Mad as a Box of Frogs.

'Mad as a Box of Frogs' describes these markets of the past few days. Currencies, Stocks, Commodities have been all over shop this past 24/48 hours. Overnight, the currency markets saw some huge swings. - Of note the AUDUSD moved sharply lower, hitting 80.72, tagging the 38.2% fib retrace of the entire 18 month rally into 2010, it then posted a 3 big figure rally in a few hours before settling down (relatively speaking). EURCHF has possibly been the most significant mover however. The SNB spent virtually all last week defending the 1.4000 area, their 'line in the sand', then in the past 2 days they squeezed the EURCHF massively higher. Overnight it almost hit 1.4600, since then it has retreated back below 1.4400. It will be interesting to see if what the do today, particularly following comments yesterday from the SNB's Danthine, stating that there were 'no limits to FX intervention'. There are reasons why I believe the EURCHF rebound significant in the immediate environment, which I will elaborate on below.

From a trading stance, I have maintained a short position on the June SP futures this past week, which has helped get my year back on track, following a spate of small disasters through April. Whilst I am of the opinion that we are in the early stages of the next leg of a significant bear market in stocks, I believe we are at risk of a short sharp correction from around current levels. I have posted 2 sets of charts below, the first chart shows the SP500 index over the past 18 months. This shows a line of support connecting a series of lows since Oct last year. It is my belief that this line is critical, and whilst I expect it to succumb I do feel that it may hold a first attempt, which would favour a short sharp correction higher

The second set of chart shows the EURCHF and the SP 500 over the past couple of years. I have highlighted the 2 previous sharp bounces higher in the EURCHF in Oct 2008 and March 2009. It is noteworthy that in both cases the SP corrected sharply higher, whilst I appreciate that 2 data points do not prove anything, I think it is an observation worth noting.

With regard to my trading yesterday; whilst satisfied with my action on the SP500, I am somewhat disappointed with my trading performance on the Bund. Having bought on the break up yesterday through 127.60, I felt we could see a move up into the mid 128s. However, I decided prematurely to get out at 127.80 anticipating a return towards the break-out, which would then be followed by a move sharply higher into the 128s. Well the return to break never occurred and the Bund rallied sharply higher into the 128s, without me on board. Finessing can sometimes be expensive.