Ahead of the FOMC Minutes, due tonight at 6 pm, it was a rather listless day for markets in thin liquidity conditions coupled with the absence of large market making news. After Asia was dominated yesterday by quite a bit of selling in Equities, European Markets continued with that theme with the Eurostoxx Index down 0.8%. After a flat start the S&P managed to eke out a small gain, closing 0.4% higher led by retailing stocks, after some better than expected earnings from the likes of Best Buy whilst the Dow closed down for the fifth day in a row. The return of some mild buying of stocks failed to inspire any more appetite for the US Dollar which lost more ground to the Euro. The Euro was supported by words from German Chancellor Merkel who said that the ‘world has understood that Europe stands firmly by the Euro and that we work for its survival’. Her words were soothing if totally familiar!
This morning on the economic front we have UK Public Sector Net Borrowing and the CBI Trends Total Orders, ahead of US Existing Home Sales at 1.30 pm. This is followed by the long awaited FOMC Minutes at 6 pm when hopefully we will get a clearer picture as to when QE tapering will start.
September S&P 500
As expected we got a nice squeeze in the S&P ahead of the release of the FOMC Minutes this evening. The S&P dropped down to my 1643 buy level and, after a nice rally, I was able to cover this position at 1652 and I am now flat. These Minutes are really important and we should get some two way volatility after they are released. I am going to stay flat here and I will be a small seller on any rally to 1662/1667 with a 1672 stop, whilst I will also be a buyer on any dip to 1635/1641 with a 1629 stop. Given the expected volatility later I will trade in smaller size with a larger stop.
Euro/USD
The rally in the Euro continues to frustrate most traders as despite the stronger data out of the US compared to Europe the US Dollar continues to weaken. As Keynes famously said ‘markets can remain illogical longer than I remain solvent’ and certainly this is the case with the Euro at the moment especially with Merkel on the Election trail ahead of the German Elections on September 22nd. After I posted yesterday the market quickly traded up to my 1.3380 sell level before stopping me out at 1.3420 and I am now flat. I am surprised at how easily the Euro broke through 1.3400 and I have to respect the market action here. For this reason I will be a small buyer from 1.3390/1.3410 with a 1.3365 stop.
September DAX
The DAX traded down to my 8260 buy level before having a small rally and I was able to cover this position at 8295 and I am now flat. Today I will leave my buy level the same at 8230/8260 with a 8210 stop. I still do not want to be short the Dax unless we break and close below 8200.
10 Year Treasury Note
No change as I am still a small buyer on any dip to 124.60/24.80 with the same 124.40 stop. If I am taken long and subsequently stopped out I will be a very aggressive buyer on any dip to 123.30/123.50 with a 122.95 stop.
September FTSE
Frustrating as the FTSE just missed my 6390 buy level with a 6393 low before having a nice rally. For today I am still a buyer on any dip to 6375/6395 with a 6355 stop while I will also be a seller on any rally to 6470/6500 with a 6510 stop.
Gold Rolling Contract
Gold worked well yesterday as the market had a nice rally and I was able to cover my 1355 long position from yesterday morning at 1370 and I am now flat. Today, given the FOMC Minutes release later, Gold has the potential to be fairly volatile. I am still a small buyer on any dip to 1348/1355 with a 1345 stop.
Silver Rolling Contract
No change as I do not want to chase the market here, so I am still a buyer on any dip to 22.00/22.30 with the same 21.80 stop.
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