Breakfast Blog

Good Morning traders, Wednesday nights stocks, commodities and risk in general's sell off continued most of the day yesterday with the Euro getting smashed down to 1.3160 following the poor PMI data from France, Germany and the Eurozone in general. The Euro currency has been getting killed all week against all its pairs and has lost more then 300 pips in the EUR/USD. This has also seen the dollar have its biggest rally in 7 months. The S&P 500 breached the 1500 level yesterday afternoon but found support at 1496 where it rallied back to 1503, so the bulls are still in control for the moment. One of our favorite indicators for price action on the S&P 500 is Copper and the last 2 weeks have seen copper selling off heavily and yesterday it breached important support at 360. This is a definite sign that there will be a correction in the stock market soon as Copper generally does what S&P 500 will do 2 weeks to 2 months before S&P.
The Volatility index also broke out above 15 for the first time since Christmas, this is a sure sign that the complacency we have had in the last 2 months is coming to an end.
On a currency perspective the EUR/USD is slightly better bid this morning up above the 1.32 handle but struggling to test higher. The market doesn't seem to want to be long Euro going into the weekend and the Italian Elections on Sunday and Monday. If Silvio Burlesconi wins and is re-elected expect to see the EUR/USD re-testing the 1.30 handle sometime next week and a significant sell-off in the European equity bourses.
Some good levels to look out for today are 1.3170 EUR/USD, some solid technical support here along with some large sovereign names on the right hand side of the order book. Topside we have seen selling this morning at 1.3250 after the Good German data, a reported Scandinavian name on offer up here. The ECB announces its LTRO repayments at 11 a.m. this morning and a large number will give a boost to the Euro short term, but any rally may be capped by the uncertainty of the elections over the weekend.
On an Equity perspective 1496 looks rock solid on the S&P 500 and 1515 will be hard to break on the topside. The market is very choppy and still ranging so avoid trading in the middle of the range, wait for a significant level and keep stops tight.
Good luck in the Markets
Lowkey