Volare? Dow breaks 50 day moving average

Quotes:

EURUSD 1.2451 (Fri Close 1.2387)
GBPUSD 1.4856 (1.4461 to target 1.53)
DOW 10436
FTSE 5250
Gold 1256.9
Crude 7846


Global recovery in confidence this week saw the risk come back, with the dollar weakening, and Euro gaining substantially as markets become less pessimistic about the Greece default situation.

The Dow having broken through its 50 day moving average at 10400, with support at 10250 and resistance at 10900, seems good from a price risk to reward ratio, however the potential for a sharp downturn with Eurozone news stil exists.
However given Greece's downgrade on Tuesday, and the market bouncing back from it, the market seems to have a positive bias. Ideally a pullback to 10350 on similar news (which does not contradict the potential catalyst of Q2 earnings) will be a potential buying opportunity.

Gold:
Gold pushing through to the 1260's and continuing its rally seems to indicate continued scepticism over the stability of fiat currency? Gold rising due to continued expectations of a low rate environment. Gold rallying on inflation concerns (Despite US CPI contracting -0.2% in May?).
I dont think its any of the above. I think simply that Gold declined with the market correction in May, with correlation to the commodities markets as fears grew over the sustainability of demand from China, and it has simply bounced back with them. Given the sharp surge in the dollar during that period, as a flight to safety, with the dollar index hitting 89, the recent pullback to 85 may have lead Gold to benefit from the weak dollar.
Gold has been notoriously difficult, in my opinion to gage following its sharp decline in December as an implrovement in payroll figures led the dollar to begin its rally. Prior to this Gold had rallied with the Dow (as the global recovery seemed to call for inflation that would outpace Bernanke's rate increases).
However having broken its previous May high of 1250, I would consider going long, with a tight stop, to target 1300. However, given the underlying Debt problems in the market, and the potetial for a fast downturn in the market at any moment, I would have to pair this trade with a short position in another asset correlated to Gold which I do not expect to perform as well.
The impact of Q2 earnings season due to be commencing soon is likely to favour a continued rally in the Dow to the 11000 zone, and perhaps beyond if the Eurozone can keep quiet.

Crude:
Crude has support at 75, and looks like it may attempt to make its way back to the lower 80's, with a previous high of 87. Personally I do not feel that the demand from China will suffice to maintain crude at these levels, I expect to see a "new normal" type situation in the Eurozone with subdued growth, so from a supply demand point of view, I think there is potential for crude to continue to range between 75-lower 80's for a while more.


Yuan:
China has stated that it will take a more flexible approach to its exchange rate, by removing its peg to the Dollar. Given the recent appreciation of the Dollar, I dont see a massive rally in the Yuan. However what will be interesting to see will be its affect on USDJPY, as a strengthening of the Yuan may lead to Japense exports becoming more competitive and leading to an incease in demand for the Yen.


Longer term:
If corporate earnings season fails to beat estimates this time, then what can hold the market up? With government debt problems, cutting in consumer credit lines, lack of robust hiring in the private sector, high unemployment, the fundamentals dont look great at the moment. But that doesnt mean the market cant go higher for now.
Strategies:

1)long dow 10436, stop 10200, target 10700.
Reducing beta risk from Eurozone: Short FTSE (The Ftse has immediate support at 5236 and below that at 5000, however resistance at 5436, with Q2 earnings due to come out first in the US it is more likely that the Dow will outperform the FTSE).