Weekly

.
Safe haven currencies are back in favor this week as specs "bought the dips". This week attention continues to focus
on US earnings season, but the real risk events will be US housing data the stress tests to be published on Friday in
Outlook Euroland. The Bank of Canada will announce its rate decision on Tuesday. UK GDP and Canada CPI wrap up the week
18 July 2010 on Friday. Fewer events than last week, but there is a good possibility we will see some very volatile price action.
EURUSD short blw 1.3100 ES 09-10 short blw 1130 DAX 0910 neutral to long CL 08-10 short blw 79.40

Sovereign credit rating games continue.

There were a lot of announcements and press releases over the past week, but very few of them were market moving events.
Most announcements are "over-hyped" as a rule anyway. The single most over-hyped story of the week was the downgrading of
US, UK, German, French, and other "Western" credit ratings by "a leading credit rating agency" in China. (Read: The credit rating
agency in the pocket of the State Council.)
I think the funniest part of that announcement was the accusation by Dagong Global Credit Rating Company that Western
agencies have an ideological bias. This is good comedy! However, the People's rating agency raised very good points about the
sovereign credit rating game -- and their ratings may be more accurate over the short term, given that their considerations are
more strictly limited to economic performance and attempt to interpolate or infer future results based on past performance.
When evaluating multinational corporations, for example, this limited methodology is a sound approach. If a corporation's
home country goes to pot, the corporations can quickly shore itself up by moving capital to more stable nations. A sovereign,
however, is a different animal. A nation state is much less agile in a crisis and is affected by a broader set of factors, such as how
strong its institutions are and how resilient its regime is over a longer time horizon.
That said, it's refreshing to see a more diverse perspective on global markets and certainly makes for interesting reading.
Traders are already acutely aware of sovereign problems in the West, however. Dagong's point is moot, but given that the agency
is closely affiliated with the State Council, it was probably inspired by nationalistic motivations as much as anything else. This is
part for the course in Chinese politics. And it's foreign affairs. If anything can be relied upon in modern China, it is its strong
nationalism and its peculiar rhetoric. I believe the markets will largely discount this story, but that won't stop China from getting
its comeuppance after its perceived subjugation to the West has ended. (This is largely up to the Chinese -- if and when they are
ready to perceive otherwise.) Have I put you to sleep yet?

Calendar GMT Ctry Event Mkt Risk Exp Prev Remarks

Sunday 2300 UK Rightmove house prices (YoY, Jun) Equ Low 5.0 Z intraday
Monday JP Marine Day holiday, markets closed
0800 EU Current account n. s. a. (YoY, May) Equ Low -6.1B ESX, DAX intraday
Const. output w. d. a. (YoY, May) Equ Low -6.1B ESX, DAX intraday
1400 US NAHB housing market index (Jul) Equ Low 16 17 ES, NQ, TF, YM intraday
Tuesday 0130 AU RBA minutes (Jul) Ccy High A$, risk barometer, discounted
0500 JP Leading index (May) Ccy Med 98.7 $J, EJ intraday
0600 EU German producer prices (YoY, Jun) Equ Med 1.1% 0.9% ESX, DAX risk barometer (two day)
1230 US Housing starts (Jun) Equ Med 577K 593K ES, TF, YM intraday
Building permits (Jun) Equ Med 575K 574K ES, TF, YM intraday
Wednesday 0100 CA BoC rate decision (Jul) Ccy High 0.75% 0.5% $C discounted?
1100 UK BoE minutes (Jul) Ccy High Z, GBP risk barometer, discounted
1400 US Bernanke speaks to SBC Equ High Risk of QE to all markets
1430 US EIA petroleum status report (Jul) Com High CL, NG 2-3 day risk
Thursday 0300 NZ Consumer confidence index (Jul) Ccy Med 122 AN, N$ intraday
0700 EU Purchasing manager index manu. (Jul) Equ Low 55.1 55.6 ESX, DAX intraday
0830 UK Retail sales (YoY, Jun) Ccy Med 2.4% 3.4% Z, G$ intraday, watch MoM
0900 EU Industrial new orders (YoY, May) Equ Low 20% 21.8% ESX, DAX intraday
1230 CA Retail sales (MoM, May) Ccy Med 0.5% -2.0 $C intraday
1230 US Initial claims (Jun) Equ Low 445K 429K ES, NQ, TF, YM, E$ intraday
1330 US Bernanke speaks Equ Low ES, NQ, TF, YM, USD intraday
1400 US Existing home sales (Jun) Equ High 5.1M 5.66M ES, NQ, TF, YM, E$ intraday
Friday EU Stress test results published Ccy High All markets
0800 EU German IFO (expectations, Jul) Equ Med 101.6 102.4 ESX, DAX, euro 2-3 day risk
0830 UK GDP (YoY, Q2) Ccy High 1.1% -0.2% Z, EG, G$, GJ 3-5 day risk
1100 CA CPI (YoY, Jun) Ccy High 0.9% 1.4% $C 3-5 day risk

