Equity markets continued their recent slide with nearly 5 stocks down for every 1 stock up on the NYSE and this theme has continued overnight with the Nikkei losing another 2.7% as the market awaits the latest FOMC Minutes, due tomorrow evening. There was little or no economic news out yesterday and the trading desks around the world are still on skeleton staff as most traders are on their summer holidays until next week.
Yesterday the Euro traded near a one week high whilst Treasury yields climbed to two year high as investors wait to see if there are any clues as to when the Fed will start to taper it’s QE Programme. In Rest of the World News, the Indian Rupee slid to a record low against the US Dollar. The problem for emerging countries is that until long term yields in the US stabilize the threat to global growth, and thus the liquidity squeeze, they will remain vulnerable as shown by the recent moves in the Rupee.
Today is another very quiet day for economic data with the highlight been the release of the Chicago Fed National Activity Index this afternoon.
September S&P 500
The S&P managed to close on the 1645 support level highlighted in yesterday’s commentary. The market dropped down to my 1649 buy level, initially, before having a nice rally and I was able to cover this position at 1655 (the high was 1657) before the market spent the rest of the day on the defensive and again it closed on its lows. The S&P is very oversold on the daily charts and we are still at the bottom of the Bollinger Band and Williams Index. I do not want to be short ahead of the FOMC Minutes tomorrow and I am looking for a small squeeze in the S&P ahead of this release. Today I will be a buyer from 1640/1644 with a 1637 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1630 with a 1625 stop. My only interest in selling the market is on a rally to 1660/1665 with a 1672 stop.
Euro/USD
The Euro traded up to my 1.3370 sell level before having a small sell-off and I was able to cover this position at 1.3345 and I am now flat. Today I will still look to sell the Euro on any rally to 1.3375/1.3400 with the same 1.3420 stop. My buy level will remain unchanged from yesterday at 1.3230/1.3260 with a 1.3210 stop.
September FTSE
The FTSE finally left a sell extreme from the 6500 level that I have been looking for over the last week. I covered my 6490 short position too early at 6445 yesterday and I am now flat. The market is now testing the key 6400 support area and, just like the S&P, the FTSE is at the bottom of the Bollinger Band and Williams Index. Today I will be a seller on any rally to 6460/6490 with a 6510 stop. I will also be a small buyer on any dip to 6370/6390 with a 6355 stop.
September DAX
I was lucky yesterday as just after the DAX hit my 8340 buy level we had a nice short-covering rally and I was able to close this position at 8380 and I am now flat. Today I will lower my buy level to 8230/8260 with a 8210 stop. I still do not want to be short the DAX at this time.
10 Year Treasury Note
This market worked very well yesterday as it dropped down to my 124.60 buy level with a 124.48 low and after a rally overnight I have covered this position at 125.10 and I am now flat. I still like this market and I will use any dip to 124.60/124.80 to reset my long position with a 124.40 stop.
Gold Rolling Contract
Gold, having made a new 1385 rally high off the 1180 low from last month, is back on the defensive this morning. The market dropped down to my 1355 buy level and I am going to lower my stop to 1345 in order to give this trade some room.
Silver Rolling Contract
Silver worked out really well yesterday as the market traded up to my 23.30 sell level and then was hit hard overnight. I was able to cover this position this morning at 22.60 and I am now flat. Today I will be a small buyer on any further dip to 22.00/22.30 with a 21.80 stop. Yesterday was another great example how important Bollinger Bands and the Williams Index are as technical indicators in helping to set up the successful trade.
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