Range trading on the back of some bad news...

The S&P rallied in the early part of this week, mainly on the back of good GDP news at the end of last week. However, a mixed bag of news surrounding jobless claims in the US, concern governments will struggle to fund their budget deficits in Europe, strikes in Greece promted by spending cuts and the BoE deciding against further quantitive easing has caused the market to drop sharply today.

Worth noting that both the BoE and the ECB have held rates at 0.5% and 1.0% respectively.

The BoE decision in relation to QE looks to be driven by inflationary concerns. This may put upwards pressure on interest rates. However, the ECB and the FED have signalled the intention of keeping rates at their current levels for an extended period. In the UK growth was lower than expected at 0.1% which is leading many analysts to expect that rates will remain low to avoid falling back into recession.

All good news for my portfolio which is net short. I had cut my S&P short on Monday @ 1080 following the rally. I since opened another short close to the top of the range @ 1097 which is looking healthy. I am sitting on the BAC, AAL and PRU positions. The Dollar trade is also looking good especially on the back of the jobless claims news out of the US. All in all, I am still bearish.

Profit taking...

The S&P pretty much did exactly what I was expecting today - we saw a retrace back up to the resistance at 1,103 on the March Future (1,107 on the cash index) and a subsequent fall. I used the retrace to add to my short S&P position. I am expecting it to return to the recent lows around 1080 (March fut). The employment news out of the US today was not great which adds to my bearish bias. US GDP data is out tomorrow and some big firms are scheduled to release results over the next week (including Microsoft and Amazon) which should give an indication to the price action we can expect in the short term.

I also took closed the IBM trade at a nice profit (+152 points) and closed half of the Lloyds position (+265 points) to lock in some realised profit.

A little note on the S&P...

Just had a close look at the S&P cash index - following what I was saying below about the fact that it may be trading in a range, today's double bounce off the support @ 1,085 may be a sigificant signal to suggest that we may see a retrace of the fall back up to the 1,100 level. Something that is worth keeping an eye on.