It is amazing how sentiment can change in 24 hours. What began yesterday morning as a rush by hedge funds to book profits in the Euro, in anticipation of some attempt by ECB President Dragi to check the rise in the Euro this Thursday, then turned into a larger sell-off centered on political angst in Spain(corruption allegations against the Rajoy Government)and Italy { a rise in poll standings of former PM Berlusconi}. Less favourable supply/demand cash flow considerations in the Euro Bond markets in February versus January are compounding upward pressure on Spanish and Italian yields which rose 23bps and 14bps respectively. The AUD,GBP and JPY, the biggest losers on the currency markets of late were the three biggest winners yesterday. The short selling ban which was lifted in Spain last week has resulted in the IBEX loosing 1200 points or 14% in this time. The DAX and CAC both lost over 3% yesterday.
Today is busy on the economic front with PMI Services released this morning for the UK, Germany and the Euro-Zone. The latter also has has Retail Sales due and this is followed in the US by the ISM Non Manufacturing, and the CBO Budget and Economic outlook.
March S&P 500
The short term top that I have been looking for looks like it arrived yesterday as we had a lovely sell extreme off the 1510 high on Friday to the 1490 low made just before the close. I covered my 1509 short position at 1493 and I am now flat. Today is Tuesday and is often known as turnaround Tuesday if we have a sell-off the previous day. After the huge rally since the beginning of the year the bulls will not give this market up without a fight. Today I am SMALL BUYER on any dip to 1485/1490 with a 1483 stop. As I believe we have put our top in for the moment I will be using rallies to get short and today I will be a seller from 1499/1505 with a 1511 stop which is just above Fridays high.
March USD Index
This trade worked really well and I cannot believe how quickly the Index moved higher. I was able to take profit on my 79.10 long position from Friday at 79.60 and I am now flat. If the Index trades back to 79.20/79.40 I will look to buy the market again with a 7895 stop.
Euro/USD
The move lower in the Euro is scary as we have now retraced over 250 points since Friday afternoon. The next big support is the 1.3450 level and I am a small buyer here from 1.3440/1.3460 with a tight 1.3420 stop.
March FTSE
The FTSE also worked really well yesterday and I was able to take profit at 6250 on my 6310 short position from Friday. Unfortunately I took profit too quickly as we are now trading at 6208. I also believe given yesterdays huge move down that we have put in a top for the foreseeable future and all rallies from here are to be sold. If the FTSE rallies I will be a seller from 6240/6260 with a 6280 stop. I will also be a buyer the first time down to 6170/6190 with a 6155 stop.
March BUND
The Bund also worked really well as shortly after I posted the Bund traded down to my 141.75 buy level. I bought the market here and just like the FTSE I took profit too early at 142.40 and I am now flat. The Bund needs to break and close over 143.10 for this rally to continue. Today I will use any dip to 142.40 to get long with a 142.20 stop.
GBP/USD (Cable)
Cable just missed my 1.5700 buy level before the market rallied strongly. Today I will leave my buy level the same from 1.5670/1.5700 with a 1.5650 stop. I do not want to be short at this time.
March DAX
Very unlucky as just as I cut me short position from Friday the Dax got slammed and closed 200 points lower. It is now at the bottom of its Bollinger BAND but not the Williams Index and this morning I will be a small buyer on any further dip to 7570/7600 with a 7550 stop.
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