A soft German ZEW Survey saw European equities in retreat yesterday and this was followed up by a higher than expected US CPI which added to the negative tone in the US with the S&P breaking its eight day ‘up’ streak by ending down 0.4%. Earnings reports were not bad yesterday but the market read them as lacklustre thus adding to the gloom. The US headline CPI came in at +0.5 for the month and 1.8% for the year, up from 1.4% last month and higher than the 1.6% expected. This was interpreted as running against the argument of so called doves on the FOMC who had been pressing for a continuation of QE on the grounds of inflation running below the Fed”s inflation target. Meanwhile the US activity data yesterday painted a picture of ongoing recovery. The standout was the NAHB Housing Index which jumped to 57 from 52, well above forecasts of 51. On currency markets the US Dollar continues to lose ground as a result of positioning ahead of Ben Bernanke’s testimony later this afternoon.
On the economic front this morning we have the Bank of England Minutes of the first meeting with Mark Carney as Governor. These Minutes will be released after we have the UK Jobless Numbers and Average Weekly Earnings. Later in the US we have MBA Mortgage Applications, Housing Starts, and Building Permits followed by Bernanke delivering his Semi Annual Policy Report and the Q&A session afterwards. Then at 7 pm, just to add to the volatility, the Fed will release its Beige Book.
September S&P 500
The S&P finally broke its winning streak yesterday with traders having one eye on Ben Bernanke’s testimony to Congress today. This will be followed by a lengthy Q&A session ahead of his second testimony to the Senate Committee tomorrow.
Yesterday, the market dropped down to my 1668 buy level with a 1666 low. I have covered this position for a small profit at 1672 as I want to be flat ahead of today’s events. If after Bernanke’s testimony, the market rallies, I will be a seller in small size from 1685/1695 with a 1702 stop and if it falls after he speaks I will be a small buyer from 1660/1665 with a 1657 stop and a stronger buyer on any further dip to 1649/1653 with a 1646 stop. For today given the expected volatility I have to leave wider parameters as his Q&A session could be very interesting.
Euro/USD
The Euro plan worked perfectly yesterday as, after I posted, the market was trading near the lows of the day before having a nice rally which continued until the end of the New York session. I bought the Euro at 1.3060 and I added to this position at 1.3110. I covered half my position at 1.3135 and the other half at 1.3150 as I want to flat ahead of today”s events. I still like the Euro as the market is trading very well and is easily absorbing all of the bad news which has been thrown at it. Today I will be a small buyer on any dip to 1.3090/1.3110 with a 1.3065 stop. I still do not want to be short the Euro at this time.
September DAX
The DAX continues to trade heavy and I will lower my sell level to to 8250/8280 with a 8295 stop. I will also lower my buy level to 7980/8020 where I will be an aggressive buyer if we trade this low with a 7950 stop.
September FTSE
The FTSE plan worked well yesterday as I was able to cover my short 6560 position at 6515 and I am now flat. This morning we have the Bank of England Minutes and since this meeting took place the FTSE is nearly 300 points higher. Today I will be a small buyer on any dip to 6440/6470 with a 6425 stop and I will also be a seller on any further rally to 6570/6600 with a 6620 stop.
Gold Rolling Contract
Gold traded up to my 1292 sell level and I am now short in small size. I will lower my stop to 1302 which is just above the highs made late last week.
Silver Rolling Contract
Very frustrating as Silver is just stuck with hardly any movement at all. I will give this market one more day to rally or else I will go flat. My stop is still unchanged at 19.50 on my two positions which are long from 19.15 and 19.80.
September Bund
The Bund worked well yesterday as the market had a nice rally off the 143.20 area. I have covered my position at 143.70 and I am now flat. Today I will look to reset my long position on any dip to 143.25/143.45 with a 143.10 stop. I do not want to be short the Bund at this time.
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