Trend End?

The first 5 months of 2013 has seen a strong trend in the American Equity Markets that has correlated with the weakening Yen. Uncertainty In Japan about the "all in" gamble on the QE program and talk of Tapering of Asset Purchases in the States has left investors uncertain and quick to take profits on a very good run year to date. Technically we have a solid topping pattern on the S&P 500 and the Down Jones 30, with a high at 1687 on the S&P and 2 shoulders at the 1660 level. We trade at 1630 on the cash as I type and some more weak American data would undoubtedly lead to a test on the 1600 level to the downside.

We have a major Risk event on Friday in the Form of the Non-Farm Payrolls release. Last month saw a huge rally on high volume when they beat Estimates at 165,000. A consensus figure of 170,000 is expected on Friday with an unemployment rate of 7.5%. It is very unclear how the Market may react to a better or worse figure as a strong reading with a reduction in the Unemployment rate may be seen as a negative in terms of future Asset Purchases by the Fed. A worse reading may show that the QE program is diminishing in effectiveness and this may cause a sell off aswell. The best play is to wait for the initial reaction before trading this release or to trade Gold or the Dollar against a foreign currency. The Dollar index will immediately price in the chances of The tapering of Asset Purchases and sometimes the Equity markets take slightly longer to react then the Dollar as the initial knee jerk reaction of Algo's buying or selling of Equities can reverse quickly and the first move may not be the right one.
Looking at the Euro currency, We saw a short squeeze higher in the Major Pair last week with some month end Dollar sales which has popped the Single currency to 1.31 against the greenback over the last few trading sessions. Tomorrow we see the ECB's rate decision and press conference and we await Mario Draghi's speech to see what clues about future policy he gives. Another rate cut is not expected at this meeting but talk of narrowing the Corridor which is the Lending spread minus the Deposit spread seems to be a better overall option as negative rates seem a no go now.
Expect a quiet session today with lower volume as traders square positions ahead of the 2 Big risk events of the month Tomorrow and Friday.
Good luck in the Markets. Lowkey