The S&P 500 Index fell yesterday, after seven consecutive weekly gains that lifted it to a record high, as energy shares retreated following Iran’s agreement to limit its nuclear programme. The S&P fell 0.1% to 1802.50 erasing earlier gains of 0.2% whilst the Dow rose 0.1% to close at another record high of 16,072. Meanwhile the VIX (Volatility Gauge) rose 4.3% to close at 12.79. The S&P was not helped by data showing that Pending Home Sales fell In October for a fifth consecutive month amid higher borrowing costs that are dampening the real-estate recovery. They dropped 0.3% after a 4.6% drop in September versus market expectations of a 0.1% rise. The housing market is not been helped by price increases and a tighter supply of homes for sale.
In Europe, Bundesbank President Weidmann said that the ECB’s Governing Council should only temporarily be responsible for banking supervision. The ECB is due to assume oversight over the Euro-Zone banks from November 2014 and started a three stage review of balance sheets this month. Weidmann also said that Sovereign Bonds should be adequately risk-weighted and exposure to individual Sovereign Debt should be capped as is already the case for private debt.
This morning on the economic front we have Italian Consumer Confidence. This is followed by the Governor of the Bank of England giving a speech on the economy. Later at 1.30 pm from the US we have Building Permits and Housing Starts. This is followed at 3 pm by the Richmond Manufacturing Index and Consumer Confidence.
December S&P 500
The S&P, having being higher when I marked prices 24 hours ago, fell after the disappointing Pending Home Sales data was released. To continue my theme of the market being ‘over-bought, over-loved and over-valued’ the Daily Sentiment Index, released last Friday, showed the market at 93% bulls which is one of the highest readings since prior to the 1987 crash. However as I mentioned yesterday this is one of the seasonaly strongest weeks of the year with the markets closed for Thanksgiving on Thursday and only open for a half day on Friday, therefore it is hard to be short this week.
Yesterday the S&P had a nice sell-off after lunch enabling me to cover my 1808 short position at 1801 as the market traded down to a 1798 low before bouncing into the close. Today I will still be a small seller from 1808/1812 with the same 1815 stop. I will also raise my buy level to 1794/1798 with a 1791 stop.
Euro/USD
The Euro also worked well yesterday as I covered my short 1.3565 position at 1.3510 and I am now flat. The market just missed my 1.3470 buy level with a 1.3489 low before having another rally overnight. This is a currency war as no Central Bank wants a strong currency at the moment as the world continues to try and fight the major threat of deflation.
This morning I will raise my buy level to 1.3490/1.3520 with a tight 1.3475 stop which is just below yesterdays low. I will also be a small seller on any further rally to 1.3590/1.3620 with a 1.3635 stop.
December DAX
The Dax also worked well yesterday as shortly after I posted the market traded at my 9315 sell level with a 9327 high before following the S&P lower after lunch and I was able to cover my short position near the close at 9285 and I am now flat. The Dax continues to trade at the top of the Bollinger Band and Williams Index and is approaching strong resistance at 9350. Today I will be a small seller from 9340/9360 with a 9375 stop. My only interest in buying the Dax is on a dip to 9190/9290 with a 9170 stop.
December FTSE
The FTSE is still trading very heavy versus the other major indices. Just before the close last night the market traded down to my 6680 buy level I am still long. I will raise my stop to 6665 as I do not want to risk too many points on this trade. The Williams Index has started to turn up and for this reason I do not want to be short the FTSE today.
Dow Rolling Contract
The Dow just missed my 16125 sell level before having a nice sell-off and I am still flat. The Dow still faces a major hurdle at the 16150, 13 year trendline, that I mentioned yesterday and today I will raise my sell level to 16140/16170 with the same 16195 stop on any short position.
December BUND
The Bund close slightly over the 141.20 resistance level that I mentioned yesterday. I am still flat and today I will be a small buyer from 141.05/141.25 with a tight 140.95 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
The Daily Sentiment Index reading at 9% bulls that I mentioned yesterday certainly worked as Gold rallied $30 off its 1226 low. Unfortunately I had my buy order at 1225 and so I missed this easy move and I am still flat. Yesterday’s close was the highest of the prior three days and this upward reversal suggests that the selling pressure has exhausted itself. Today I will raise my buy level to 1232/1240 with a 1224 stop which is just below yesterdays low.
Silver Rolling Contract
Silver worked very well yesterday as just like Gold above we had a nice upward reversal into the New York close. I covered half of my 19.60 long position at 20.20 and I will leave a breakeven stop on the other half as I look for Silver to retest the important 20.95 key resistance level.
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