Wednesday market outlook

Interesting times we`re trading in. The markets are screaming for an impeding correction, but as the global printing press pumps liquidity into the markets the game of musical chairs has no choice but to continue. What will happen when the music stops and all these injections will prove they have diminishing returns? Until then, let`s take a look on what the markets did this week: gold has managed to hold the bullish channel it entered on the 22nd of February, the S&P looks like a rabid bull and the effects of Bank of Japan`s massive intervention on the yen seems to be wearing off.

Last one out is a rotten AAPL

All good things come to an end, and the recent rally in the Cupertino based technology mammoth is no exception. Apple reversed yesterday almost $24 from its most recent highs, down to $502.08. The main culprit seems to be a piece of news according to which Apple iPads are the subject of a trademark infringement in the Chinese mainland. It seems that the sino company Proview International Holdings is the holder of iPad trademark on the Chinese mainland and is currently seeking a ban on imports and exports of Apple products.

BoJ sprays markets with 10 trillion Yen of liquiditity and all I got was a lousy SL

The Bank of Japan announced more monetary easing today and pumped $128 billion into money markets in a move set to reverse the appreciation of Yen against other currencies. Copy-catting the US Federal Reserve they also expressed their intention to target a 1% inflation for the period. This comes after disappointing GDP news which revealed that the Japanese economy contracted by 2.3% on an annualised basis, on expectations of a 1.8% shrinkage.

Back to the USD/JPY long trade

I`m re-entering the USD/JPY position at $77.71 with a very tight stop loss at 77.48 to capitalise on the disappointing GDP figures posted today. The Japanese annualised GDP was posted at a negative 2.3% on expectations of -1.4%. Moreover, the Bank of Japan is starting today a two-day policy meeting in which they might decide that further intervention is warranted. The risk-reward ratio is favourable.

MF Global hole widens to $1.6 billion

KPMG, the bankruptcy administrator of the former financial services company MF Global revised upwards the estimation of the shortfall in customer custodial accounts. It seems that Jon Corzine, the CEO of MF Global authorised the embezzlement of customer funds through commingling (using the cash left in margin accounts for collateral in their own transactions).  The claims from commodity traders using MF Global accounts are now $6.9 billion, out of which 3.9 billion will be returned by the trustee in the upcoming week. It holds an additional $1.4 billion in reserve, thus leaving it with a gap of $1.6 billion in claims.

Short S&P500 @ 1339.7

I`m entering a short position on the S&P500 as of now at the $1339 level. The QE2.5, Operation Twist, LTRO and MBS repurchases are starting to wear off. Stop loss at $1360. Target at $1291.