Equity markets lost ground again yesterday in the aftermath of the FOMC meeting with pressure continuing on the US Dollar ahead of today’s very important Non Farm Payrolls data. European markets lost ground early, weighed down by weak French and German spending data. US Equity markets held on a little better, supported by some good economic figures yesterday. US Personal Income rose by a spectacular 2.6% in December thanks to Dividend/Bonus payments paid out in late 2012 to avoid the late anticipated tax increases, whilst the Chicago PMI rose 55.6 to easily beat expectations of 50.5 but the good news was partially offset by the rise in Weekly Jobless claims to 366K versus 350K expected. Overnight China reported that its Manufacturing Expansion continued in January validating the nation’s reluctance to add to policy stimulus amid increasing inflation concerns. China also said that House prices have risen to their highest level in two years.
Today is a very busy day on the Economic front and potentially a big moving day in the markets. This morning we have PMI Manufacturing for both the UK and the Euro-Zone. The latter also has CPI due this morning ahead of Non Farm Payrolls at 1.30pm. Later at 3.00pm in the US we have the University of Michigan Confidence and ISM Manufacturing Reports.
March S&P 500
After the weaker than expected Weekly Jobless Claims, the S&P dropped down to my 1493 buy level with a 1491 low. I took a nice gain at 1499 and I am now flat. Today is the one day of the month that I don’t want to have a position going in to the Non Farm Payrolls as it is to dangerous. As I have been saying for the last week the market is trying to put in a top and there is still a risk that we could trade as high as 1520/1530 before we get this top. If the Non Farm Payrolls come in better than expected I will be a small seller from 1506/1510 with a 1515 stop. I will also be a small buyer on a weaker number from 1487/1491 with a 1485 stop. Today is the beginning of a new month and traditionally new money enters the market at this time.
GBP/USD (Cable)
Cable worked really well as after I posted we dropped down to my buy zone with a 1.5770 low. I bought the market at 1.5791 and I took a really nice gain at 1.5870 and I am now flat. If Cable continues to rally I will be a small seller from 1.5940/1.5960 with a 1.5980 stop. I will also be a buyer on any pull back to the 1.5790/1.5820 area with a stop below yesterdays low at 1.5770.
Euro/USD
As the Euro would not go down yesterday I covered my position for a small loss at 1.3590 and I am now flat. I am going to stand aside in the Euro as I want to put on a more macro position in the US Dollar and I am going to do this via the US Dollar Index which is not as risky and I can stay in the position longer.
March US Dollar Index
Unfortunately this a 5 pip spread for trading. The 78.60/79.00 level is key support for the US Dollar Index and as long as we can hold over this level the US Dollar is fine. However a closing break below 78.60 will be very bearish and the market could possibly look to challenge the 73.50 lows from 2011. I have bought the Index this morning at 79.10. In the latest Daily Sentiment Survey the market has dropped to just 10% for US Dollar bullish sentiment reading versus other currencies and conversely the Euro has a bullish reading of 91% versus the US Dollar. The last time traders were this bullish the Euro lost almost 20% over the next 14 months. My stop on this position will be 70 points at 7840.
March FTSE
No change from yesterday I am a seller from 6290/6310 with a 6330 stop.
March DAX
Also no change from yesterday as I am a seller from 7850/7875 with a 7890 stop.
March Bund
The Bund dropped down to my buy level this morning at 141.70. I have only bought in half size as I do not want to have to big a position ahead of Non Farm Payrolls today. My stop is at 141.38.
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