A solid session for equity markets yesterday, after weak European data raised hopes of further ECB easing, whilst US markets were also supported by earnings reports and a rise in New Home Sales. The European PMIs were disappointing, keeping the Euro-Zone on track for another contraction in Q2 but instead of raising Global concerns, equity markets actually rallied as it raised the prospect of another rate cut from the ECB. The Euro-Zone Manufacturing PMI fell to 46.5 from 46.8 in March whilst the Services PMI rose slightly to 46.6 from 46.4. But a key concern is the weakness in Germany where both the Manufacturing and Services PMI’s declined. Weakness on the periphery and perhaps a fall in Chinese demand for automobiles is now beginning to weigh on German activity. European equities rose 3% and US markets also closed higher, overcoming a mid-session plunge due to false reports of explosives in the White House after the Associated Presses Twitter Account had been hacked. The Dow fell 140 points but this was quickly reversed once is was confirmed the reports were false. US markets were boosted by strong earnings from Netflix, DuPont and Delta Airlines whilst US Home Sales rose 1.5% in March versus 1.2% expected.
On the economic front we have the very important IFO Survey from Germany this morning which will be a market mover. Later in the US we have Durable Goods Orders and then the ECB’s Mersch and Contancio also speak later in Dresden and Brussels respectively.
June S&P 500
What a wild day it was yesterday in the S&P – starting with the initial sell off on the weak German PMI, to the huge rally on the expectations that the ECB will cut rates followed by the 18 handle sell-off as a result of a false ‘tweet’ only for the market to regain its earlier highs! Now the market is higher again on the better earnings results from Apple. I did not do a trade yesterday in the S&P as I did not want to have a position ahead of Apple’s results. I am very surprised at how strong the market is but as a trader you have to just respect the price action. The fact that the S&P closed over 1570 is bullish and I expect the market to eventually trade up to the 1600/1610 key resistance area before sellers return. Today I am a small buyer on any dip to 1567/1571 with a 1654 stop. I do not want to be short at this time.
Euro/USD
The Euro is very weak and I am surprised that despite the strong equity markets the US Dollar is not lower. The Euro briefly broke my 1.2990 key support before ralling back above this level and has been basically stuck in the 1.3000/1.3020 area for the last 24 hours. I have gone short the Euro in small at 1.3005 with a 1.3040 stop as I look for the Euro to break 1.2980 and trade down to the next support at 1.2930. I do not want to be long the Euro at this time.
June DAX
It was very frustrating as the Dax just missed my 7430 buy level by 19 points before the market rallied 240 points. The question is what to do now after such a rally. I am going to stay flat until after the IFO Survey is released this morning. If the Dax subsequently rallies after the IFO is released I will be a small seller from 7690/7720 with a 7735 stop. If the Dax breaks and closes over 7725 I will then look for it to trade back to the 7830 key resistance level. If the IFO No is weak I will be a buyer on any dip to 7570/7600 with a 7550 stop.
June FTSE
Yesterday was another day to illustrate how important stops are in the market as I was quickly stopped out of my 6260 short position at 6280 and I am now flat. The FTSE, having looked very weak over the last two weeks, now looks strong especially the fact that we broke the key 6330 resistance area. This morning I will look to by the FTSE on any dip to 6330/6350 with a 6320 stop. I do not to be short at this time.
June BUND
Not my day yesterday as the Bund just missed my 146.80 sell level by 3 points before having a nasty sell off. As I write this commentary the Bund is still holding over the key 145.80 support zone and a break of this level will lead to lower prices. I am going to stand aside here and wait for the market to make its next move before deciding, especially with the IFO due. After the release, I will be a small seller on any rally to 146.30/146.50 with a 146.80 stop.
Gold Rolling Contract
The key level to watch for Gold is 1400 and as long as the market holds over this level, it will probably trade back to the key 1460/1480 resistance area. Gold is now trading at 1427 and I do not want to chase the market here. I will use any pull back to the 1405/1415 support zone to get long with a 1395 stop.
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