Yesterday was all about the FOMC and we saw some pretty immediate price action after the release of the Fed Minutes from the July 31st meeting. When the headlines hit the screens that the FOMC showed broad support for the tapering timeline that Bernanke had outlined at the June FOMC Press Conference the US Dollar and US Treasuries surged higher whilst stocks got hit hard with the market sensing that it was becoming close to a done deal. But then in the aftermath of the initial reaction, a cooler reading of the full Minutes began to permeate the market. The Minutes outlined some misgivings about the economy with questions about how much the labour market has really improved and fears that the US Budget sequestration could weigh heavily on growth. Hilsenrath, from the Wall Street Journal, drew attention to this more guarded assessment five minutes after the Fed Minutes were released and the Dow surged on this news before the market had a late fade as Bond Yields started to pick up again. The Dow ended the day down 0.7% for its sixth down day in a row.
Today in the economic news we have Euro-Zone PMI Services/Manufacturing (which will be very important and a market mover) this morning followed in the US by the Weekly Jobless Claims, House Price Index and leading indicators. Later this afternoon we have the Jackson Hole Economic Summit and for the first time in 25 years the Fed Chairman will not address this gathering.
September S&P 500
The S&P worked really well today as after the Fed released its Minutes the market traded down to my 1640 buy level before having a 15 handle rally as all the traders who shorted the market got run in. I covered my 1640 long position at 1649 and I am now flat. The market then got hit into the cash close and and the Futures ended the day down 20 full handles from the 1655 high. The S&P is very oversold on the Daily Chart and the market traded down to the key 1630 support level overnight before finding support. Today I will be a buyer on any dip to 1630/1635 with a 1627 stop and given how oversold we are if I am stopped out I will use my 5 handle rule to reset my long position (for example if the market stops me out at 1627 and makes a new low at 1623 and we subsequently trade back to 1628 I will go long again at 1628 with a stop below whatever low is put in, in this case 1622.5 would be my stop). I do not want to be short at this time unless we trade back to 1654/1658 with a 1661 stop.
Euro/USD
After I posted yesterday morning the Euro was trading at 1.3395 which was in my buy zone and just before the Fed released its minutes I was stopped out of this position at 1.3365 and I am now flat. As this is the second day in a row that I have been stopped out for a small loss I am going to stand aside and take another look at the Euro tomorrow.
September DAX
The DAX continues to outperform the other major indices as the market is now focused on Merkel’s re-election campaign next month. This morning the Dax dropped down to my 8260 buy level and I am now long with a stop at 8245 which is just below this mornings low. If I am stopped out I will be a more aggressive buyer in front of 8200 with a 8180 stop. I still do not want to be short the Dax at this time.
September FTSE
I was lucky with the FTSE yesterday as the market dropped down to my 6390 buy level in the afternoon and then it a nice rally before the Fed Minutes were released and I was able to cover this position at 6420 and I am now flat. This morning, given how oversold the FTSE is trading, I have gone lone long again in small at 6380 and I will leave my stop at 6340 which is just below the overnight lows. My only interest in selling the FTSE is on a rally to 6470/6500 with a 6510 stop.
10 Year Treasury Note
Unfortunately I was stopped out of my 124.70 long position at 124.40. However, given how oversold this market is together with my belief that the Fed won’t hike interest rates for at least another year I have re-entered this position again at 124.20 this morning. I will leave a 123.95 stop on this trade as I do not believe that the 10 Year Treasuries will break 3% without having a meaningful rally first.
Gold Rolling Contract
Gold also had a wild day yesterday. Overnight the market dropped down to my 1355 buy level and I am now long with a 1345 stop.
Silver Rolling Contract
Silver just missed my 22.30 buy level with a 22.45 low and is now following Gold higher. This morning I will raise my buy level to 22.30/22.60 with a 22.25 stop which is just below the low made earlier in the week.
Recent Comments