The Lonely Trader

Disclaimer: All information is provided as market commentary and not as investment or trading advice. The Lonely Trader
expressly disclaims liability, without limitation, for losses or damages resulting from reliance on such information. Past
results are no guarantee of future performance. Please consult a registered financial advisor before risking your capital.
Stress tests and housing data will dominate the week.
Over the previous week, more than two thirds of US companies reporting earnings produced upside surprises. On the other hand,
risk currencies finished the week lower as optimism faded. It is clear speculators still fear deflation and a "double dip" scenario. In
my opinion, there is some merit to this perspective. The FED minutes were dovish and the financial reform bill isn't very clear. The
FED will maintain its accommodative position given weak near-term growth prospects, persistent underutilization in the US
economy, and consequent disinflationary pressures. The VIX did not break support this week and appears to be heading higher.
The macroeconomic data contradicted the earnings. (No big surprise there.) Several central bank officials went on record saying
the recovery is too weak to mitigate unemployment.
Given this week's data, the markets could be in one of those situations where specs are anticipating problems with the
stress tests in Euroland. (Remember, it's tough to fool a speculator.) Most of the US data this week will focus on the housing
market, with the most significant data being existing home sales. Although only indirectly related to the stress test data, the early
releases could set the tone for Friday and the expectation is not good. A lot of other risk and inflation related data from key
economies is also on tap. Fear will likely contain any upside moves in the euro and the major equities indices. Given technical
events in EURUSD and the S&P, and the recent IMM data showing specs net short USD for the first time since March, the
possibility of a downside correction has grown. Or, at any rate, the possibility for an extension much more beyond 1.3000 and
1100 has diminished.
The biggest problem for the euro, and asset markets in general, will be if speculators question the credibility of the stress
tests. There are already grumblings from the pundits and the blogosphere suggesting this is a foregone conclusion. (A couple of
market clichés come to mind here.) My opinion is the stress tests will reveal a neutral to optimistic outlook on balance, but not
too optimistic.
Watch USDCAD and CADJPY after the BoC rate announcement and through the rest of the week. (Canada is in the
beginning of a tightening cycle.) If the BoC decides to hold rates at 0.5%, this could send CAD, AUD and NZD lower. Watch
EURCAD and EURUSD in particular around the time of the Euroland bank stress test results. There is a chance the market will take
the pair lower well beforehand, but technical levels will likely present themselves after the release as well. I will look to get short if
I see a good setup. Safe haven plays are still in effect.
On the equities front, earnings season continues, with Halliburton and IBM on Monday; Bank of NY Mellon, Goldman
Sachs, Yahoo, Apple, and State Street on Tuesday; and Comerica, US Bankcorp, Coca Cola, Wells Fargo, Qualcomm on Wednesday
for starters. The S&P should be rolling before the open tomorrow morning.

See charts below.

The Lonely Trader

Disclaimer: All information is provided as market commentary and not as investment or trading advice. The Lonely Trader
expressly disclaims liability, without limitation, for losses or damages resulting from reliance on such information. Past
results are no guarantee of future performance. Please consult a registered financial advisor before risking your capital.
EURUSD weekly outlook

Short on good technical setups between 1.30 and

1.31, with SL above 1.3125. TP 1.2535. Watch
intermediate levels and close trade if good support
is seen.

Quarterly
resistance
trend line

EURUSD has broken above key resistance. I didn't expect this pair to break above 1.28 so quickly. See the (very faint) grey arrow.
The next fib extension (161.8) of the rally from 1.9 is 1.31. Unlike what I said last week, this level is no longer a stretch. Seems like
a 50/50 bet that this level will be tested in the next two days, but against the backdrop of the stress tests, my bias is down until
Friday. Sovereign bids are still noted at 1.2485, so keep this area in mind as a potential bottom for the current cycle. Near term
support has formed at 1.27, but I am not confident this level will hold if a good selling program gets underway. 1.26 should be
better supported. I will also be watching equities for correlations and divergences. At the moment, offers are clustered from
1.3000 to 1.3010, with stops above 1.3020. If we break through this level, I will look for short setups between 1.3075 and 1.3100.
The signals have to be perfect. The last thing I want to do is get caught on the wrong side of EURUSD on a tear.

