A triple whammy of weaker than expected US Economic data released on Friday, namely Retail Sales, Consumer Sentiment and PPI brought a 5 day US stock market rally to a halt although an afternoon recovery meant the Dow closed flat whilst the S&P and the Nasdaq pared their losses to end lower at just 0.3% and 0.2% respectively. Basic materials, oil and gas stocks led the weakness whilst 10 Year Treasuries caught a bid with yields dropping 7 basis points to 1.72%. Gold was the biggest market mover on Friday as it fell $80, or 5%, to close below $1500 for the first time since July 2011. Gold has continued to fall heavily overnight. My suspicions of Troika forcing Central Banks to sell their gold holdings is coming to pass after Cyprus were forced to sell down a large portion of its reserves. Oil and hard commodities were all weaker as the data cast further aspersions on the veracity of the US and Global recovery. The latest Brookings Institution-Financial Times Tracking Index of Recovery describes the Global Economy as stuck in a rut, unable to sustain a decent recovery. USD/JPY has been the biggest currency mover dropping 150 points after the US Treasury’s 6 Month Report warned Japan against competitive devaluation of its currency.
Today on the economic front we have UK Rightmore House Price Index and Euro-Zone Trade Balances, followed later in the US by Empire Manufacturing.
June S&P 500
The S&P continues to hold in well despite the weak economic news as every dip is bought by traders. I was unlucky on Friday as it just missed my 1574 buy level with a 1574.75 low before having a nice rally back to the 1584 level. However overnight, on the back of the weak commodities, the S&P traded down to my 1574 buy level. I will leave a 1570 stop on this position and I will look to take profit if we can close the Gap at 1582/1584 level. If I am stopped out of the market I will look to reset my long position on any dip to 1563/1568 with a 1557 stop. As long as the S&P can hold the 1558/1562 area the market is still bullish. I do not want to be short the market at this time.
Euro/USD
The Euro worked really well on Friday as the market traded down to my 1.3060 buy level and I was able to take a profit at 1.3110 and I am now flat. I am very impressed how well the Euro is trading given how weak the commodities are trading as the Euro has hardly moved despite Gold falling nearly $150. Today I will look to reset my long Euro position on any dip to 1.3030/1.3050 with a 1.3025 stop. Just like the S&P above I do not want to be short the market.
June BUND
The Bund traded up to my 145.90 sell level after the weak economic data and I am still short. I will lower my stop to 146.02 on this position and I will look to take profit on any dip to 145.30/145.50. If I manage to take profit I will look to resell the Bund on any subsequent rally to 145.95/146.20 with a 146.30 stop.
June DAX
Very unlucky with the Dax as I had my stop too tight at 7750 on my 7780 long position and after I was stopped out it traded back to the 7800 level. I still like the Dax as long as it holds over 7740 and today I will be a small buyer on any dip to 7670/7690 with a 7650 stop. A break and close below 7650 will be short term bearish.
June FTSE
The FTSE worked well as after I posted on Friday the market traded down to my 6320 buy level and I was able to take a profit at 6350 and I am now flat. This morning I will look to buy the market on any dip to 6250/6270 with a 6245 stop.
Gold Rolling Contract
Friday was another great example how important stops are in the market. I was stopped out of my 1525 long position at 1505 and I am now flat. As I said on Friday, a break and close below 1510 would be very bearish but I did not expect Gold to trade down to $1430 so quickly. Gold is very oversold and at the bottom of the Bollinger Band and Williams Index and I am a very small buyer on any further dip to 1400/1425 with a tight 1390 stop.
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