Equity markets held onto their gains yesterday after the big jumps last Friday in the wake of the better Non Farm Payrolls report in the US. Although London and Tokyo were closed the S&P 500 closed up 0.2% driven by banks and techs.The former rose after a very good Fed Senior Loan Officers Survey reporting easier lending standards and better demand for credit. Financials ended the day up 1.1%. On the Currency markets, the US Dollar was stronger over the past 24 hours with the Euro lower on remarks from ECB’s Dragi who said that they will be looking at all the data that arrives from the Euro-Area in the coming weeks and if necessary we are ready to act again. The Aussi Dollar took a big hit over the last 24 hours after Retail Sales posted a worse than expected outcome of -0.4%.
Today markets should be getting back to normal after yesterday lacklustre session and on the economic front we have UK BRC Shop Price Index this morning and Lloyds Employment Confidence. We also have German Factory Orders followed by US Consumer Credit.
June S&P 500
The S&P rallied to a new high yesterday at 1615, even though the Dow did not do so too, on what was one of the slowest trading days of the year so far, with volume very low. The S&P is still overbought on the daily and weekly charts and the Daily Sentiment Index of traders has pushed back to 87% which is near the previous record high of 91% which occurred two years ago on April 29th 2011 and this led to a 22% decline in the market over the next six months. I am not saying that the same scenario is going to happen here but it gives you an idea of how over extended this market is but until we get two big down days in a row it is very hard to be short. The S&P has rallied for the last 16 Tuesdays in a row which is incredible.
In terms of trades it finally hit my 1614 sell level yesterday and I am still short. I only have a small position and I will leave my stop the same at 1622. I will also be a small buyer on any dip to 1591/1595 (which is where Friday’s Gap comes in) with a 1588 stop.
Euro/USD
The Euro finally broke lower and hit my 1.3050 buy level after comments from Dragi late yesterday. I have taken a small profit overnight at 1.3090 and I am now flat. Normally after comments like yesterday from Dragi the Euro would be a lot lower but, just like the stock market at the moment, every dip gets bought. Today I will be a small buyer on any dip to 1.3025/1.3050 with a 1.3015 stop and I only want to sell if we rally back to 1.3190/1.3220 with a 1.3250 stop.
June DAX
Even though the Dax is extremely overbought we are in very important resistance zone from 8100/8200 so I will leave my sell level the same at 8160/8200 with a 8220 stop. I do not want to be long the Dax at this time.
June FTSE
The FTSE is back open today after been closed for the May Bank Holiday. It, just like the other main stock markets, is very overbought and at the top of the Bollinger Band, however the Williams Index is starting to turn down and I will be a small seller here from 6480/6500 with a 6520 stop. Just like the Dax I do not want to be long the FTSE at this time.
June BUND
The Bund came close to stopping me out of my 146.30 long position but I get to survive another day. I still like the Bund and I will give it one more day to perform. I will leave my stop the same at 145.95 and I will still look to take profit at 146.50 and I will also look to go short from 146.70/146.90 with a 147.15 stop.
Gold Rolling Contract
Gold just missed my 1482 sell level before heading lower overnight. As I have been saying recently, this 1470/1490 is huge resistance and it is going to take a lot for Gold to break this level as there are a lot of stale long positions at this level. My own view is that Gold is going to retest her April lows. Today I will lower my sell level to 1465/1480 with a 1485 stop. It goes without saying that I do not want to be long Gold at this time.
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