The US Dollar fell against the Euro and the Japanese Yen after Federal Reserve Chairman Ben Bernanke said the Central Bank’s main interest rate will probably remain near zero for a considerable time after the QE Asset Purchase Programme ends. In a speech to Economists in Washington yesterday Bernanke said that the labour market has shown meaningful improvement since the Fed’s Bond Buying Programme started. He also said that a preponderance of data would be needed to begin tapering and that benchmark interest rates may remain low perhaps well after the jobless rate falls below the Feds 6.5% threshold.
The Dow ended the day flat whilst the S&P and NASDAQ lost 0.2% and 0.45% respectively. Stocks were not helped by comments from US Billionaire, Carl Icahn who said that he fears that the US stock markets are set for a big drop, with many companies overvalued because their earnings are driven by low borrowing costs rather than organic growth. In another sign that the stock market is overvalued the Schiller Cyclically Adjusted P/E Ratio shows that the S&P 500 is 51% higher than the historical mean of 16.3. However against these overvaluations the Fed’s ‘monetary tailwind’ is still very positive.
This morning the Bank of England will release it’s latest Monetary Policy Committee Minutes whilst we have no data of note from the Euro-Zone. Later at 1.30 pm we have US Retail Sales, CPI, Existing Home Sales and Business Inventories. Later this afternoon the Fed’s Bullard will speak on the Economy and Monetary Policy in Chicago. This is then followed by the latest FOMC Minutes from the October 29-30 Meeting and this has the potential to move the markets.
December S&P 500
Today is a very important day for economic data with a host of releases due. Then at 7 pm we have the main event, being the FOMC Minutes. None of my parameters were hit yesterday and given today has the potential to be very volatile I am going to leave my buy and sell levels unchanged. I am still a buyer on any dip to 1776/1780 with a 1773 stop whilst I will still 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 high is put in.
Euro-USD
Overnight the Euro traded up to my 1.3565 sell level with a 1.3580 high. I am still short and I will lower my stop to 1.3595. If I am stopped out I will be a more aggressive seller on any subsequent rally to 1.3640/1.3670 with a 1.3695 stop. I am still a buyer on any dip to 1.3390/1.3420 with a 1.3370 stop.
December DAX
The Dax had a very quiet trading session yesterday and I am still flat. I will move my buy level slightly higher to 9110/9140 with a 9095 stop. I will still leave my sell level the same at 9235/9260 with a 9270 stop which is just above last Monday’s record high.
December FTSE
Overnight the FTSE traded down to my 6665 buy level and I am now long in small. I do not want to risk to much on this trade and I will leave a 6640 stop on this position. I will also be a small seller on any rally to 6720/6735 with a 6745 stop.
Dow Rolling Contract
The Dow just missed my 16030 sell level with a 16026 high before having a nice sell-off and I am still flat. Given today is FOMC Minutes day I will raise my sell level to 16050/16080 in small size with a 16085 stop. There is huge resistance at 16132 which encompases a 13 year trendline and if I am stopped out of my short position I will be a more aggressive seller on any rally to 16100/16150 with a 16175 stop.
December BUND
The Bund traded down to my 141.45 buy level yesterday and I have just been stopped out of this position for a small loss at 141.25 and I am now flat. Today I will still be a buyer of the Bund on any drop to 140.70/140.95 with a 140.55 stop. I still do not want to be short the market at this time.
Gold Rolling Contract
No change as I am still long in small size at 1271 with the same 1263 stop. If I am stopped out and Gold subsequently falls further I will still be a reasonable buyer on any dip to 1248/1254 with a 1243 stop.
Silver Rolling Contract
No change as I am still long at 20.40. I will leave my stop the same at 19.95.
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