Long Opportunity On S-franc; Sell-off Imminent On S&P Soon
| CURRENT POSITIONS (As of 4/23/99) | ||||
|---|---|---|---|---|
| Market | Long/Short | Entry | Stop | Target |
| June T-bonds | Flat | – | – | – |
| June S&Ps | Short | 1365 | 1390 | 1356 |
| June Swiss franc | Long | .6660 | .6600 | .6710 |
Note: All price levels are approximate.
S&P 500 futures
We sold the June S&P [SPM9>SPM9] short at the 1365 level today with stops in around 1390. Volatility and rate of change indicators suggest a sell-off is due Monday or Tuesday. We will look to cover at the 1356 level.
Extreme sector rotation in the market is causing violent price swings as mutual fund managers get out of tech stocks and rotate into cyclical stocks. This type of action gives us good opportunities to take advantage of the fact that they have to re-adjust their portfolios and trade against people like us.
Figure 1. June S&P futures (USM9), 15-minute bar. Source: Quote.com.
Currency futures
We exited our long position in the June Swiss franc [SFM9>SFM9] last night at the .6695 level after shooting for the .6725 level. Short covering last night gave us the small rally we were looking for, but I was surprised to see how fast it faded.
We took another long position around .6660 that we will look to exit around .6710, with stops at the .6600 level. This trade will be heavily influenced by what happens in the Balkans over the weekend.
Figure 2. June Swiss franc futures (SFM9), 15-minute bar. Source: Quote.com.
T-bond futures
The June futures [USM9>USM9] closed up a couple of ticks today after Thursday’s sell-off. There are no major reports to speak of right now. The only bullish factor today was reports of bond purchases by the Fed, which helped the market a little.
The market never got into our sell zone yesterday. As usual we have the Balkans factor to watch over the weekend. Any escalation or de-escalation will move the bonds. We remain on the sidelines.
Next scheduled update: Monday, April 26, 1999
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