US Non-Farm Payrolls came in a little ahead of the ‘whisper’ (expected) number at 203k but considerably ahead of the consensus 185k with +9k upwards revision. There was also a drop in the unemployment rate to 7% from 7.3% and a drop in the participation rate. This was a positive enough growth story to support equities whilst Treasury Yields, which initially rose on the report, subsequently fell back. Gold and Oil prices both rose whilst the US Dollar again ended the day soft. The Fed’s Plosser, in a speech on Friday following the Payrolls, said that employment had been positive. There are a raft of Fed speakers this afternoon who may provide more clarity on their level of comfort with the employment situation now that the 7% threshold has been met.
The markets now seem to be more comfortable with the idea of a December beginning to QE Tapering whilst Fed watcher, Hilsenrath, outlined the pros and cons of such a move in the Wall Street Journal over the weekend. There may be a few more details to iron out if the FOMC chooses to implement any other action than a straight taper at next weeks meeting but with the Fed having made it clear that ‘tapering is not tightening’ and the reality of better growth figures, the prospect of tapering a little is less intimidating than before.
The Dow and S&P ended the day up 1.3% and 1.1% respectively. On the economic front today is very light for data. This morning we have German Trade Balance and Industrial Production. We have no economic releases of note from the US whilst, noted above, the Fed’s Locker, Bullard and Fisher all speak on monetary policy and the economy this afternoon.
December S&P 500
The five day loosing streak for the S&P ended on Friday as the market rebounded nicely to close up 1.1% and, in the process, regained the key 1800 level. The three tests of the 1778/1782 support level during the week show how important this support area is and we now need a break and close below 1778 for the market to turn bearish. On the upside we will need to break and close over 1815 for me to look for higher level towards the 1840 area as outlined over the last few weeks. It shows how bullish the market is as despite how overbought the S&P is trading the market could only fall 35 points from its high made on Black Friday before buyers returned. The S&P traded up to my 1807 sell level on the open last night and I am now short with a tight 1813 stop which is just above the high made on Black Friday. If The market manages to break and close over 1815 I will then look to reset a long position. I will also be a small buyer today on any dip to 1798/1802 with a 1795 stop.
Euro/USD
The Euro continues to trade higher despite the US having better Growth Figures and much lower unemployment. Again the Keynes theory ‘that markets can remain illogical longer that I can remain solvent’ comes to mind. The Euro traded up to my 1.3715 sell level and I am now short in small size with a tight 1.3740 stop. The Euro is at the top of the Bollinger Band whilst the Williams Index has started to turn down and in the process hopefully giving a sell signal. I am still long the US Dollar Index at 80.25 and I will leave my stop the same at 79.80.
December DAX
The Dax worked really well on Friday as just after the Non-Farm Payrolls were released it traded down to my 9100 buy level with a 9086 low before later following the S&P higher. I covered my small long position at 9165 and I am now flat. The Dax is back over 9200 this morning and today I will be again be a small buyer on any dip to 9160/9190 with a 9140 stop. I still do not want to be short the Dax at this time.
December FTSE
The FTSE also worked well on Friday as the market had a nice rally off the bottom of the Bollinger Band and Williams Index thus enabling me to cover my long 6490 position at 6545 and I am now flat. The FTSE has good resistance from 6595/6620 and I will be a small seller here with a tight 6630 stop. I will also be a buyer on any dip to 6530/6550 with a 6515 stop.
Dow Rolling Contract
Just like the FTSE the bottom of the Bollinger Band and Williams Index again proved itself to be a fantastic buy signal for the Dow. The market had a huge rally off the 15800 low which it made on Thursday and I was able to cover my long 15815 position at 15960 and I am now flat. The Dow is higher this morning and today I will be a small buyer on any dip to 15940/15970 with a 15910 stop. My only interest in selling the market is against the 13 year trendline at 16140 with a 16180 stop.
March BUND
The Bund rolled to the March Contract with a discount of 16 pips. After the Non Farm Payrolls were released on Friday the Bund trade down to a low of 139.53 before having a bounce. The market is oversold and today I will be a buyer on any dip to 139.70/139.90 with a 139.45 stop.
Gold Rolling Contract
Gold also worked well on Friday as the market spiked down to a low of 1212 before having a nice rally. I bought Gold at 1216 and after a nice rally I was able to cover this position at 1232 and I am now flat. Today I will still be a buyer on any dip to 1212/1220 with the same 1208 stop on any long position. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1182/1200 with a 1175 stop.
Silver Rolling Contract
Silver traded down to my 19.25 buy level before having a nice rally and I was able to cover this position at 19.70 and I am now flat. Today I will be a buyer on any dip to 19.00/19.30 with a 18.85 stop.
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