The Dow broke its 10 day winning streak as all three main US Indices closed lower on ‘Expiration Friday’ with the US Dollar somewhat weaker. However that all changed last night on the reopening of world markets in the wake of the Cyprus news over the weekend which has seen the Euro gap down 100 points on the open. The Euro-Zone, IMF and Cyprus agreed on terms for a €10 billion bailout (55% of the tiny economy’s GDP) to bailout banks and support the economy, a further €5.8 billion will be drawn from a tax on Cypriot home bank deposits. Depositors were endeavoring to withdraw deposits over the weekend to find they have been frozen and will be taxed before banks open tomorrow. The IMF highlighted the need for the Euro-Zone to move with haste to an integrated banking supervision model with uniform depositor protection.
After 10 up days the Dow had a small retracement on Friday enhanced by a weaker than
expected consumer sentiment reading for the first half of the month. It may have been with some trepidation as the US Budget cuts (sequester) kicks in, though last weeks Retail Sales report did not seem to show any such nerves with spending okay. US Industrial Production was stronger than expected for February. Over the weekend newly installed Chinese Premier Li Kequiang said that the top priority was for a steady growth of 7.5% with a stronger safety net and continuing urbanisation as job opportunities and Social Services permit.
This morning we have Euro-Zone Trade balance at 10.00 followed in the US by the NAHB Housing Market Index but all eyes will be on the reaction to the bailout for Cyprus.
June S&P 500
Finally on ‘Triple Witching Friday’ we got some decent moves in the S&P. The Sentiment Indicators that I have been talking about all week finally kicked in last night and this morning. Last night on the reopen of the US markets I was able to take profit at 1537 on my 1558 short position taken early Friday morning and early this morning the S&P traded down to my 1532 buy level with a 1529.5 low. This 1525/1530 area is key support and I am going to let this 1532 long position run to see how much of the gap is closed when the cash market opens at 1.30 pm. I will leave a 1534 stop on this position and look to take profit in front of 1545. If I am taken out I will look to go short on any rally to 1550/1555 in small with a 1559 stop. I will also be a buyer on any dip to 1526/1530 with a 1523 stop.
June DOW
My Dow short finally found daylight when the Futures Market reopened last night and I was able to take a nice profit at 14314 on my 14435 short position from Thursday morning and I am now flat. I will be a very aggressive buyer on any dip to 14180/14220 with a 14150 stop. I will also look to sell the Dow on any further rally to 14410/14440 with a 14485 stop which is just above contract highs.
Euro/USD
The Euro missed my buy level on Friday before the market rallied strongly as the US Dollar got hit across the board. On the back of the Cypriot bailout the Euro gapped down my 1.2875/1.2900 support area before having another rally this morning. I bought the Euro at 1.2900 and I have taken profit this morning at 1.2950 and I am now flat. I still like the Euro despite the Cypriot news as the price action is telling you the Euro is bid. This morning I am a buyer on any dip to 1.2890/1.2920 with a 1.2870 stop. I do not want to be short the Euro at this time.
June BUND
The Bund also worked really well this morning. As I have been saying all week a break and close over 143.30 would be very bullish and we finally got that on Friday as the Bund closed at 143.43. I went long the Bund on the close and I have taken profit this morning on the open at 144.40 and I am now flat. Today I will be a buyer on any dip to 143.60/143.90 with a 143.25 stop.
Silver Rolling Contract
As I said on Friday I would give Silver one more day to rally and I took profit last night at 29.00 on my 28.70 long from last week and I am now flat. I am going to stay flat as I have no strong view here.
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