Markets ended weaker yesterday after an unexpected contraction in US Manufacturing. The ISM Manufacturing Index fell to 49.5 in November, below market expectations of 51.4, from 51.7 in October. The ISM claimed that concerns about the Fiscal Cliff drove the decline rather than any impact from Hurricane Sandy. Of particular concern is the Employment Index which fell to 48.4 from 52.1 the first reading below 50 since 2009. This
helped the Dow and the S&P to have Key Day Reversals where we made a new high at the open only to make a new low before the close and also close on their lows. Please click on the Education Tab on Tradernoble.com to explain how Key Day Reversals work. Meanwhile the PMIs reading for China, UK, India and the Euro-Zone saw better than expected readings yesterday which helped to spike European Equities higher. Overnight Obama rejected the GOP Fiscal Cliff plan as US House Speaker John Boehner proposed $2.2 trillion of spending cuts and new revenue that lack what Obama calls essential for a Fiscal agreement namely higher taxes for top-earning Americans. Mr Boehner called it a credible plan that deserves consideration by the White House. However the Obama Administration promptly rejected the proposal which would raise the Medicare eligibility age and slow social security cost-of-living increases. The two sides remain far apart with four weeks left before the $600 billion in tax increases start taking effect which could trigger another recession. In other news the Australian Central Bank cut rates to 3% overnight.
This morning on the economic front we have UK PMI Construction and Euro-Zone PPI. later in the US we have the ISM for New York which will be closely watched after yesterday’s disappointing data.
Dec S&P 500
The S&P worked really well as we traded up to my 1421 sell level with a 1423.75 high before falling hard for the rest of the day as we generated a Key Day Reversal in both the Dow and S&P. The close in the Dow at 12965 brought the Index back below its 200 Day Moving Average. The S&P has now closed the Gap on the upside that I have been looking for over the last two weeks. I went short at 1421 and I took a nice gain at 1412 on this
position. The market then dropped to my 1409 buy level and as we were approaching a Key Day Reversal I covered this position at 1410 due to the lateness of the day and I am now flat. This morning I am a seller on any rally to 1407/1411 with a 1415 stop as the 1412/1414 level has held the market for the last couple of days and should provide good resistance. I will also look to buy the market on any dip to 1395/1399 with a 1393 stop.
Dec DAX
The Dax also worked really well as we traded up to my 7470 sell level with a 7488 high. I covered my my 7470 short position at 7430 and I am now flat. I thought the Dax would fall further but continues to hold in well. This morning I am a buyer on any dip to 7390/7410 with a 7375 stop. I do not want to be short unless we trade higher to 7485/7505 with a 7520 stop.
Dec BUND
The breakdown in the Bund that I have been looking for finally happened yesterday and I was able to take a nice profit at 142.60 on my 143.00 short position from last week. This morning I will look to reset my short position from 142.80/143.00 with a 143.10 stop which is just above yesterday’s high. I will also look to buy the market on any dip to 141.90/1420.05 with a 141.80 stop.
Euro/USD
The Euro continues to trade higher and for the moment is ignoring the sell off in US Equities. The Euro traded up to my 1.3070 sell level and I have taken profit this morning at 1.3050 as the Euro should be lower and I always respect the price action. This morning I am a buyer from 1.3020/1.3040 with a 1.2995 stop and I am also a small seller from
1.3090/1.3120 with a 1.3140 stop. As I said for the last few days I still expect the Euro to trade into the 1.3250/1.3400 resistance area.
Dec FTSE
The FTSE also worked really well as we traded up to my 5905 sell level and I took a nice gain at 5865 on this position and I am now flat. This morning I will look to go short on any rally to 5895/5915 with a 5925 stop. I still do not want to buy this market as we are still very overbought on a daily basis.
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