On Friday, the US Non Farm Payrolls Report came in much stronger at 204k versus the 120k expected leading to another volatile day for US Stock markets. The market initially sold off after the release of this strong headline report but then rallied hard after the Consumer Confidence Numbers were released which were the weakest for some time. The theme of ‘good news is bad and bad news is good for the markets’ continues as economists debate when the Fed will start the tapering process. Despite the very strong headline report the unemployment rate ticked back up to 7.3% from 7.2%. Even though the strength of the Payroll Report brings December into the equation for tapering to begin the favourite month according to a Bloomberg Survey, conducted over the weekend, is still March.
US Treasuries had the largest fall in 4 months, after the Payroll Report, with 10 Year Yields rising 15 basis points to 2.75% whilst the Dow S&P and NASDAQ ended the day up 1.1%,1.35% and 1.6% respectively, erasing the previous day’s losses. The US Dollar also gained on the back of the strong Payroll Report. Gold had another bad day on Friday ending down 2.2% as Hedge Funds continue to cut bullish bets on Fed Stimulus Outlook. Goldman Sachs issued a Report saying the Gold will end the year around current levels before dropping to $1050 in 2014.
Today, we have no economic data of note on either side of the Atlantic. The US Bond market is closed for Veterans Day, however the stock markets are open as normal.
December S&P 500
The S&P retraced a sizeable portion of Thursday’s sell off on Friday especially after the University of Michigan Survey came in a lot weaker than expected. Normally when we get such two way volatility it is the signal that a trend is changing. The S&P needs to break and close over 1775 to negate the Key Day Reversal from Thursday and given today is a US Holiday I would not expect to many traders at their trading desks. If the S&P can break and close over this 1775 it will be very bullish and opens up the possibility of a test of 1810.
On Friday the S&P traded up to my 1755 sell level before quickly stopping me out of this position at 1760 and I am now flat. I have to respect that the S&P managed to close back over 1758 and today I will be a small buyer from 1758/1762 with a 1754 stop. I will also be a seller on any rally to 1770/1774 with a 1776 stop.
Euro/USD
The Euro continues to trade softly after the ECB surprise rate cut on Friday. The Euro just missed my 1.3310 buy level with a 1.3318 low before having a nice rally and I am still flat. Today I will raise my buy level to 1.3300/1.3330 with a 1.3285 stop which is just below Thursday’s low. My only interest in selling the Euro is on a rally to 1.3450/1.3480 with a 1.3510 stop.
December DAX
The Dax worked well on Friday as the market traded down to my 9000 buy level before having a nice rally and I was able to cover this position at 9070 and I am now flat. The market has now left another ‘buy extreme’ from this key 8980/9000 support zone resulting in the Dax is still a buy on dips rather than a sell on rallies. Today I move my buy level up to 9040/9070 with a 9025 stop. I still do not want to be short the Dax at this time.
December FTSE
The FTSE also left a buy extreme from the key 6640 support zone. The market never spent any time below this level on Friday and as a result I am still flat. Given how strong the FTSE traded back higher on Friday,this market is also a buy on dips rather than a sell on rallies and today I will be a buyer from 6670/6695 with a 6655 stop. In contrast to last Friday I do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow is proving to be the most difficult market to trade over the last few weeks as the theme of ‘will they or wont they taper’ continues to dominate trading. Late on Friday the Dow traded up to my 15680 sell level before stopping me out of this position at 15725 and I am now flat. I am going to stay flat unless we trade up to 15820/15850 where I will be a small seller with a 15880 stop.
December BUND
After the Non Farm Payrolls where released on Friday the Bund got hit hard and the market traded down to my 141.40 buy level before stopping out of this position for a small loss at 141.20 and I am still flat. I still like the Bund as it is a safe haven for any Euro crisis and today I will be a small buyer from 140.80/141.00 with a 140.65 stop. If I taken long and subsequently stopped out I will be a more aggressive buyer from 139.90/140.20 with a 139.70 stop.
Gold Rolling Contract
Gold has been working very well over the last few weeks as my theme of trading this market with tight stops is working. Gold fell another 2.2% on Friday as the $1300 was breached and it really needs to break back above $1310 for the market to be back on a even keel. If Gold does not start to trade higher soon it open up the possibility of retesting last months 1251 low. A break and close below 1250 will be very bearish and would probably lead to a test of the 1180 low from June. Last Friday the market traded down to my 1296 buy level before stopping me out of this position at 1288 and I am now flat. Today I will be a small buyer from 1255/1265 with a 1248 stop. I will also be a small seller from 1300/1308 with a 1312 stop.
Silver Rolling Contract
Silver continues to trade better than Gold. Shortly after I posed last Friday Silver traded higher and I was able to cover my 21.50 long position at 21.85 and I am now flat. I still like Silver and today I will be a small buyer from 21.00/21.30 with a 20.80 stop.
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