Global markets, in the main, have absorbed the Fed’s decision to start scaling back its bond purchases with little anxiety. This reflects the fact that the move was pretty much expected, the size of the taper was modest and the forward guidance suggests that rates will remain low for a long time after the bond buying programme ceases. Chairman Bernanke’s emphasis that they want to see inflation closer to target also helped.
Asian markets yesterday followed the Wall Street positive action and European Bourses also caught up with the US yesterday as the Eurostoxx 600 rose 1.7%. Last night the Dow and S&P closed basically unchanged but still near record highs as the Santa Clause rally continues. However overnight the Chinese market was hit again with the stock market closing down over 2% on fears that the economy is slowing down.
Gold was the big loser yesterday, closing down over 3.2% to 1195. Gold is really just a currency of sorts so the move reflects the rising US Dollar. Of course the Fed printing less money means less of a flow into speculative assets like Gold which is not helped by the lack of inflation which is now weighing hard on the metal. The US Dollar continued higher with the key US Dollar Index closing up 0.7% as it challenges the key 81.20 resistance level.
This morning on the economic front we have UK GDP and Public Sector Net Borrowing, followed by Euro-Zone Consumer Confidence at 10.00 am. Later at 1.30 pm we have the latest US GDP Report.
March S&P 500
Today is the last contract expiration for the year as the December contract matures at 2.35 pm whilst the Options do not expire until 9 pm. This can be a very tricky day to trade as you get lots of moves, both ways, until the last of the contracts expire tonight. It is worth noting that after the Options expire the Futures Markets are still open for another 15 minutes and this more often than not can lead to a lot of volatility. After I posted yesterday the S&P traded down to my 1798 buy level with a 1795.25 low before having a nice rally and I was able to cover this position at 1804 and I am now flat. The key level for the March contract is 1806 as a break and close over this level will be very bullish as the cash market will have broken over 1812 for another new high. I still like this market and today I will still be a buyer on any dip to 1796/1800 with a 1793 stop which is just below yesterday’s low. I still do not want to be short the S&P at this time especially with all the contracts expiring later.
Euro/USD
The Euro continues to sell-off as it catches up with the other main currency pairs that trade against the US Dollar. These other currencies have been weak for the last month hence my reason to be long the US Dollar Index. Today I will be a small seller of the Euro on any rally to 1.3660/1.3690 with a 1.3720 stop. I do not want to be long the Euro at this time as the Williams Index gave a strong sell signal on Wednesday night.
I am still long the March US Dollar Index at 79.90 and today I will raise my stop to 80.50.
March DAX
I was very unlucky with my Dax call yesterday as the market dipped to 9290 and in the process just missed my 9270 buy level before having a nice rally and as a result I am still flat. The Dax will close early on Monday and does not re-open until next Friday so you need to be cautious trading this market as anything can happen with a market due to close for 3 1/2 days. I do not want to be short the Dax at this time and today I will be a small buyer on any dip to 9320/9350 with a 9285 stop which is just below yesterday’s low.
March FTSE
Just like the Dax, the FTSE just missed my 6490 buy level by a few points before also trading a lot higher. As I have mentioned over the last week I thought the FTSE would play catch up and have a rally into year end. Today I will raise my buy level to 6520/6540 with a 6485 stop which is just below yesterday’s low.
Dow Rolling Contract
This morning the Dow is trading at the top of the Williams Index but not quite the top of the Bollinger Band. As a result of this development I will raise my sell level to 16240/16270 with a 16295 stop. I still do not want to be long the Dow at this time.
March BUND
No change as I am still a small buyer on any dip to 139.30/139.60 with the same 139.05 stop.
Gold Rolling Contract
After I posted yesterday Gold continued to sell off and is now at the bottom of the Bollinger Band and Williams Index as the market looks to challenge the 1180 low made last June. Gold is now oversold on a Daily and Weekly basis. I added to my very small 1203 long position at 1190 and I will leave my stop the same at 1170 on this position.
Silver Rolling Contract
After I posted yesterday Silver traded down to my 19.20 buy level. Silver is holding in better than Gold at this time and I will raise my stop on this position to 18.70 which is just below last months low.
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