day trading strategies weekly review

– A tone of uncertainty overtook global markets
this week, as investors contemplated the ambiguous growth outlook for 2012.
Trading pivoted around the FOMC rate decision and press conference on
Wednesday. The Fed once again moved the goal posts on its “extended
period,” saying that rates would remain low until late 2014 (recall that
it was only last August when the Fed introduced the mid-2013 language). It also
tempered its economic forecasts, warning of lower US GDP growth and higher
unemployment rates over the next two years. PIMCO’s Bill Gross called the
FOMC’s low rate pledge extension the equivalent to QE 2.5 and suggested that
the Fed may be preparing additional easing to boot. Before the Fed move, the
IMF lowered its 2012 global GDP forecast (to 3.3% v 4.0% prior) and IMF Chief
Christine Lagarde warned that the global economy could be in danger of sliding
into a “1930s moment.” Data out on Friday showed that US GDP grew
2.8% in Q4, a sharp acceleration from the 1.8% in Q3 and the quickest pace
since the second quarter of 2010, although still less than expected, and the
quality of the growth was questioned as unsustainable inventory builds were a
major contributor to the number. In Europe, negotiations between Greece and its
private creditors were much in the news, and it appears that officials have set
a final deadline of February 15th to announce a deal, with hopes that final
details can be worked out this weekend. For the week the DJIA lost 0.5%, the
NASDAQ gained 1.1%, and the S&P 500 was up less than 0.1%.

– Negotiations between the Greek government and
its private creditors were a major focus this week. Talks between the two sides
have been ongoing for months, and by Friday, the Greek finance minister stated
that the final deadline for a deal was February 15th. At the Ecofin meeting on
Tuesday, euro zone finance ministers hashed out the debt restructuring terms
they could accept. Creditors, represented by the Institute of International
Finance’s (IIF) made their maximum offer, although the real outstanding issue
was whether Greece would apply a collective action clause, which would force creditors
to accept a write-down or whether the deal would remain “voluntary.”
The other major outstanding issue is the coupon on the new debt to be issued,
while various legal issues are also seen as potential hurdles to an agreement.
The talks stalled several times throughout the week, but optimism about the
changes for a deal remained in place heading into the weekend. There is still
plenty of skepticism about Greece, deal or no deal. German Chancellor Merkel
said that she did not believe the existing multi-billion dollar bailout coupled
with austerity measures were working after two years of crisis. Meanwhile
S&P’s Chambers said that Greece would likely be downgraded to selective
default in the first half of 2012, calling the move a matter of “when, not
if.”

– The FOMC post-rate decision statement determined the fate of the greenback
this week. Analysts said that if the committee adopted inflation targeting,
EUR/USD could retake the 1.3250 area, while no inflation targeting would
provide the EUR/USD with momentum to test the low 1.2800’s. The Fed explicitly
committed itself to an inflation target with the decision, and EUR/USD was
above 1.3200 by Friday. The extension of the extended period to 2014 didn’t
help the dollar, either, and by week’s end the greenback was at one-month lows
against the GBP and two-month lows against the CHF. Note also that euro short
positions hit their fourth consecutive weekly high .

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