The CSFB made a near term bottom on 6/7/2010. It then proceeded to launch to a new high (6/17/2010 and 6/18/2010) with a strong uptrending week. This implies higher discomfort with the market level, which coincides with 6/11/2010 breaking the down channel resistance from May 2010.
Part of this run-up may be future contract rollover, since the ESU0 volume built as the ES-mini contract volume and open interest trended higher. A break below 1104 on ESU0 would seriously slow a further bull run.
6/7/2010 thru 6/18/2010 represents professional price-level confidence (shrinking spreads, lower cost to insure negative downside.) The market trended higher, and struggled/capitulated for a few days 6/16-6/18, as option expiration approached. This reversal (protective spread increasing, with equities heading higher) may have been driven by the oversold levels of the market at the time of the reversal on 6/7/2010, and the realization that the downward trend was in place, calling for lower protective put spreads.
Gold broke a new high on 6/18/2010, as the market retested the previous day's range. Gold has trended higher as the TED Spread has continued to decrease from it's recent highs near 50.
The TED Spread is still in a position to trend higher, implying that credit/lending risk has reversed from it's multi-year lows carved out this year. If the TED breaks and holds under 40, the market may have nothing else to do this summer other than sector rotation, to determine who carries the market into Q4 2010.
Beware if credit risk shown in the TED Spread spikes higher without notice by the equity markets. This could imply a major credit event readying to be uncovered. My target for credit risk fear is 75, then to consider 4-6 month protective puts on the 3-month highest flying asset class.
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