Equity markets ended the day with strong gains, rising for the 4th day in a row, after the release of positive US Economic data and the fact that Fed officials further calmed market fears of imminent QE tapering. New York Fed President Dudley said that the timetable for tightening policy had not been brought forward and a tapering of QE later this year was only one possible outcome, if the economic recovery continues. Fed Governor Powell also stressed that the timing of QE tapering would be determined by the strength of economic data but it was likely that purchases will continue for some time. These dovish Fed comments saw the US Dollar Index ease back to 83.00 having already made some strong gains towards 83.20 after the US Economic data. Housing data, in particular, was strong with Pending Home Sales up 6.7% in May, versus +1% expected, and up 12.5% over the past year whilst Jobless Claims fell 9k to 346k.
Europe also had some better economic data with Euro-Zone Economic Confidence rising from 89.4 to 91.3 whilst Sterling was the weakest currency yesterday after GDP revisions showed growth of just 0.3% for Q1, down from 06% reported earlier. Markets are starting off on a better tone this morning after stronger than expected Retail Sales from Germany which showed an increase of 0.8% for April versus 0.4% expected.
This morning on the economic front we have UK PMI Construction and Euro-Zone PPI followed later in the US by Factory Orders and the New York ISM. There will also be a couple of speeches later this afternoon by Fed non-voters, Lacker and Williams.
September S&P 500
The positive seasonal factors continue to power the S&P forward with the market up for 4 days in a row. It is so important to remember that when we are approaching month-end and in particular quarter-end that the S&P tends to rally as hedge fund performance payments are correlated with market valuations. I was stopped out of my small 1611 short position at 1614 and I am now flat.
As I said yesterday my target ‘shorting area’ is from 1617/1624 with a 1628 stop. This sell level contains the Gap left from 10 days ago and I would expect the market to have trouble getting through this area. My only interest in buying the S&P is we dip back to 1582/1588 with a 1576 stop.
Euro/USD
The Euro plan worked well yesterday as the market had a nice rally off the 1.3000 support zone and I was able to cover my long position at 1.3060 – I am now flat. I will still look to buy the Euro on dips and today I will be a small buyer on any dip to 1.2990/1.3020 with a 1.2975 stop. My only interest in going short the Euro is if we rally to 1.3130/1.3150 with a 1.3170 stop.
September Dax
Very frustrating yesterday as having planned my trade in the expectation of a Dax rally, unfortunately the market kept missing my buy level before trading higher. The Dax is higher again this morning on better Retail Sales data and today I will be a small buyer on any dip to 7940/7970 with a 7925 stop. My only interest in shorting the Dax is if we rally to 8130/8160 where I will be a reasonable seller with a 8210 stop.
September FTSE
As expected, the FTSE has also rallied into month end and I was stopped out of my small 6130 short position at 6158 and I am now flat. If the FTSE continues to rally I will be a more aggressive seller on any further rally to 6270/6310 with a 6330 stop. I do not want to be long the FTSE at this time.
Gold Rolling Contract
Gold is a market that I have not traded since been short at 1470 and I have just been watching from the sidelines. Just like Silver, Gold is extremely oversold and I suspect that the overnight low at 1179 will hold for a while and we should have a good short covering rally from here. Today I will be a small buyer from 1190/1202 with a 1175 stop.
Silver Rolling Contract
I was stopped out of my 18.85 long position for a small loss at 18.50 and the market traded down to my 18.20 buy level overnight with a 18.19 low. It subsequently rose and I covered half my position at 18.85 and I will leave a 18.50 stop on the rest of the position as I look for a large short covering rally from here. If I am stopped out of this position I will be a more aggressive buyer in front of 18.20 with a 17.80 stop.
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