Tuesday was another quiet day for trading with most traders only returning to their desks this morning or next Monday when normal trading will resume. With Europe mostly closed, the US equity markets closed at another record high with the cash S&P closing at a new all time high of 1848, US 10 Year Bond yields closed higher at 3.03% whilst Gold rebounded to close at 1205 having been lower all day.
Across 2013 the Euro outperformed the US Dollar whilst the Japanese Yen and Australian Dollar were the weakest currencies in the G10. Yesterday China reported a fall in its PMI to 51 versus 51.2 expected but remains in expansionary territory but only at levels seen last August. This reading is softer but not substantially so and may weigh on markets but with other Chinese data generally very stable it would not do to over react.
This morning on the economic front we have the latest Manufacturing PMIs from Europe at 10.00 am which are expected to be little changed from last month with the UK Manufacturing PMI released earlier at 9.30 am. Later at 1.30 pm we have the Weekly Jobless Claims from the US and this is followed at 3 pm by the latest ISM Manufacturing PMI.
March S&P 500
The S&P closed the year, as it started, with another rally as the market ended up nearly 30% for the year for an incredible move. After I posted on Tuesday the market just missed my 1833 buy level before trading higher and I am glad that I decided to stand aside form going short. Today through Monday can be difficult to trade as new money comes into the market whilst traders are trying to position themselves from what can be a very volatile first week of trading. We are in the seasonally very strong time of the year for the stock market making it very difficult to go short at this time. Today I will only trade in small size and I will be a small buyer on any dip to 1833/1837 with a 1828 stop. My only interest in selling the S&P is on a rally to 1854/1858 with a 1862 stop.
Euro/USD
The Euro has been very volatile over the last 10 days and I would expect this volatility to continue over the next week as traders return to their desk after the Christmas and New Year celebrations. The Euro really needs to break 1.3900 for me to turn bullish as I still believe it is ‘a sell on rallies’ especially with the US 10 Year Bond Yield finally breaking the very important 3% level. Today my only interest in selling the Euro is on a rally to 1.3850/1.3880 with a 1.3910 stop. I still do not want to be long the Euro at this time.
I am still a buyer of the US Dollar Index on any dip to 79.80/80.00 with a 79.60 stop.
March Dax
The Dax continues to trade at the top of the Bollinger Band and Williams Index but as Keynes famously said ‘the markets can remain illogical longer than I remain solvent’ and it is very important to remember his wise words as they have certainly saved me a lot of money over the years. The Dax has now rallied from a low of just 3500 to nearly 9700 since 2008. I still believe that market are going to run into trouble this month and today I will be a small seller from 9710/9740 with a 9760 stop.
March FTSE
The FTSE is also trading at the top of the Bollinger Band and Williams Index having had a nice rally up over the last 10 days. Historically the first few days of the new year is positive for UK equities as new money is put to work. However given how overbought the market is trading I will be a small seller from 6770/6800 with a 6820 stop. My only interest in buying the FTSE is on a dip to 6650/6670 with a 6625 stop.
Dow Rolling Contract
No change as I am still flat the Dow and I am going to stay flat today as I want to see how the market reacts to its new closing highs. I still believe the Dow is extremely overbought but I want to stand aside today and watch the price action before committing to a new trade tomorrow.
March BUND
The Bund finished the year on the defensive as finally traders started to sell the market. The Bund is still oversold and today I will be a small buyer from 138.40/138.60 with a 138.25 stop. I still do not want to be short the Bund at this time unless we break and close below the key 138.00 support level.
Gold Rolling Contract
No change as I am still long Gold from last Tuesday at 1195 with the same 1178 stop. Given that sentiment towards Gold is near historic lows and this is why I am looking for a rally to develop near the key 1180/1200 support zone.
Silver Rolling Contract
Silver worked out well on Tuesday as after I was stopped out of my small 19.70 long position at 19.25 the market traded down to my 18.90 aggressive buy level with a 18.69 low. I am still long and I am hoping that is this accelerated move lower followed by the spike higher will prove to be the final wash out. I will move my stop higher to a break even at 18.90 on this long position and if I am stopped out I will be a more aggressive buyer on any dip to 18.50/18.80 with a 18.35 stop.
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