A partial shutdown of the US Government has now been in place for the past 28 hours as Congress has still not agreed to pass Budget Funding Bills. Reports suggest that more than 818,000 workers have now been sent home without pay. Essential services workers are being kept on with their pay deferred but guaranteed for a later date. The Federal Government employs about 2.9 million civilian workers in all.
Market participants are taking the view that this partial shutdown won’t be especially damaging to the economy but until the effects are known the shutdown is a reason for the Fed not to reduce its $85 billion bond buying programme. Hence stock markets were higher yesterday with the S&P up 0.8% after strong gains in most of Europe apart from in the UK. The biggest loser yesterday was Gold which fell in excess of 3% on speculation that the ratings agency Fitch will downgrade the precious metal.
This morning on the economic front we have UK and Euro-Zone PMI. The ECB are also meeting today where no cut in rates is expected but Dragi is holding a press conference after the announcement at 1.30 pm. The US will release its latest ADP Employment data which will be closely watched ahead of Friday’s Non Farm Payrolls. Later this afternoon Ben Bernanke is due to speak in St Louis. However all eyes will be on Washington this afternoon as President Obama has cancelled an overseas trip to try and resolve the Budget and he is due to meet leading chief executives from the business world at 4 pm Irish time.
December S&P 500
The S&P just missed my 1673 buy level yesterday before having a nice rally up to a high of 1691 before sellers returned with traders nervous that we have no sign of a Budget agreement. The key level for the market is 1668 and as long as we hold above this level the market is fine but a break and close below 1668 will be very bearish and could possibly lead to a test of 1640 and even the 1605/1615 major support zone. Today the ADP Employment No’s at 1.30 pm will very important as will Bernanke’s speech from St Louis.
Today I will raise my buy level to 1671/1675 in small with a wider 1665 stop which is just below Monday’s low. I will only look to put on a short position if we break and close below 1668.
Euro/USD
The Euro plan worked well yesterday as shortly after I posted the market was trading at my 1.3520 buy level and after a small rally I was able to cover this position at 1.3540 and I am now flat. Today my only interest in buying the Euro is on a dip to 1.3460/1.3480 with a 1.3440 stop. The Euro could become volatile later as we have the press conference from Dragi and Italian Government confidence vote.
December DAX
I was very unlucky yesterday as the Dax just missed my 8610 buy level with a 8614 low before the market went up almost 90 points – I am still flat. The key level for the Dax is 8590 and as long as we can hold above this level the market is fine but a break and close below here will be very bearish. Today I will still be a small buyer on any dip to 8590/8610 with the same 8570 stop.
December FTSE
The FTSE plan worked well yesterday as shortly after I posted the market dropped down to my 6400 buy level before having a nice rally and I was able to cover this position at 6430. and I am now flat. This morning the FTSE is very weak and at the bottom of the Bollinger Band and Williams Index and for this reason I am a buyer from 6325/6360 with a 6295 stop. I do not want to be short the FTSE at this time.
December 10 Year Treasury Bond
No change as I am still a buyer from 125.30/126.30 with the same 125.10 stop.
December BUND
Shortly after I posted yesterday the Bund traded down to my 140.20 buy level. I am still long and I will leave my stop the same at 139.85. If I am stopped out of this position I will be a more aggressive buyer in front of 139.50 with a 139.30 stop.
Gold Rolling Contract
Yesterday was another great example of how important it is to have stops in the market as shortly after I posted I was very quickly stopped out of my 1328 long position at 1319 as speculation of a Fitch downgrade hit the wires. Gold managed to close below the very important 1290 support level and before I get to bearish on Gold I would like to see if we close below this important support again today before I decide to set a short position. My only interest in Gold today is to be a small buyer from 1250/1260 with a 1240 stop.
Silver Rolling Contract
After I posted yesterday Silver traded down to my 21.55 buy level before quickly stopping me out of this position at 21.25 and I am now flat. Silver traded down to a low of 20.60 before having a nice bounce and today I will be a small buyer on any dip to 20.60/20.80 with a 20.45 stop.
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