(7-1-12) Supposed German Concessions Prompt Largest Short-Covering Rally in Three Years

The boards lifted sharply across the planet in Friday's action on supposed German concessions, which are actually meaningless, leaving the boards in the most technically overbought condition since March of 2007.

Although a further continuation rally is possible in Monday's session combined with the typical first day of the new quarter institutional buying, we are looking to short on any further extension of the rally on Monday.

We have already established light short positions on the close in the September S&P contract. We also have light short positions in the September Coffee contract, established on the close and also in the August Crude Oil contract.

In Friday's session, the Sep. Long Bond contract came down albeit grudgingly -- pounded down as bids flooded into the equity and commodity markets. However with a loss in the Sep. Long Bond contract of a point and a half, we think the Bonds acted well relative to the action in the equities and commodity complexes.