European stock markets had their biggest climb in two weeks as the Consumer Confidence Index rose more than expected, to 7.4 versus 7.1 last month. The conflict in US data continued again as Durable Goods Orders dropped in October pointing to a slowdown in US business investment which will, in turn, lead to a cut in US Economic growth this quarter. Meanwhile the Weekly Jobless Claims, released a day early due to the Thanksgiving Holiday today, showed an unexpected decline of 10,000 to 316,000 which is the lowest in two months and the University of Michigan Consumer Confidence had a final reading of 73.1 after a preliminary reading of 72.0. The Dow rose on this news with the market closing at another record high at just below 16,100. The NASDAQ was the biggest mover, closing up 0.7% which is its highest level in 13 years.
In other news, Sterling advanced to it strongest levels since last January after a Government report confirmed Britain’s economic growth accelerated in the last quarter. GDP rose 0.8% boosting Sterling to move over 1.63 versus the US Dollar and below 0.8300 versus the Euro.
This morning on the economic front, we have Euro-Zone Consumer Confidence and PPI. This is followed by the latest German Unemployment Numbers whilst the UK has a 30 Year Bond Auction. The US is closed today and I would expect a very quiet trading day with most US traders not back at their desks until next Monday.
December S&P 500
For the third consecutive day the S&P traded in a very narrow range and with the Futures Market closing at 4.30 pm today and the other markets only open for a half day tomorrow we will not see any real action again until next Monday. As I mentioned earlier in the week the positive seasonal’s will last through tomorrow but the latest measure of investor optimism has now become even more extreme. The latest Investors Intelligence Advisors Survey has traded to its highest level since March 1987.
Yesterday after I posted, the S&P traded up to my 1807 sell level before having a small sell-off and I was able to cover my short position at 1803 and I am now flat. Today I will still be a small seller in the 1808/1812 with the same 1815 stop. A break and close over 1815 will be more bullish and could see the S&P trade up to 1825/1830 and possibly as high as 1840/1850. Given how overbought this market is I do not want to be long at this time.
Euro/USD
The Euro worked well yesterday as we had a nice sell-off after lunch and I was able to cover my 1.3595 short position at 1.3565 and I am now flat. This morning the Euro is back above 1.36 and I will again be a seller on any rally to 1.3640/1.3670 with a 1.3695 stop. I will also raise my buy level to 1.3520/1.3550 with a 1.3495 stop.
December DAX
The DAX traded up to my 9355 sell level yesterday morning and while my short position looked fine for a while, I have just been stopped out this morning at 9375 and I am now flat. The Dax is now up over 15% since early September as the market continues to make new highs in very narrow trading. The Dax is still at the top of the Bollinger Band and Williams Index but as of yet the latter has not yet given a sell signal. Today I will raise my buy level to 9320/9340 with a 9295 stop. My only interest in selling the Dax is on a rally to 9425/9450 with a tight 9460 stop.
December FTSE
The FTSE worked well yesterday as shortly after I posted it traded up to my 6660 sell level and after a small sell-off I was able to cover this position at 6640 and I am now flat. The FTSE continues to underperform the other main indices as shown by the DAX. FTSE spread which has widened from just under 1700 in early September to over 2700 this morning. This is incredible when you see that GDP is much stronger in the UK compared to Germany. The old Keynes saying that ‘markets can remain illogical longer than I can remain solvent’ is very evident here. Today I will still be a small seller on any further rally to 6665/6680 with a tight 6690 stop.
Dow Rolling Contract
This morning the Dow is approaching the 13 year trendline resistance at 16150 that I have mentioned over the last few days. I have gone short here in very small size at 16140 with a wider 16205 stop. I have only gone short in small size as I am going against the positive seasonal trends that this week traditionally brings.
December BUND
The Bund has traded down to my 14125 buy level this morning and I am now long in small with a 140.95 stop.
Gold Rolling Contract
Gold worked well yesterday as shortly after I posted it had a nice rally and I was able to cover my long 1240 position at 1253 and I am now flat. Today I will still be a buyer on any dip to 1230/1236 with a 1224 stop which is just below Monday’s low.
Silver Rolling Contract
No change as I am still long at 19.60 with a breakeven stop. If I am stopped out I will be a more aggressive buyer on any dip to 19.10/19.30 with a 18.85 stop.
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