It traded to 7805 high yesterday and it did punch through the upper Bollinger band on daily chart at 7774, which was my upside target. A punch on the Bollinger Bands is a overbought reading and I favour a move lower next to close the open gap at 7675 at least and possibly 7604 near term.  

Corn – It has an open gap at 677 from 3rd of July last year that is still open and I am looking for this to be filled shortly. Could be interesting to look at a bullish strategy down towards 677 for a bounce.

Crude Oil (Feb futures) –   It traded to a high of 93.87 yesterday and it punched through the upper Bollinger Bands on daily chart. Looking overbought and I favour a correction lower towards 91.47 support near term. The next major objective on this rally would be the 200 day EMA at 95.70.

Euro – The rally yesterday failed just ahead of the 1.33 resistance and it is trading much lower this morning, down almost 190 pips off that yesterday high  (1.3289) at this time. That was the 4th rejection of the 1.33 level over the last 2 weeks and I would not be surprised to see a larger move lower next and target would be the 200 day EMA at 1.2887. I favour selling any type of rally for the time being.

Today’s Economic Calendar (CET):

14:15     US ADP Non-Farm Employment Change (exp. 134K)

14:30     US Weekly Claims (exp. 356K)

20:00     FOMC Meeting Minutes

 

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Risk Warning:      

Any information in this report is based on data considered to be reliable, but no representations or guarantees are made by KBR Capital Partners AS with regard to the accuracy of the data. This information is provided on condition that we accept no responsibility, legal or other for its contents. We, including our directors, officers, employees or publishers, disclaim all liabilities. Any statement constitutes only current opinions, which are subject to change. Neither the information nor any opinion expressed shall be construed to be, or constitute an offer to sell or a solicitation of an offer to buy any investments mentioned herein. Prices can go down as well as up. There is a significant risk involved in derivatives trading, including the risk of loss greater than the original investment. Past performance is no guarantee of future results.Conditions can vary from client to client, and therefore influence performance. The opportunity for profit creates a corresponding risk of loss. Anyone wishing to invest in any of the products mentioned should seek their own financial or professional advice.

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