Friday, May 6, 2011

Trichet and US unemployment Deliver double blows in Sentiment

So the recession trades are in play - euro falling hard off last night's trichet comment about monitoring closely the data points - traders were looking for obviously more hawkish comments. I added the sp500 position but got stopped out at a small profit overnight. The rising umemployment claims against an expected drop has sent some warning signals that not everything is rosy in the economic recovery.

Going forward I see the continuation of this current selloff - whether it be liquidity driven, profit taking or sell in may and go away, I expect at least a hard retest of 1300 on the sp500. Gold seems to have some support near 1450 but it's the headlines of commodity prices retracing and history that can give us an estimate of what to expect. The oil was near the highs before the last GFC crash, and if we really are in a secular bear market, then this is the beginning of some horrendous downmoves. However, I remain optimistic and think the sell-off will remain moderate and we'll remain range bound in the market for the next few weeks before some buying in the final qtr of the year.