A stellar set of US Housing Starts and Permit No’s released yesterday, adding to the lower unemployment and higher retail sales, all point to signs of some growth re-emergence. Both Housing Starts and Permits rose at double digit rates in the month which was confirmed by the NAHB Homebuilders Index through October. This higher housing activity could add at least 1/2% to US growth. In the UK the BOE Minutes revealed differing views about the effectiveness of more QE and whether it would be required. Meanwhile, UK employment data improved, surprisingly, and against the grain of what has been a cautious economic mood.
Markets are quiet this morning ahead of the EU Summit which gets underway today and there will lots of reports and comments arising from the meeting. Given the huge rally in Spanish Bonds over the last week it will interesting to see how the scheduled Bond Auction for 3,4 and 10 year Bonds is received this morning. In the UK, we have Retail Sales and later in the US we have the Weekly Jobless Nos followed by the October Philly Fed Index and Leading Indicators.
Dec S&P 500
A very quiet day for trading in the S&P yesterday as the market continues to grind higher. The market is overbought and approaching a key resistance area with the Dow approaching a trend line going back to 1937! If we don,t sell off today it means the Breakaway Gap will have held from yesterday which will be very bullish. I don’t want to raise my buy level to high and this morning I will look to go long from 1445/1449 with a 1443 stop. I dont want to go short at this time as it is very hard to fight the trend and I still think we will test the key 1490/1510 resistance area.
Euro/USD
The Euro is overbought and I will look to go short from 1.3130/1.3160 with a stop at 1.3180 which is just above last months high. I will still look to go long on a dip to the 1.3040/1.3070 with a 1.3030 stop.
Dec DAX
No change from yesterday as the market goes on hold ahead of the EU Summit today. I will still look to go long from 7330/7360 with a 7320 stop. Just like the S&P I do not want to be short at this time.
Dec FTSE
The FTSE is also very overbought and we are at the top of the Bollinger Band and Williams Index. This morning I will look to go short from 5890/5910 with a 5925 stop. I will still look to go long on any dip to the 5830/5850 with a 5820 stop.
Dec BUND
The good run that I have had in the Bund over the last 2 months has come to an end this week and I was stopped out of my 140.20 long at 139.95 and I am now flat. I don’t want to keep chasing this market and I am going to stand aside to see how we trade over the next 24 hours. The next major support comes in at the 139.20/139.40 area.
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