Risk markets recovered their poise on Friday even though the December Payrolls report came in line with original market expectations and so falling a little short of the expected No’s on the back of the stronger ADP Nos on Thursday. The Japanese Yen was again the weakest of the G10 Currencies with USD/JPY adding another 1%, to close over Y88 in New York. This latest run up comes in the face of the latest IMM data that shows speculative futures traders trimming their short Yen exposure. Net JPY shorts were down by 5000 contracts to 80.5k.
US Treasury yields stabilised in the wake of the Employment Report, following the 20 basis points run-up in the 10 Year Yield since December 28. The VIX, proxy for risk appetite, continued its descent falling from Thursdays close of 14.5 down to 13.8 which is the lowest close since mid September 2012. Fridays Unemployment Report conformed to expectations in most respects, overall Non Farm Payrolls added 155k with fairly minor upward revisions to the previous two months readings. The Unemployment rate ticked up to 7.8%. It was a decent if not spectacular report which at least helped stabilise the Bond market and this in turn helped the Equity markets. Also supportive was the Non Manufacturing ISM report exceeding expectations with a rise to 56.1.
Messrs Bullard and Plosser, from the Fed, said on Friday that the Bond Buying Program could end once the unemployment rate falls below 7%. Yesterday the Basle Committee on Banking Supervision announced that the new global liquidity standards to be applied to the banks will not be fully enforced until 2019, four years later than planned, which should help banks back to profitability.
Today is very quiet on the data front with the only news of note is Euro-Zone PPI which is due this morning.
March S&P 500
Friday was the quietest Non Farm Payroll day in a very long time. It is the first payroll day ever that I did not take an S&P trade. The Vix has collapsed from a high of 23.23 on Dec 28 to Fridays close of 13.8 which is a 40% fall in a week, the steepest decline in the Vix back to 1990 as complacency sets in. Today I am seller from 1463/1468 in small size with a wider 1472 stop as I am looking for the market to put in a top over the next week. I will also look to buy the market from 1451/1455 with a 1450 stop which is just below Fridays low. If I am stopped out I am a very aggressive buyer if the market falls and challenges the 1422 Gap from New Years Eve.
Euro/USD
The Euro worked really well on Friday as the Bollinger Band and Williams Index kicked in. The market dropped down to my 1.3000 buy level and I took a nice 60 point gain on this position and I am now flat. I don’t like the Euro long term and it is interesting with Fridays close below 1.3100 that we have a had a Key Week Reversal in the Euro. As you know Key week Reversals are rare and have to be respected. Today I am a seller from 1.3120/1.3150 with a 1.3175 stop. I will also look to buy the market on any dip to 1.2960/1.2990 with a 1.2950 stop.
Silver Rolling Contract
Silver has had a nice rally off the 29.19 low made on Friday and as long as we stay over 29.20 the market is short term bullish. Today I am a buyer from 29.60/29.90 in small with a 29.15 stop. I do not want to be short at this time.
Nasdaq 100
If the Nasdaq continues to rally over the next week I will be an aggressive seller from 2790/2810 with a 2825 stop. It will not happen today but it is one market to keep an eye on going forward especially if we rally up to this level.
Mar BUND
Unfortunately I was stopped out of my 142.95 long at 142.75. The Bund continues to trade in a very oversold manner and I re-bought my position near the close on Friday night at 142.85. I will leave a 142.50 stop which is just below Fridays low and I will look to take profit in front of 143.50.
Mar DAX
No change I am still a seller from 7810/7840 with a 7860 stop.
USD/JPY
The USD/JPY continues to trade a the top of the Bollinger Band but the Williams Index is starting to turn down. Today I am a seller from 88.20/88.50 in small with a 88.60 stop.
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