The US Congress has finally passed a Bill to re-open the Government and raise the Federal debt limit with hours to spare before the country risked default. The Democrat controlled Senate’s bipartisan compromise won approval by 81 votes to 18. The deal was then passed by 285-144 in the House of Representatives whose Republican leadership begrudgingly agreed to support the measure.
The deal will fund the US Government until January 15, 2014 and provides debt ceiling relief until February 7 so we could go through this all over again in 3 months time. The deal requires negotiations to reduce the Budget deficit to be completed by December 13, but of course the two parties remain poles apart in their Budget policy. Markets jumped on the news with US Equities up 1.4%, more than erasing Tuesday’s losses. US Treasuries also rallied with 10 Year Bond Yields falling from 2.75% to 2.65%, whilst the One Month Bill Yield has fallen from a high of 0.44% early yesterday morning to 0.13% which is the lowest level since October 8.
The US data released yesterday was mostly as expected. The NAHB Housing Market Index eased back to 55 in October from a revised 57 level in September. Meanwhile the Beige Book saw modest to moderate growth in the economy in September and early October but noted the increased uncertainty due to the US Fiscal woes. With the US Government set to re-open today, the delayed US data releases will have to be re-scheduled but it is unclear at this stage when the key ones (especially Non Farm Payrolls and Retail Sales) will be released. Nonetheless the damage done to the US economy in the short term as a result of the shutdown means that the Fed’s QE Tapering timetable will be delayed, most likely into 2014.
Today is a very busy day for economic releases. This morning we have UK Retail Sales, followed at 1.30 pm from the US by Weekly Jobless Claims and Housing Starts. At 2.15 pm we have Industrial Production and this data is followed by the the latest Philly Fed Survey. A number of Fed officials are also speaking later, namely Fisher, Evans, George and Kocherlakota who are all scheduled to talk on the economy.
December S&P 500
After I posted yesterday morning the S&P went straight up as Capitol Hill finally got an agreement to re-open the Government and raise the debt ceiling. However this agreement is only for 3 months which means that we will soon be back to watching all of the headlines from Washington again, leading to more two-way action in the markets.
The S&P traded up to my 1716 sell level late yesterday and I have covered this position this morning at 1711 and I am now flat. The S&P is too near its 1724 September 19 high for the market not to test this level. Today I will be a small seller on any rally to 1720/1724 with a 1726 stop whilst I will be a buyer on any dip to 1695/1700 with a 1692 stop.
Euro/USD
The Euro plan worked well yesterday as the market just missed my 1.3570 sell level with a 1.3567 high before trading down to my 1.3480 buy level. It then had a nice rally and I was able to cover this long 1.3480 position last night at 1.3540 and I am now flat. Today I will be a small seller on any rally 1.3650/1.3680 with a 1.3720 stop. The 1.3480 support level is still holding the Euro and I will be a buyer again on any dip to 1.3480/1.3500 with a 1.3465 stop which is just below yesterday’s low.
December DAX
Unfortunately I had my stop too tight on the Dax yesterday as after the market traded up to my 8845 sell level I was stopped out of this position at 8865 (the high was 8867) and I am now flat. The Dax is overbought and at the top of the Bollinger Band but interestingly the Williams Index has started to turn down. Today I will be a small seller from 8830/8850 with a 8875 stop. My only interest in buying the Dax is on a dip to 8670/8700 with a 8649 stop.
December FTSE
The FTSE also traded up to my sell level at 6540. I am still short and I will leave my stop the same at 6572.
Dow Rolling Contract
I was also very unlucky with the Dow yesterday as after the market traded up to my 15330 sell level I was quickly stopped out of this position at 15360 and I am now flat. The Dow is a lot lower this morning as the market decided to sell the news after the House passed the Bill on Capitol Hill.. Today I will look to reset my short position on any rally to 15340/15370 with a 15395 stop. My only interest in buying the Dow is on a dip to 15160/15190 with a 15135 stop.
December BUND
I was also stopped out of my 139.40 long Bund position at 138.95 before it traded higher on the debt ceiling increase. I still like the Bund and I am impressed how quickly it was able to regain the 1.3920 level. For this reason I have bought the Bund this morning at 139.38. I will leave a 139.10 stop on this position.
Gold Rolling Contract
Gold is exploding higher this morning as I write this commentary and is now back above the key 1300 level. I am still flat and I am going to stand aside and let the market settle for the next 24 hours before making my next decision.
Silver Rolling Contract
Silver is also trading higher this morning and is now back above the key 21.50 resistance level. Today I will raise my buy level to 21.40/21.70 with a 21.25 stop. I still do not want to be short Silver at this time.
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