After the brutal reversal yesterday and closing near the lows we are coming into calmer asset classes this morning. The dollar is reversing across the board and every single currency has moved contrary to yesterday’s wild action which has a “turn around Tuesday” kind of feel to it. Some are trying to say the carry trade unwind is over and all was accomplished in one week.
I am not so sure about that as at 20 year lows on a trade weighted basis the yen seems undervalued while, on the other hand, the Australian and New Zealand dollar seem over valued and their growth expectations are moderating. More on this later.
Commodities continued their liquidation yesterday. Gold was off its recent highs of over $50 oz while silver had tumbled from a high of 14585 to a low of 12470. The base metals fell hard lead by nickel. However, after the close in the stock market my shortest term model went to a buy and as mentioned yesterday I expected a rally early in the week. Sensing a shift or possibly just worn out from going down, long positions were established in gold, silver, the mini S&P and mini Russell index. The market(s) are oversold on a short term basis as we had the 10 day moving average put to call ratio at a extremely high level. I still anticipate a sell off later, but for now I am testing the long side with break even stops. No hero here!In the mini S&P today the 1379.00 is a pivot with 1389.50 my 1st resistance, then, 1392. A “point of control” which signifies the area where the most amount of activity occurred the prior day, is 1384.25. Support now is 1381.25, then, should we take out yesterday’s low, 1364.50 is the next support.
I continue to stay long the volatility plays established in mid February as I do not think the roller coaster is over.