US Equity markets closed mixed yesterday with the Dow up 0.1% and the S&P and NASDAQ down 0.37% and 0.94% respectively, with the latter not helped by a 6% fall in Facebook shares. The S&P briefly broke the key 1800 level shortly after the open with a 1802.33 high before spending the rest of the day struggling and finally closed down at 1791.53. The US Treasury market volatility has fallen to near-record lows on speculation that the Fed Chairman, Ben Bernanke, will support the case for maintaining QE Bond Purchases in a speech later today. Congress is expected to ratify Janet Yellan’s nomination as Fed Chair later this week and the biggest challenge that the new Fed leader will face is how to taper without increasing interest rates. It will be interesting to see if Bernanke deals with this issue in his speech later.
This morning on the economic front we have the key German ZEW Survey at 10.00 am. This will be followed by the always interesting OECD November Economic outlook for the Euro-Zone. Later at 1.30 pm we have the US Employment Cost Index whilst the Fed’s Evans is due to speak on the economy in Chicago. However the main event will be Bernanke’s speech and the reaction of the markets after he finishes.
December S&P 500
As expected the S&P successfully attempted to break 1800 but finally lost momentum and closed lower on the day. The Daily Sentiment Index at 90% that I reported yesterday was actually for the close last Thursday. On Friday this index closed with a reading of 93% which is one of the highest closes over the last 6 years and is a definite warning signal going forward.
Yesterday the S&P traded up to my 1798 sell level before having a small sell off and I was able to cover my position at 1792 and I am now flat. Today I will be a seller on any rally to 1796/1801 with a 1803 stop. If I am taken short and subsequently stopped out I will use any ‘5 handle sell-off’ to reset my short position with a stop just above whatever new high is created.If the S&P can break and close back below 1775 it will be bearish. Today I will be a small buyer from 1776/1780 with a tight 1773 stop.
Euro/USD
As expected, shortly after I posted yesterday morning I was stopped out of my small 1.3490 short position at 13520 and I am now flat. I am still looking for the Euro to start putting in a top versus the US Dollar and today I will leave my sell level the same at 1.3550/1.3580 with a 1.3610 stop. I will also move my buy level up to 1.3390/1.3420 with a 1.3370 stop.
December DAX
Just as I posted yesterday morning the Dax traded through my sell level and stop at the same time and as a result I did not get a chance to put on my trade and I am still flat. The market then traded up to 9257 before finally following the S&P lower. The Dax is still trading 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 9235/9260 with a 9270 stop which is just above yesterday”s high. I will also move my buy level higher to 9100/9130 with a 9075 stop.
December FTSE
The FTSE worked well yesterday as shortly after I posted the market traded up to my 6720 sell level and after a nice sell-off overnight I have been able to cover my position this morning at 6690 and I am now flat. Today I will still be a small buyer on any dip to 6650/6665 with a 6635 stop. I will also look to go short on any rally to 6720/6735 with a 6745 stop.
Dow Rolling Contract
The Dow continues to be the strongest of the US Indices. Shortly after I posted yesterday morning I was stopped out of my short 15930 position at 15980 and I am now flat.The Dow is still extremely overbought and at the top of the Williams Index but just like the Dax it has started to turn down. I am only trading the Dow in very small size as I am trying to get my edge back in this market and today I will be a small seller from 16030/16060 with a 16080 stop.
December BUND
The Bund worked well yesterday as the market traded down to my 141.50 buy level before having a nice rally and I was able to cover this position at 141.85 and I am now flat I still like the Bund and today I will move my buy level slightly higher to 141.40/141.60 with a 141.25 stop.
Gold Rolling Contract
Gold traded down to my 1271 buy level yesterday and I am still long with the same 1263 stop which is just below last week’s low. If I am stopped out I will be a more aggressive buyer on any dip to 1248/1253 with a 1243 stop.
Silver Rolling Contract
Silver is still trading the heavier of the metals and shortly after I posted yesterday it traded down to my 20.40 buy level. Silver is back down to the bottom of the Bollinger Band and Williams Index and I will leave my stop at 19.95 on this long position.
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