check01 trader01 Tim Haberkorn Euro, S&P and Oil

Euro, S&P and Oil: Short-Term Gains Not Likely to Last Wednesday, June 22, 2011 http://www.insidefutures.com/article/284422/Euro,%20S&P%20and%20Oil:%20Short-Term%20Gains%20Not%20Likely%20to%20Last.htmlby Tim Haberkorn of Lind-Waldock

 

by Tim Haberkorn

This week marks a key juncture in the Greece debt debacle, and investors are optimistic that Greece do what it takes to receive a fresh rescue package. The euro moved higher ahead of a key confidence vote Tuesday, June 21, 2011, in parliament for Greek Prime Minister George Papandreou to clear the way for the country to avoid a debt default. The market had already priced in a positive result, and got it. To receive aid from the European Union and International Monetary Fund, Eurozone finance ministers gave the Greek government a deadline of July 3, 2011, to approve the steps it needs to take. Spending cuts, tax hikes, longer working hours and state asset sales are on the table.

This vote of confidence that Greece can do what it needs to do is likely to give the euro a further lift in the short-term. I think the euro rally will fail. I don’t think the eurozone is out of the woods just yet. Germany has invested interest in Greek debt and of course doesn’t want Greece to go belly up. However, in my opinion, the changes required of the country’s citizens are just too big. Even just getting the vote of confidence for Papandreou was a big challenge. You have to get the people to comply and change, and that’s going to be difficult. A completely new system, with measures such as longer working hours and a higher retirement age, won’t go over too well. We’ve already seen riots in Greece when faced with these possibilities, and I’m not sure the public at large is ready to accept the measures that are needed to stay in the Eurozone.

For now, traders with bullish positions should cover on rallies for more short-term gains. However, hands down, I’m looking for levels where the rally will fail, possibly around $1.44, $1.46 or $1.48 in the September futures. I believe the euro will see another downturn in the next two or three months. If you are looking for more specific trading strategies, please contact me. Remember, you should never enter the markets unless you understand the risks involved, which price areas look more ideal to establish a position, and where you should place stops.

In the worse-case scenario, Greece leaves the Eurozone, and it’s a possibility if Greece can’t do what needs to be done. Support for further aid packages is unlikely. I just don’t think Greece has what it takes to make the austerity measures needed to really restore its financial outlook.

 

S&P 500

In terms of the S&P 500, this market can bring out a lot of emotion, which can be dangerous. So far this week, the market is on the upswing. But in my opinion, despite two days of gains, the trend remains bearish. Positive sentiment surrounding the developments in Greece and perhaps some good U.S. economic data should keep this rally going a bit further, but in my opinion, it hasn’t made a significant upside breakout. I don’t see the S&P 500 above 1360 in the next month, and I see 1200 as more likely before it sees 1400. There are still a lot of economic problems in the U.S. that have not been solved, and optimism can only go so far.

 

Crude Oil

Crude oil futures rose to $114 a barrel in late April, but the market has since broken down. The market has been choppy and rally attempts have failed, even with continued volatility in the Middle East, and the failure of OPEC members earlier this month to agree extend crude oil production. These failures tell me the market is looking more bearish. It has fallen below the 200-day moving average, where it hasn’t been since November – December 2010. Other major moving averages are also turning lower, including the 8-day and 21-day moving averages. The Relative Strength Index (RSI) is at 35 and signaling this market is a bit oversold, so I wouldn’t necessarily recommend selling at current prices. However, traders might consider selling on a bounce back up to $96, and consider a stop around $99 or $100. Selling options may also be worth considering for a short-term trade. Again, these are just my general ideas based on what I see taking place in the markets at this time, and can quickly change. Please contact me for a more detailed course of action to fit your particular situation, and to answer any questions you may have.

Tim Haberkorn is a Senior Market Strategist with Lind-Waldock. He can be reached at [e-mail].

Futures trading involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.