Heady mid-week optimism evident in US Equity markets evaporated on Friday with a mini meltdown on the 25th anniversary of Black Monday. The major indices lost between 1.5% and 2.2% as they had their worse day in four months. The decline was led by the Nasdaq with Microsoft announcing a revenue miss and another poor day for Google. In addition, earnings misses from MacDonalds and GE led the weakness in the Dow and the S&P. The EU summit ended with little change but the following comment from the Swedish PM Reinfeldt is interesting :for me, he said “Europe is not about sharing debts of the past. These are complicated matters. There are lots of questions that need to answered legally but also when it comes to how do you answer what happens in a bank that has problems. Who is recapitalizing that bank and who is paying?” Then on Friday Merkel said “As long as there individual national budgets I regard the assumption of joint liability as inappropriate from our point of view and this is not up for debate. My fear is that the Eur-Zone is heading for a new crisis in the next few months”.
In terms of news, this week we have an FOMC meeting and today is very quiet on the economic front with just the Euro-Zone Debt/GDP ratio.
Dec S&P 500
The market had its worst day in4 months on the back of the very weak earnings reported on Thursday and Friday. I was stopped out of my 1445 long at 1440 and unlike the previous week when after been stopped out of a long position I did not go long again and I just observed the market for the rest of the day. The S&P also had a very weak close. This morning, as long as the market stays over 1420, it is till bullish and I will be a buyer on any dip to 1420/1423 with a 1417 stop. If I am stopped out I will also look to go short at 1417 with a 1423 stop. I only want to go short if and when we break 1417.
Dec FTSE
The FTSE worked very well and I was able to take profit at 5860 on my 5900 short position. It then dropped down to my buy level late on Friday night and I went long at 5845. I will raise my stop to 5830 and I will aim to take profit on any move back to 5875/5895. I will also look to go short in front of 5920 with a 5935 stop.
Euro/USD
I was very surprised to see how strong the US Dollar is given the scale of the Equity market sell off with the Dollar Index rising just 0.25% This morning, after been stopped out of my 1.3055 long position at 1.3030, I will be a buyer on any dip to 1.2990/1.3010 with a 1.2980 stop. I do not want to be short at this time.
Gold – Rolling Spot
No change from Friday as the market just missed my 1740 selling level with a 1738 high.
Dec DAX
I was stopped out of my 7395 long at 7380 and I am now flat. To me the Dax is trading very well and I will use any weakness to the 7330/7350 area to get long with a 7310 stop. Just like the Euro I do not want to be short at this time.
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