Europe followed the Nikkei higher yesterday, led by the FTSE, after some good construction figures out of the UK with the PMI Construction rising to 50.8 from 49.4 versus expectations of 49.8. However US stocks were on the slide most of the day with the Dow and S&P breaking their ’20 Tuesday-in-a-row’ winning streak to both close lower. The key theme in markets remains the timing of the Feds easing back on purchases of Bonds – the tapering of QE. The market was not helped by comments from Esther George, the Kansas Fed President, who urged the Central Bank to cut back on its $85 billion per month program because of the improving economy. She also expressed concern that the current low interest rate environment was encouraging investors to buy riskier assets. Also John Williams, the San Francisco Fed President, said yesterday that a modest pull back in the Bond buying program could be appropriate as early as this summer.

The markets were not helped overnight after a speech from Japanese Prime Minister Abe who vowed to slay the Deflation Monster! The Nikkei is down almost 700 points or over 5% from its early morning high as Abe’s plan does not have any surprises that meet the overblown expectations in the market. The Nikkei is now down almost 20% or 3000 points in the last two weeks. The Nikkei needs to hold the 12800 level or this sell off could accelerate.

Today is another busy one for economic data. This morning we have UK and Euro-Zone PMI Services. The Euro-Zone also releases its latest GDP Number whilst Germany is to sell Bonds. Later from the US, we have MBA Mortgage Applications, Non-farm Productivity, Unit Labor Costs and Factory Orders, ISM Non-Manufacturing Composite and finally the ADP Employment Change which will be closely watched for clues ahead of Friday’s Non-Farm Payrolls. Later this evening the Fed releases it’s Beige Book.

June S&P 500

Another wild day for the S&P yesterday as the ’20 Tuesday-in-a-row Rally’ came to an end, but not without a fight. The S&P rallied up to my 1640 sell level with a 1645 stop. I covered this position at 1633 and then the market dropped down to my 1628 buy level with a 1621.50 low. I had to be patient here before finally the market rallied into the close and I was able to cover this position at 1633 and I am now flat. The S&P is down hard again this morning on the back of the lower Nikkei overnight. I feel that this market is an accident waiting to happen but it is very hard to fight the Fed. Today I will be a small seller on any rally back to 1631/1635 with a 1638 stop. If I am taken short and subsequently stopped out I will use any ‘five handle sell off’ (see the Education Section) to go short one more time with a stop above whatever high is put in. My only interest in buying the S&P is  on any dip to 1608/1614 in small with a wider 1599 stop.

Euro/USD

The Euro just missed my 1.3110 sell level with a 1.3105 high and I am still flat. I will leave the parameters the same as yesterday, I will be a seller on any rally to 1.3110/1.3140 with a 1.3155 stop. I will also look to buy the Euro on any dip to 1.2970/13000 with a 1.2950 stop.

June FTSE

The FTSE plan worked well yesterday as after I posted the market traded up to my 6555 sell level. I covered this position at 6510 and I am now flat. I still believe the FTSE is trading heavy and today I will look to reset my short position on any rally to 6520/6540 with a 6565 stop which is just above the highs made this week. If the FTSE sells off from here I will be a small buyer on any dip to 6420/6445 with a 6395 stop.

June DAX

The Dax finally broke my 8280 support zone last night and I went short the market in small at 8270. I will leave my stop the same at 8310.

June BUND

The Bund just missed my 143.10 buy level and today I will raise my buy level to 143.10/143.35 with a 142.95 stop. I still do not want to be short the Bund at this time.

June Nasdaq 100

After I posted yesterday, the Nasdaq rallied back to my 3000 sell level. I covered this position  at 2970 last night and I am now flat. Today I will use any rally back to 2985/3000 with a 3020 stop to go short again. We still have a Gap left from early May at 2911 and I would expect this Gap to be filled at some point.

Silver Rolling Contract

Silver just missed my buy level yesterday. I do not want to chase the market and I will leave my buy level the same at 21.90/22.20 with a 21.75 stop.