The US Government has begun a partial shutdown after the Republican-led House of Representatives refused to approve a Budget for next year. A midnight deadline passed without agreement despite a last gasp appeal from President Obama. More than 700,000 US Government workers face unpaid leave with no guarantee of back-pay once the shutdown is over, the first for 17 years.
Republicans have insisted on delaying President Obama’s healthcare reform as a condition for passing the Budget. With less than an hour to go to the deadline the Republicans called for a conference, a bipartisan committee with the Senate, to try and thrash out a deal but Democrats said it was too late to avoid a shutdown. The Senate will meet again at 2.30 pm Irish time to try and resolve the situation. The Dow and S&P fell 0.8 and 0.6% respectively in anticipation of a shutdown whilst the VIX (volatility Index for stocks) rose rose 1.1 points to 16.6.
In Europe, the Euro made some small gains despite Italy’s political woes where PM Latta is trying to form a new Coalition Government.
This morning on the economic front we have UK and Euro-Zone PMI Manufacturing whilst later from the US we have Construction Spending and ISM Manufacturing. Later the Fed’s Yellan (who is tipped to replace Bernanke) speaks to the Economic Club in New York.
December S&P 500
The S&P worked well yesterday despite the Government shutdown. The market dropped down to my 1671 buy level with a 1667 low before having a nice rally and I was able to cover this position before the close at 1678 and I am now flat. The S&P has a gap left in the cash market from September 9 at 1672 and the low for the cash yesterday was 1675 which almost filled this Gap. Today is going to be a very tricky day for scalping as the market is going to be very news-driven by events from Capitol Hill plus we have Yellan speaking later this afternoon.
Today I will be a strong buyer on any dip to 1668/1673 with a 1664 stop whilst I will also be a small seller on any rally to 1700/1705 with a 1708 stop. The reason I have my sell level at this high a price is that in the event that we get a Budget agreement the market will spike and then fall.
Euro/USD
The Euro also worked well yesterday as the market traded up to my 1.3550 sell level before having a small sell of into the close and I was able to cover this position at 1.3525 as I did not want to have a position overnight. The Euro is higher this morning as the US Dollar is getting hit across the board. My ideal selling level of 1.3700/1.3800 is not too far away now. Today I will be a small buyer on any dip to 1.3500/1.3530 with a 1.3480 stop. I do not want to be short the Euro today.
December DAX
The Dax traded up to my 8600 sell level and but unfortunately closed back above the key 8590 support. I closed my short position last night at 8620 for a small loss as I did not want to have a position overnight and I am still flat. Today I will be a small buyer on any dip to 8590/8610 with a 8570 stop. I need to sell the Dax close below 8590 before I will set bearish positions.
December FTSE
No change as I am still a seller on any rally to 6470/6500 with a 6515 stop whilst I will also be a small buyer on any dip to 6380/6410 with a 6365 stop.
December 10 Year Treasury Bond
The bond market is a little weaker this morning on the Government shutdown and I will still leave my buy level the same at 125.30/125.60 with the same 125.10 stop on any long position taken.
December BUND
The Bund worked well yesterday as shortly after I posted the Bund traded down to my 140.40 buy level with a 140.23 low before having a nice rally into the close and I was able to cover my position at 140.65 and I am now flat as I did not want to have a position overnight. Today I will be a small buyer on any dip to 140.10/140.30 with a 139.85 stop.
Gold Rolling Contract
Gold traded down to my 1328 buy level yesterday and I am still long. I will raise my stop to 1319 which is just below yesterday’s low.
Silver Rolling Contract
Silver worked really well yesterday as shortly after I posted Silver traded down to my 21.60 buy level before having a nice rally and I was able to cover this position at 22.00 and I am now flat. Today I will again be a small buyer on any dip to 21.40/21.65 with a 21.25 stop.
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