US Equity markets closed at record highs on Friday after the US Payrolls Report which was stronger than expected. Non Farm Payrolls rose 165k in April, higher than the 140k expected whilst the Unemployment Rate fell to 7.5% from 7.6%. There was also a 114k upward revision to the previous two months, with March’s gain now 138k, much more respectable than the originally reported 88K.The improvement in the Unemployment Rate was driven by a 293k gain in Household Employment, a clear positive as it was not due to fall in the participation rate, which was steady at 63.3%. After the recent disappointment in the US data releases, the Payrolls data provides some relief but also some encouragement that overall US growth will continue at a moderate 2 – 2.5% annual pace this year. Equity markets jumped after the release, with European markets closing 1.6% higher, despite some early softness after the European Commission revised its 2013 Euro-Zone growth forecast lower to -0.4% from -0.3%, whilst growth for 2014 is expected to be 1.2%. In the the US both the S&P 500 and the Dow closed at record highs with the Dow rising above 15,000 for the first time during the session. On the currency markets the main mover was USD/JPY which jumped from 98.00 to above 99.40 which will have encouraged the Yen bears and put at test of the hitherto unassailable 100 barrier back onto many investors radar.
Today the UK and Ireland are closed for the May Bank Holiday and the markets will be quieter than usual. On the economic front we have Euro-Zone PMI Services and Retail Sales due this morning. There is no data due from the US today and it will be interesting to see if the Equity Markets can hang on to last Fridays gains.
June S&P 500
Friday was another good example in which it was best to have no position ahead of important economic data. It was good that I covered my short position at 1591 as
the market gapped up after the Payroll No’s were released and never looked back. We now have a very large gap from from Thursday’s close at 1593 to Fridays low at 1604 which I would expect to be closed over the coming sessions. After the cash market opened in Chicago, the S&P rallied to my 1608 sell level and I was stopped out near the days high at 1613 and I am now flat. The S&P is still in the sell area that I have been looking for for the last two months and today I am a seller in small size from 1611/1615 with a wider 1622 stop. The S&P and the Dow are now up over 20% since the lows on November 16th last and I am still convinced that we will run into trouble in May. If it can close the gap I will be a small buyer from 1591/1595 with a 1589 stop.
Euro/USD
The Euro worked well on Friday as we dropped down to my 1.3045 buy level with a 1.3018 low before having a sharp rally to 1.3160. I took profit at 1.3120 on my 1.3045 long position and I am now flat. The Euro is having these very sharp moves up and down and yet the market is not making any progress. Today I will be a small seller on any rally to 1.3190/1.3220 with a 1.3250 stop and I will also look to buy the Euro on any dip to 1.3030/1.3060 with the same 1.3015 stop which is just below Fridays low.
June DAX
I cannot believe how strong the Dax is trading given how weak the economic data is from Germany and especially the Euro-Zone. The Dax has now rallied over 10% in two weeks. It continues to trade in an overbought manner and is still at the top of the Williams Index. After the Payroll No’s I went short at 8025 and I was very quickly stopped out at 8055 and I am now flat. The next big resistance is from 8160/8200 and I will be a seller here in small with a 8220 stop. I do now want to be long the Dax at this time.
June FTSE
After the Payroll No’s were released on Friday the FTSE traded up to my 6450 sell level and I was quickly stopped out of this position at 6475 and I am now flat. As the FTSE is closed today for the May Bank Holiday I will take a look again in the morning when the market reopens.
June BUND
In contrast to the rising equity markets on Friday the Bund got hammered after the No’s. I waited and finally bought at 146.30. My stop at 145.95 never got hit and I am still long. I only have a small position and I will leave my stop at the same level. I will look to cover this position on any rally back to 146.50 and I will also look to go short from 146.60/146.90 with a 147.10 stop.
Gold Rolling Contract
Gold quickly dropped after the Payroll No’s were released on Friday. I took profit at 1462 on my 1477 short position and I am still flat. Today I will look to reset my short position in small size on any rally to 1482/1490 with the same 1495 stop
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