The resolution to the US Fiscal impasse provided some relief to markets but there were big moves in the US Dollar across the board yesterday as markets started to reassess the Fed’s outlook. Despite a US debt deal being done and a crisis averted, for now, investors are wondering whether to expect another Government shutdown and another round of deadline-day deals early next year. A later start to QE Tapering now looks likely and as a consequence the US Dollar got hit hard yesterday.
The US Dollar Index lost over 1% with the major currencies notching up gains of 0.4% (CAD) to 1.3% (GBP). Further highlighting the push-back in tapering expectations,10 year US bond yields lost another 6 basis points yesterday to close at 2.59% and is now down 16 basis points from 2.75% since before the debt ceiling was raised. Sterling was the best performing currency yesterday after stronger than expected UK Retail Sales were reported.
US equity markets had a fairly positive session. The S&P 500 hit a new closing record high and finished up 0.7% on the day,but the Dow was more subdued closing 2 points lower. The Dow was weighed down by IBM and Goldman Sachs earnings reports where both companies reported big falls in revenue but 23 of the 30 Dow stocks rose on the day. No firm date has been fixed yet for the September Payroll data but is likely to be released next week.
This morning we have no economic data of note from the UK or the Euro-Zone whilst at 1.30 pm we have the US Leading Index. Later this afternoon the Fed’s Evans speaks on the economy in Chicago.
December S&P 500
The S&P has now closed up 5 of the last 6 trading sessions with the market now almost 100 handles higher than the 1640 lows made last Wednesday, which was at the height of the Budget impasse in Washington. It is trading at the top of its Daily Bollinger Band and Williams Index and on a more macro view I am looking for the market to make a top of some significance between 1745/1770. Yesterday, the S&P having traded lower all morning then turned around in spectacular fashion to make a new closing record high.
In terms of the trading plan, the market having just missed my 1700 buy level then traded up to my 1722 sell level and I was stopped out of this position for a small loss at 1726 and I am now flat. Today I will be a seller on any further rally to 1738/1743 with a 1746 stop whilst I will also be a small buyer on any dip to 1723/1727 with a 1719 stop.
Euro/USD
The US Dollar was hammered yesterday with the Dollar Index loosing over 1% as the market reckons that QE Tapering will be put on hold until well into 2014. The Euro/USD is trading at the top of its Bollinger Band and Williams Index.
Yesterday it traded up to my 1.3680 sell level and I went short. I am still in this position and I will leave my stop the same at 1.3720 which is just above the highs made earlier in the year. If I am stopped out I will be a more aggressive seller in front of 1.3770 with a 1.3810 stop. I will also be a small buyer on any dip to 1.3590/1.3620 with a 1.3575 stop.
December DAX
The Dax traded up to my 8850 sell level and I am still short. This market is also overbought and I will leave my stop the same at 8875 which is just above the highs made on Wednesday. I will also be a small buyer on any dip to 8760/8790 with a 8735 stop.
December FTSE
The FTSE worked well yesterday as shortly after I posted it traded lower and I was able to cover my 6540 short position at 6515 and I am now flat. I still prefer the FTSE to the other major indices as this market has totally under-performed and I believe the UK economy is doing a lot better. The Retail Sales data released yesterday and the Housing Starts have both been very strong. Today I will raise my buy level to 6520/6540 with a 6495 stop. I do not want to be short the FTSE at this time.
Dow Rolling Contract
I was very unlucky with the Dow yesterday as the market just missed my 15190 buy level with a 15198 low before it rallied 200 points. It then traded up to my 15360 sell level and I was stopped out of this position overnight for a small loss at 15395 and I am now flat. Today my only interest in selling the Dow is on a rally to 15425/15460 with a 15480 stop. I will also be a small buyer on any dip to 15280/15310 with a 15260 stop.
December BUND
The Bund worked well yesterday as the market had a nice rally and I was able to cover my 13938 long position at 139.75 and I am now flat. I still like the Bund and today I will be a small buyer on any dip to 139.25/139.45 with a tight 1239.15 stop which is just below yesterday’s low.
Gold Rolling Contract
Gold had a very impressive day yesterday as the market managed to close over the important 1300/1310 support level. Today I will be a small buyer in this area with a 1295 stop. I do not want to be short Gold at this time.
Silver Rolling Contract
Silver worked well yesterday as shortly after I posted it traded down to my 21.70 buy level before having a nice rally and I was able to cover this position at 22.10 and I am now flat. Today I will still be a buyer in the 21.40/21.70 support area with a 21.20 stop.
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