In the aftermath of the Fed’s non-move, markets eased back yesterday with small falls in US Equities and most major currencies off their post FOMC high.The US Dollar found some modest support helped by better than expected US economic data, with Jobless Claims rising just 15k to 309k (330k was expected) after last weeks computer glitch when two States were not included in the stats. Home Sales held up better than some other indicators were suggesting but some softness lies ahead given the rise in mortgage yields and the decline in Pending Home Sales in recent months.
Meanwhile the Philly Fed Index rose to a 30 month high of 22.5 in September from 9.3 in August. US Bond yields rose off their lows following the data release with the 10 Year Treasury Bond Yield rising 10 basis points to 2.79%. Sterling also gave back some gains yesterday after a disappointing UK Retail Sales release. Headline Sales fell by 0.9% (+0.4% was expected) almost reversing July’s 1.1% increase.
This morning on the economic front we have UK Public Sector Net Borrowing and Euro-Zone Consumer Confidence. Later from the US we have the Fed’s, George and Bullard speaking on the economy in New York and it will interesting to see what their take was on the decision to delay QE tapering. We have no US data release of note today.
December S&P 500
After the fireworks from last Wednesday night the market was back to more normal trading yesterday. Today is contract expiration day for the September S&P Futures Contract as well as other Futures and Options Contracts (this is known as triple witching Friday and happens every third Friday of each quarter). As a result it could be very volatile as the September S&P contract expires at 2.35 pm while the Options contracts do not expire until the cash S&P closes at 9 pm.
Yesterday the plan worked well as the S&P traded up to my 1725 sell level and after a nice sell off I was able to cover this position at 1719. The market then traded down to my 1714 buy level and after a small rally into the close I was able to cover this position at 1717 and I am now flat. I still believe that the S&P will make a top of some significance between here and 1750 as we are now approaching the traditionally weakest time for equities. Today I will be a small seller from 1719/1723 with a 1728 stop which is just above yesterday”s high and I will also be a small buyer on any dip to 1707/1711 with a 1704 stop.
Euro/USD
The Euro also worked well yesterday as shortly after I posted the market was trading at my 1.3560 sell level and after a nice sell-off late in the afternoon I was able to cover this position at 1.3520 and I am now flat. Today I still want to sell the Euro on rallies especially with the German elections on Sunday and since a Merkel victory is already well priced into the market. Today I will be a small seller on any rally to 1.3550/1.3575 with a 1.3590 stop which is just above yesterday’s high. I will still be a small buyer on any dip to 1.3460/1.3480 with a 1.3440 stop.
December DAX
The Dax just missed my sell level before finally having a weak day as this market has been on fire over the last three weeks. Today the Dax could be volatile ahead of the German Elections on Sunday and I will be a small buyer on any dip to 8590/8630 with a 8570 stop. I will also be a seller on any rally to 8720/8750 with a 8775 stop which is just above the highs made on the open yesterday morning.
December FTSE
The September contract expires this morning at 10.00 am and I have now rolled to the December contract with a discount of 30 points. The September contract traded down to my 6620 buy level after I posted yesterday and I have now rolled this position to the December Contract at a price of 6590. I am still long and I will leave a 6555 stop on this position. I still do not want to be short the FTSE at this time.
December 10 Year Treasury Bond
Today I will be a small buyer on any dip to 124.40/124.70 with a 123.95 stop.
December BUND
The Bund just missed my sell level yesterday before falling 80 points and I am still flat. Today I will be a small buyer from 138.40/138.70 with a 138.20 stop. I will also still be a seller on any rally back to 139.30/139.50 with a tight 139.65 stop.
Gold Rolling Contract
Gold, having just missed my buy level after I posted yesterday, had a nice rally but it is back in my buy zone this morning and I have gone long in very small size at 1356. I will leave a 1345 stop on this position as a break and close back below 1350 will be bearish.
Silver Rolling Contract
No change as I am still a small buyer from 22.50/22.75 with a 22.35 stop. A break and close below 22.50 will just like Gold above be short term bearish.
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