It is all coming together for the Fed to start scaling back its Bond purchase programme at it’s September 18 meeting and the markets are reacting accordingly. Stock markets in Europe and the US were down on the prospect of easy money drying up, with US Bond Yields rising to new highs, and both Gold and Silver higher as alternative investments to Stocks. US Weekly Jobless Claims fell to 320k, the lowest since October 2007 at the onset of the Global Financial Crisis, and CPI rose 0.2% . The rest of the US data was mixed, reporting yet another strong NAHB-Housing reading but weaker Industrial Production, Empire Manufacturing and Philly-Fed indices. Adding to the mix was the better than expected UK Retail Sales which rose 1.1% in July versus 0.3% last month. The US Dollar having been initially stronger was hit badly with the US Dollar Index falling by 0.7%.
This morning on the economic front we have Euro-Zone CPI and Trade Balances. Later at 1.30 pm we have US Unit Labor Costs and Housing Starts/Permits. This is followed at 3:00 pm by the very important University of Michigan Consumer Confidence Report.
September S&P 500
My concerns about this market yesterday morning certainly came to fruition with a bang as the S&P had its worst day since June. After I posted yesterday morning the market hovered around my 1680 sell level before getting hit hard before lunch and spent the rest of the day falling with small intermittent rallies. The market has now got two open gaps on the downside from 1648.5/1654 whilst on the upside the market left a large gap yesterday from 1669/1682. I went short at 1680 and I covered this position way too early at 1672. The market subsequently dropped down to my 1660 buy level and I covered this position for a small profit at 1664 and I am now flat. Today as the market is very oversold I will be a reasonably aggressive buyer on any dip to 1647/1651 with a 1645 stop. I will also be a seller on any rally back to 1672/1682 with a 1685 stop.
Euro/USD
What a day for the Euro yesterday as this market was all over the map. The market traded up to my 1.3300 sell level before getting hit hard. I covered my short position at 1.3250 and the the market dropped down to my 1.3220 buy level with a 1.3205 low. I covered this long position at 1.3280 and I am now flat. The Euro is back approaching my long term sell levels and today I will be a seller on any further rally to 1.3370/1.3400 with a 1.3420 stop. I will also be a buyer on any dip to 1.3240/1.3270 with a 1.3220 stop.
September FTSE
The FTSE is proving one of the more difficult markets to trade at the moment. The market initially reacted favourably to the very good Retail Sales data before getting hit hard and the market dropped down to my 6520 buy level before quickly stopping me out of this position at 6485 and I am now flat. The fact the FTSE could not rally after the good numbers yesterday and the fact we closed below the important 6500 level is a concern. Today I will be a small seller on any rally to 6475/6500 with a tight 6515 stop. I do not want to be long the market at this time.
September DAX
The DAX worked well yesterday as the market dropped down to my 8350 buy level with a 8308 low before having a nice rally into the close and I was able to cover this position at 8385 and I am now flat. As I mentioned yesterday this 8300 level is crucial for the market going forward and today I will be a small buyer on any dip to 8310/8335 with a 8290 stop. Again 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
The Bund also dropped down to my 140.60 buy level and again showed how important it is to have stops in the market as I was quickly stopped out of this position at 140.35 and I am now flat. The Bund is very oversold and if the market can break and close below 140.00 it should lead to an acceleration lower. Today I will be a small seller from 140.50/140.75 with a 140.90 stop.
Gold Rolling Contract
Some days you get lucky in this trading game and yesterday was one of those for me in Gold. The market dropped down to my 1325 buy level and just missed my stop before having a nice 2.3% rally and I was able to cover this position at 1355 and I am now flat. Gold is overbought here and I will be a small buyer on any dip to 1345/1352 with a 1339 stop. If Gold can continue to consolidate here and close over 1350 for another few days it will be very bullish.
Silver Rolling Contract
Whereas I was very lucky with Gold above, Silver was not as kind as the market just missed my buy level by 3 cents before having a 5% up-day and I am still flat. Silver is way overbought this morning and I will be a small seller from 23.20/23.50 with a tight 23.70 stop.I will also look to buy the market on any dip to 22.25/22.55 with a 21.95 stop.
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