European Closing Thoughts 03/07/12

Thanks God I had already closed my position!!! The reason I'm saying it is because I would not have been able to catch the up-move we had since 4.00 PM GMT  on all European benchmarks.

At 5.00 PM GMT DjEurostoxx50 Sept future is up 1.53% to 2316, Dax Sept Future gains 1.42% to 6580, Italian Ftsemib Sept Futures closed at 14.485, +1.16% near session high. Eur/$ cross overtook the 1.2600$ mark, it's now trading to 1.2623$. Commodities are following the same path, Gold up 1.51% to 1621.7$ and Crude up 4.06% to 87.125$.Let me say “what a day”.

Where did this up move come from??  US benchmarks (S&P +0.70% to 1367, Nasdaq Future +0.84% to 2636.25)advanced just after the Factory Orders' number (it came in at 0.7 vs 0.2 expected), while Europe did not react immediately to the move, it looks like European traders where watching another movie in the mean time, the pick up happened afterwards around 4.00 PM GMT.

At this point we got a lot of foods for our brain to work on. It looks like we got the same answer to two highly different numbers:

• the first one the Ism Manufacturing, which nosedived to 49.7 vs 52 expected,
• the second one the factory orders, which  came in at 0.7 vs 0.2 expected,

In the first case, “investors are buying on expectations of a new stimulus package by the Fed”, this is what financial journals were saying, in the second case “investors are buying because the economy is working its way out”.  Two faces of the same coin, and as we said before the market gave the same answer, an up close.

With US market closed tomorrow, with ECB on Thursday, with Non-Farm Payrolls on Friday, professionals are waiting the Casino to show the cards before making their bets, but the way it's important to observe what we said in the MidSession Review:

“Short interest in stocks listed in NYSE  sits at the highest level of the year. NYSE short interest rose to 14.7 billion shares as of June15, the highest level since Sept.30, and up 17% from the end of the first quarter”.

Part of these shorts have been protected through options, you can take a look at benchmarks' skew, therefore in my opinion before calling a new bull market it's better to see if it gains traction, on the other side I would be really careful in going for the gap left open on the 29th of June.

For what it may concern our daily game plan we shorted the market on yesterday high, just to close the trade with few points before the afternoon session, the lack of volumes and our own rule (do not trade in days with holiday type volume) saved our P&L today.

For now, happy independence day to all my american friends.

Originally posted at www.77sigmatrading.com