Analyst picks for 31 January 2012


My pick: Short S&P 500 below 1,300
Expertise: Fundamental and technical analysis with risk management
Average time frame of trades: 1 day to 1 week

We have kept the capital markets afloat for months on the expectation that policy officials are willing to feed moral hazard and inject stimulus whenever investors are faced with a significant loss. However, not only will their will for this falter, but their capacity is also limited. We have seen a correction on the S&P 500 today, and a larger correction may soon be at hand. Alternatively, the Swiss National Bank and Bank of Japan may be forced into action soon.


My pick: Stay short euro-dollar
Expertise: Global macro
Average time frame of trades: 1 week to 6 months

I entered short at $1.3526 on 9 November, expecting the Eurozone debt crisis to continue to spread. I revised my soft target to $1.2586 after the trade’s second objective at $1.2872 was met. A corrective recovery played out as suspected over the past two weeks, but now the EU leaders’ summit threatens to hand momentum over to the bears once more as sovereign risk jitters return. I will continue holding short, with a stop-loss to be activated on a daily close above $1.3231.


My pick: Looking to sell Australian dollar-dollar at $1.0410
Expertise: Technical Analysis
Average time frame of trades: 1 to 5 weeks

The latest surge looks like it could be stalling, with the market failing to reach the key highs from October ($1.0755), breaking back below last Friday’s low. Overall, the core outlook remains intensely bearish. Look for a more significant downside extension back below parity over the coming days. Daily studies are now unwinding from overbought and a break below $1.0425 over the coming sessions should confirm and accelerate. Ultimately, only back above $1.0755 would negate outlook.