Equity markets ended last week generally flat on their highs whilst US 10 Year Bond Yields have hit 3% which should help support the US Dollar. Oil prices are a little higher whilst Gold is weaker this morning after a nice run up on Friday with the Euro also hitting highs before reversing.
We have now reached the ‘Year End FX Merry-Go-Round’ where compulsory re-balancing of portfolios meets low liquidity. This results in moves such as the Euro moving to a new high for the year at 1.3895 before retracing much of the move. The comments from ECB’s Weidman that low inflation should be used to justify lose monetary policy as well as Dragi’s noting there is no immediate need for more rate cuts are both supportive. Yesterday’s news that the millionaire 75% income tax in France is constitutional could be seen as both positive or negative for the Euro.
Political turmoil in Turkey continues to weigh on the Turkish Lira whilst there is ongoing upheaval in Egypt. This morning on the economic front the only data of note from Europe is Italian PPI. This is followed at 3 pm by the latest US Pending Home Sales and the Dallas Fed Business Index.
March S&P 500
The S&P ended the week slightly lower as the market was not helped by the downgrade for Twitter which saw their share price being hit by 13%. Volume levels were again very low on Friday which is as expected for this time of the year whilst sentiment readings are still one-sided across the board. This week’s Investor Intelligence Advisor’s Survey showed that the lopsided market opinion of advisors is now even more extreme. The Bull-Bear plurality has show up to 45.5 which is the widest disparity between bulls and bears since 1987. Moreover the bulls have outnumbered the bears for 114 consectutive weeks which is also another record.
After I posted on Friday, the S&P traded up to my 1839 sell level before having a small sell-off and I was able to cover this position at 1835 and I am now flat. The S&P has a full trading day today and tomorrow and the markets will close Wednesday for New Year’s Day before normal trading resumes on Thursday. We are still in the positive seasonally strongest times of the year making it very difficult to short the market for any length of time. Today I will be a small seller on any rally to 1839/1843 with a 1845 stop. I still believe this market needs a decent sell-off before trading higher and for this reason I still do not want to be long the market at this time.
Euro/USD
The Euro just missed my 1.3900 sell level with a 1.3895 high before having a dramatic reversal lower and I am still flat the Euro. Today I will lower my sell level to 1.3790/1.3820 with a tight 1.3835 stop. I do not want to be long the Euro at this time.
The US Dollar Index traded down to my 79.95 buy level with a 79.80 low. I am still long and I will raise my stop to 80.20 on this position as I look for the US Dollar Index to at least re-test the key 81.00 resistance level. A break and close over 81.00 will be very positive for the Dollar going into 2014.
March DAX
After I posted on Friday the Dax traded up to my 9600 sell level. The Dax will close today at 1pm and does not re-open again until Thursday and even though the market is extremely overbought, and at the top of the Bollinger Band and Williams Index, I have decided to cover this position for a break-even this morning as I do not want to have open position in a market that will be closed for the next few days. I will take another look on Thursday when it re-opens.
March FTSE
The FTSE did indeed break the key 6695 resistance level on Friday and I bought the market at this level and I am still long. I will raise my stop to 6680 as I still look for the FTSE to trade higher into year-end tomorrow. Even though it is overbought I still do not want to be short at this time.
Dow Rolling Contract
The Dow worked well on Friday as shortly after I posted the Dow traded up to my 16520 sell level before having a nice sell-off enabling me to cover this position at 16475 and I am now flat. The Dow is still very overbought and today I will be again be a small seller on any rally to 16520/16550 with a 16570 stop. I do not want to be long the Dow at this time.
March BUND
After I posted on Friday the Bund traded down to my 138.90 buy level and I entered long. However, just like the Dax market, the Bund will close early today and will not re-open until Thursday and for this reason I have covered my long position at 138.92 this morning.
Gold Rolling Contract
Gold had a nice spike higher after I posted on Friday and I was able to cover my long positions from 1203 and 1190 at 1215 and I am now flat. I still like Gold and today I will again be a small buyer on any dip to 1185/1195 with a 1178 stop.
Silver Rolling Contract
This morning Silver has traded down to my 19.70 buy level. I am still long and I will leave my stop the same at 19.35. If I am stopped out of this position I will be a more aggressive buyer on any dip to 18.70/18.90 with a 18.45 stop.
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