The focus yesterday was on the first release of the second quarter Euro-Zone GDP numbers which were somewhat better than expected. For the Euro-Zone as a whole GDP growth returned, rising 0.3% which was a little ahead of the 0.2% expected and the first quarterly growth for two years and a boost to general confidence. Amongst the countries that have so far reported, growth was broad-based across the Continent with, in particular, France and Germany reporting 0.5% and 0.6% respectively. Even Portugal managed to return to growth!
The Euro barely budged on the growth news whilst the release of somewhat lower US Producer Prices saw some Dollar selling and a 0.5% fall in the S&P. Sterling continued to strengthen after better than expected Unemployment data whilst the Bank of England Minutes showed some disquiet over rising Gilt Yields.
Today is another busy day for economic releases, with UK Retail Sales at 9.30am, followed in the US at 1.30pm by Weekly Jobless Claims, Empire Manufacturing, CPI and the NAHB Housing Market Index. Later at 2.15pm we have Industrial Production and this is followed later in the afternoon by the very important Philly Fed Business Outlook.
September S&P 500
Yesterday, the S&P generated its sixth Hindenburg Omen signal in the last two weeks and this is a big worry going forward for the market. There is also an air of, in my view, misguided complacency around at the moment as shown by the five-day CBOE put/call ratio which slipped to .83 yesterday, it’s lowest reading since shortly before the Dow’s May high.
As a result of the above data and the fact that the market sold off into the close I have had a change of view on the market. The S&P dropped down to my 1683 buy level yesterday and I have covered this position this morning for a small loss at 1680 and I am now flat. Today I will be a seller from 1680/1685 with a 1688 stop. My only interest in buying the market is a on a dip to 1648.50 to 1660 where there is still a very wide open Gap from a couple of months ago and I will try and narrow this buy range if and when we do test this very important support zone.
Euro/USD
The Euro had another very quiet day yesterday but it was interesting to see that there was no buying after the better than expected Euro-Zone GDP data. I am still a seller on any rally to 1.3300/1.3300 with a 1.3345 stop. Again if I am taken short and subsequently stopped out I will be a more aggressive seller from 1.3370/1.3400 with a 1.3420 stop. My buy level remains unchanged from yesterday at 1.3195/1.3220 with a 1.3175 stop.
September FTSE
The FTSE dropped down to my 6570 buy level before having a small rally and I was able to cover this position at 6592 and I am now flat. The FTSE continues to trade heavy versus the other main European Indices despite the good Economic data we have had from the UK over the last month. The next big support for the FTSE is from 6500/6525 and I will be a small buyer here with a 6485 stop. A break and close below 6500 will be very bearish.
September DAX
No change as I am still a small buyer from 8330/8360 with a 8295 stop. Similar to the FTSE above, the DAX is approaching very important support at 8300. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 8200 with a 8170 stop.
September BUND
After I posted yesterday the Bund just missed my 140.50 buy level before having a nice rally. The market is still oversold and today I will raise my buy level to 140.45/140.70 with a 140.35 stop. Again my only interest in selling the Bund is on a rally to 141.60/141.90 with a 142.10 stop.
Gold Rolling Contract
Gold worked well yesterday as we had a nice rally and I was able to cover my 1318 long position at 1334 and I am now flat. Today I will be a small buyer on any dip to 1320/1326 with a 1314 stop which is just below the recent low.
Silver Rolling Contract
Silver also worked well as the market continued to rally off the 18.00 low, made last month, to reach its highest level since the beginning of June and is at 22.00 this morning. Silver is again overbought here and I have covered my 21.25 long position at 21.85 and I am now flat. Today I will be a small buyer on any dip to 21.40/21.70 with a 21.15 stop.
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