The US Stock Market continued its recovery from Thursday’s low to close up over 200 points on a stronger than expected Non Farm Payrolls Number which rose 176k, although the Unemployment Rate remained unchanged at a high 7.6%. Extraordinary volatility greeted the market in the aftermath of the report with the Euro/USD touching 1.3190 before soaring to 1.3280 moments later. USD/JPY initially jumped to 96.40 before dropping sharply to 94.99 before rebounding again to over 98.00 – we are still at this level this morning on talk of Japanese intervention. The Nikkei followed the Yen path, dropping to 12550 before it rallied nearly 1000 points to close at 13470 this morning for a gain of over 4.6%. The last two weeks have been the most volatile market conditions that I have seen since the crisis of 2008!
In Europe, Chancellor Angela Merkel said Euro-Zone Nations must follow Germany’s lead in tightening budgets and reshaping labor markets in order to return to growth as she seeks to stave off any crises before the German elections in September. As European leaders struggle with recession and unemployment, Merkel praised Germany’s efforts to keep its economy stable through the crisis and said that the Euro-Zone’s 17 Members States must stick to the recipe of budget discipline and improving competitiveness in order that growth can take hold.
Today on the economic front we have Euro-Zone Senflix Investor Confidence and Italian GDP. The UK releases its latest RICS House Price Balance whilst we have nothing of note from the US however the Fed’s Bullard is to speak on the economy in Montreal, Canada this afternoon.
June S&P 500
Friday was another wild day for the S&P as the the over-leveraged shorts were forced to buy into the market to close their positions after the better than expected Non Farm Payroll Numbers were released. The McClellan Oscillator which hit a low of over -330 on Thursday improved to close at -126 on Friday but still sits in negative territory enhancing the prospect that this action is just a short and violent squeeze before sellers return.
After the Payroll Numbers were released the S&P dropped to 1618 before the market rallied to 1635. I went short at 1633 and I covered this position for a small gain at 1628. The market then traded to 1626 before spending the rest of the day just grinding higher. Today I will be a small seller from 1645/1650 with a 1652 stop and I will also be a small buyer on any dip to 1630/1634 with a 1627 stop. If I am taken long and subsequently stopped out I will be a a more aggressive buyer in front of 1615 with a 1609 stop.
Euro/USD
The Euro also had another wild day on Friday and the market just missed my 1.3190 buy level before it rallied 100 points and then fell the same amount just a quickly – I am still flat. My big dilemma is trying to decide on whether the Euro made its high on Thursday at 1.3310 or are we going to test this level again one more time before it starts to roll over to the down side.
Today I will be a small seller on any rally to 1.3215/1.3240 with a tight 1.3250 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller on any rally to 1.3320/1.3350 with a 1.3380 stop. My only interest in buying the Euro is if we drop to 1.3090/1.3120, in which case I will do so with a 1.3050 stop.
June FTSE
The FTSE worked very well on Friday as the market had a nice rally and I was able to cover at 6360 on my 6305 small long position and I am now flat. Today I will be a small buyer on any dip to 6350/6370 with a 6340 stop. I do not want to be short the FTSE at this time.
June DAX
The Dax had a Key Day Reversal (See Education Section) on Friday as it made a lower low at 8030 on Friday morning before making a new closing high on Friday as we traded back to 8284 after the Non Farm Payrolls were released. I went short the Dax at 8200 in small and I was stopped out of this position at 8240 and I am now flat. Today I will be a small buyer on any dip to 8190/8220 with a 8175 stop and I will also be a small seller on any rally to 8295/8320 with a 8335 stop. Again given the extreme volatility I am only trading in small size.
September BUND
The Bund plan worked well on Friday as my 143.40 buy level was hit after the Payrolls were released and I was quickly able to cover this position at 143.80 and I am now flat. Today I will be a small buyer on any dip to 143.00/143.20 with a 142.85 stop. I do not want to be short the Bund at this time.
June Nasdaq 100
The Nasdaq did not hit my level on Friday and the market is back testing the 3000 level again this morning. I will be a small seller on any rally to 3000/3020 with a 3035 stop.
Silver Rolling Contract
I am so glad that I had a tight stop on Silver on Friday as the market dropped to my 22.40 buy level before quickly stopping me out of this position at 22.20 and I am now flat. Silver is back down to the bottom of its Bollinger Band but not the Williams Index and today I will be a buyer on any further dip to 21.00/21.30 with a 20.70 stop.
June Nikkei
The Nikkei plan worked well on Friday as I was able to cover my 12680 long position at 13150 and I am now flat. The Nikkei continued to rally overnight and the market has now closed over the important 13200 resistance level. Today I will be a small buyer on any dip to 13200/13300 with a 13050 stop.
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