The Lonely Trader

Disclaimer: All information is provided as market commentary and not as investment or trading advice. The Lonely Trader
expressly disclaims liability, without limitation, for losses or damages resulting from reliance on such information. Past
results are no guarantee of future performance. Please consult a registered financial advisor before risking your capital.
ES90 weekly outlook

150 SMA
flattening

ES should continue to respect the descending channel (and

the 50 DMA, not pictured here).

The ES September contract is moving technically. Range studies still suggest little possibility of breaking 1000 this week, although
a test is likely. The failure at 1100 should extend to at least 1044, at which point I expect a bounce before sellers take the contract
further down. This will depend on earnings, however, and I expect to know which way this market is going by the Tuesday close. If
the market rallies for some inexplicable reason, I will have to switch to long mode above 1130. I doubt this is going to happen --
range studies put the probability at 14% -- but it's good to have a plan. It would be nice to get another chance to short from 1100,
but for now I will consider selling a failure at 1080, targeting 1060 and 1044. The odds are good (more than 66%) that a short will
hit either or both before hitting my stop. The market should bottom at 1010, but I have no idea whether that will happen so I'm
not going to press my luck. If it happens this week, I will look to buy bounces from this level, but the profit targets will be much
more conservative. And the entry setups have to be impeccable. Longer term, I believe there is a chance for this market to trade
as low as 850 and as high as 1350. But that's beyond the scope of the view from here.

The Lonely Trader

Disclaimer: All information is provided as market commentary and not as investment or trading advice. The Lonely Trader
expressly disclaims liability, without limitation, for losses or damages resulting from reliance on such information. Past
results are no guarantee of future performance. Please consult a registered financial advisor before risking your capital.
DAX weekly outlook

The DAX 30 remains volatile and range bound. We closed the week very close to where we began. Volume over the past two
weeks has been consistent, but ranges have been fairly volatile. I continue to believe that as long as this index remains above
5600, the uptrend is still intact. German producer prices could create a bit of movement on Tuesday, but the market will likely
remain relatively subdued until IFO and stress test data are published on Friday. (I say subdued, but remember we are talking
about the DAX here. Anything can happen.) Short term resistance levels are 6280 and 6350, with 6500 being the extreme of my
weekly range studies. Short term support levels are 5840 (statistical), 5750 (technical), and 5600 (weekly range extreme). It's
important to keep in mind that currently the DAX sits in the middle of a very large range -- from the 2008 range high to the 2009
range low -- and also at a very important breakdown level. There will be very strong headwinds above 6340 and 6500 unless
fundamental justifications are clear.

The Lonely Trader

Disclaimer: All information is provided as market commentary and not as investment or trading advice. The Lonely Trader
expressly disclaims liability, without limitation, for losses or damages resulting from reliance on such information. Past
results are no guarantee of future performance. Please consult a registered financial advisor before risking your capital.
 Crude weekly outlook

Crude will continue to lose ground in a weak global economy. The rally extended early last week before failing just above the
projected top at 78. The range top is 79.38 and a retest of this level is possible -- about 37% according to range studies. If seen I
will attempt a small short from that level and hold on for dear life to 72. Range studies suggest not more than 3 handles to the
upside and not more than 4.5 handles to the downside, making 79 and 71.50 the projected extremes for the week, with 78.15,
74.25 and 73 the only significant intermediate technical references. My bias would be to fade just below 79 with solid setups, if
seen. I'll be watching the EIA petroleum status report very carefully on Wednesday for near term direction through Friday.

Interested in contributing to this letter? Jay Schneider -- FX and futures, range studies
San Diego Area, USA
Please contact the number over there --> 760-444-0307
Or, email me: jay AT lonelytrader DOT com

The Lonely Trader

Disclaimer: All information is provided as market commentary and not as investment or trading advice. The Lonely Trader
expressly disclaims liability, without limitation, for losses or damages resulting from reliance on such information. Past
results are no guarantee of future performance. Please consult a registered financial advisor before risking your capital.