Dow New High-BUY?

The Dow made a 17 month high today, maintinaing its positive dynamic following Tuesdays FOMC statement of rates remaining low for an "extended period". Having broken past the key resistance level of 10700, this now looks to become key support, and now looks like an opportune moment to go long.

Obviously there are still potential volatile events relating to P.I.G.S and a possible downgrade of the US or the UK, however market consensus right now seems to be that its all fine, Greece and anyone else who needs to will be bailed out, and the market will work itself out in the event of a downgrade, and borowing costs for the US should not rise too much. I dont know about that, but I know that one must not fight the tape. And while fundamentals in my opinion, are still weak, a liquidity driven market where excess money is being printed is very likely to drive the price of assets higher, and also lead to inflation. Given the nature of markets, and that when everyone is bullish, (as everyone, really seems to be, in the media anyway) I would advise a tight stop, an inital stop at 10700, and a second stop at 10650 (for longs placed in the 10670/10680 region).

With CPI due for release tomorrow however, my view is that over the coming weeks it is more likely to beat expectations, and with forecast currently at 0.1% I think it is likely to be beat or matched. Given however that the markets are currently fearful of inflation, any major overshoot on this result could provide a 30-50pt sell off, and this would be looked at as a buying opportunity tomorrow in my opinion given the current market dynamic, and in the absence of any unexpected debt related news.

GBP/USD has been driven up by a short squeeze as perception of fundamentals improves with better than expected unemployment report, and also a general easing of fears relating to government debt (despite Mondays news relating to potential cuts for the UK and US ratings). Although there is continuing unexpected news possibilities, with random poles on the election, and the "hung parliament" scenario coming back in to cause weakness in the pound. Fundamentally given this, and deficit, and the lack of improvement in the economy, I feel the pound is currently still susceptible to a sell off. However you cant fight the tape, and with a tight stop at 15285 I am looking to go long.


Quotes:

DOW 10739
FTSE 5645
GBP/USD 15324
EUR/USD 13737
Gold 1123
Crude 8306
Goldmans 176.68
RBS 43.55
USD Index 79.74

Trading strategies for Thursday 18th:

1)Buy GBP/USD 15324, Stop 15285 Target15380, however medium term target to 1.56-1.57, and potentially beyond.


2)Buy Dow current 10739, Stop 10700. Target 10790
Buy Dow at 10680, stop 10650, target 10730.

A longer term trade would be placement of a stop in the 10400 region, as there is also support there, however this is likely to be reached only if there is sudden unexpected news, hence it would be good to combine this with puts, or buying the VIX.

In order to hedge beta, or correlation risk, I would be looking to short crude, as it is close to upside resistance, at 8350

3)Short Crude 8309, target 8250 (however short to be held as long as above longs are held). (crude postion to be approx 30% of the portfolio)

4)long ftse, at 5645, stop at 5600, target 5700.

short term (next day)
Alternatively shorting the FTSE in proportion to the Dow would enable a beta hedge, as the Dow currently looks technically stronger than the FTSE in my opinion.

Medium Term (1/2 weeks):
Long FTSE
Long Dow