The Euro led the push higher in G10 currencies versus a generally weaker US Dollar. Risk appetite was supported by optimism that Spain will soon seek a precautionary credit line from the ECB and a series of US Earnings Reports that all beat Wall Street estimates. The unexpected resignation of CitiGroup CEO Vikram Pandit has not dented Citi’s stock price which finished up 1% yesterday. Intel reported after the close last night and has beaten the Street estimates by 9 cents whilst IBM reported Q3 EPS of $3.62 versus $3.61 expected. The European markets were also helped by the better than expected ZEQ Investor Survey for October whilst in the US there are signs that Manufacturing is stabilising/growing again together with the Homebuilders Survey reporting a further lift in prospective buyer interest.
This morning we have the BOE Minutes and we also have UK Unemployment. The German Government releases updated German economic forecasts followed in the US by Housing Starts and Permits. Finally, in the US Presidential debate overnight first indications are that Obama won as Romney look rattled on a few occasions whereas Obama was alive in comparison to his sleepy performance two weeks ago.
Dec S&P 500
Unfortunately the S&P just missed my 1434 buy level with a 1435 low and the market gapped up and never looked backed as we closed at 1450. The market left an 8 handle Gap yesterday and if this is not filled by tomorrow we will have a new Breakaway Gap which will be very bullish. The last Breakaway Gap we had was back on August 1st when the market jumped on the August Payroll Nos and we still have this Gap back down to 1362 which has never been filled. At least we did not sell the market yesterday and this morning I like the fact we closed over the critical 1440/1443 area which should now act as good support. Today I will look to go long on any dip to 1441/1445 with a 1438 stop. I am only interested in going short if we trade up to the recent 1466 high where I will look to go short against a 1472 stop.
Euro/USD
Just like the S&P, the Euro just missed my 1.2980 buy level with a 1.2985 low and then rallied hard on the back of the Spanish news. As I have been saying for the last few weeks I still believe the Euro will have one test of the 1.3250/1.3400 critical resistance area. Today I will be a buyer from 1.3050/1.3080 with a stop at 1.3030. This 1.3050 level should act as good support.
Dec DAX
I was stopped out of my 7340 short at 7370 and I am now flat. I am surprised how easily we took out the 7350 level and the 7330/7360 level will now be strong support. I will look to go long in this area with a tight 7320 stop.
Dec FTSE
The FTSE worked very well and I was able to take profit at 5845 on my 5780 long position and I am now flat. I still like the FTSE and I will be a buyer on any dip to the 5810/5830 area with a 5800 stop on any long position. I do not want to be short at this time.
Dec BUND
It was good that I lowered my buy level yesterday in the Bund but unfortunately having been up nicely on my 140.82 long position I did not take profit and I was stopped out this morning on the open at 140.57 and I am now flat. The 140.15/140.30 is the next good support level and I am a buyer on any dip to this area with a 139.95 stop.
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