Yesterday was a measured day for the markets with little headway in currencies as participants wait on the sidelines ahead of the very important FOMC announcement tonight with the Fed needing to grasp the nettle and map out a path towards the tapering of QE. Speaking of the Fed, in an interview last night, President Obama signaled that Chairman Bernanke will not be re-appointed when his term expires next January 31st 2014. Lauding his efforts saying that “Ben’s done and outstanding job”, the President said that Bernanke has already stayed a lot longer than he wanted or was supposed to. US data released yesterday did little to move the US Dollar or Treasury Yields with CPI continuing to run below 2%, thus the lower Inflation risk could figure in the thinking of Bernanke and the FOMC.
Economic reports out of Europe showed a pick-up in investor confidence in the ZEW Survey for the Euro-Zone and Germany although there were indications that Germany is still a struggling economy. As for the peripheral economies EU Commissioner Rehn said that the EU is looking at precautionary arrangements that could help countries exit from the Troika aid arrangements more quickly. UK Inflation came in higher than expected at 2.7% and still above the BOE 2% target.
Today is very quiet for economic data with the BOE releasing it’s latest Monetary Policy Minutes this morning whilst all eyes will be on the FOMC announcement at 7.15 pm followed by Bernanke’s press conference at 7.30 pm. Later this evening UK Chancellor Osborne and outgoing BOE Governor King are delivering their annual Mansion House speeches.
September S&P 500
The equity markets continue to rally ahead of the FOMC tonight. I think today’s announcement and the subsequent press conference will be one of the most important events of the year especially given the fact that President Obama has announced that Bernanke will be leaving next January. I am very surprised that the market has not reacted negatively to this news. The S&P rallied up to my 1646 sell level and I am now short in small and I am going to leave my stop at 1651 on this position. The market has now priced in a lot of good news ahead of this evening and either way I will be flat at 7.10pm before the FOMC. If the market reacts negatively initially I will be a buyer on any decent dip and in contrast if the market goes higher after the announcement I will look to go short. Resistance comes in at 1658/1662 where I will be a small seller with a 1667 stop whilst support is at 1630/1634 where I will be a small buyer with a 1628 stop.
Euro/USD
The Euro closed over the very important resistance level at 1.3380 and now I am looking for it to test the 1.3570/1.3600 area over the next two weeks. Today I will be a small buyer on any dip to 1.3350/1.3380 with a 1.3330 stop. I do not want to be short the Euro at this time.
June DAX
The Dax, having been weak all morning, followed the US and the FTSE higher in the afternoon. It traded up to my 8240 sell level and I have covered this position this morning at 8225 for a small profit as I want to be flat ahead of the FOMC tonight. If the Dax breaks and closes below 8180 it will be bearish whilst a break and close over 8325 will be bullish and I would look for the market to trade back to the 8520/8550 resistance area.
June FTSE
After I posted yesterday the FTSE was already trading at my 6350 sell level and I was quickly stopped out of this position on the better than expected UK Inflation data at 6375 and I am now flat. If the FTSE can break and close over 6400 I will be a small buyer with a 6375 stop.
September BUND
The Bund traded down to my 143.25 buy level. I am still long and I will raise my stop on this position to 143.08 which is just below yesterdays low. I still do not want to be short unless we trade to 144.30/144.50 in which case I will take a position with a 144.75 stop.
September Nasdaq 100
The Nasdaq traded up to my 2995 sell level and the market has now closed the open Gap left from last month. I will leave my stop the same at 3025 and I will look to take profit on any move back to the 2960 support area. If I manage to take profit here and the market continues to fall I will still be an aggressive buyer from 2920/2940 with a 2195 stop.
September Nikkei
Another quiet trading day for the Nikkei overnight. I do not want to chase the market and I will leave the parameters the same as yesterday. I will be a small seller on any rally to 13650/13800 with a 13950 stop while I will only look to buy the market on any dip to 12700/12850 with a 12500 stop.
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