The FOMC Minutes from the December meeting showed a less than unanimous decision to cut monthly bond purchases by $10 billion. Most members agreed that the labour market improved in 2013 and it was likely that it would be sustained and this meant that tapering could begin. Some members voted for a larger reduction whilst others wanted QE to remain unchanged due to the slack that still remained in the labour market and low inflation.
The diminishing marginal benefits from additional QE purchases were also cited as a key reason to start tapering but the Minutes highlight that the Fed will proceed cautiously and future reductions in QE will depend on the economic data and, in particular, continued improvement in the labour market. The US Dollar rose slightly after the Minutes were released whilst US Treasury Yields rose across the curve. The markets were helped initially by the increase in the ADP Employment data which showed a rise of 238K in November, beating expectations for a 200K increase. Whilst the ADP results are not always a reliable guide for Payrolls, they nevertheless improve the chances for an above consensus Payrolls Number on Friday where the forecast is for an increase of 195K.
Today is another busy day for economic data. This morning we have the UK Trade Balance and the Bank of England Rate announcement at 12.00 noon. The Euro-Zone has its latest Business Climate Indicator and Economic Confidence ahead of the ECB Rate decision at 12.45 pm. This is followed by the press conference from Dragi at 1.30 pm which is guaranteed to move the markets. Also at 1.30 pm we have the latest US Weekly Jobless Claims and these numbers will also be closely watched ahead of tomorrow’s Non Farm Payroll data.
March S&P 500
The S&P worked well yesterday as the market traded down to my 1826 buy level before having a nice rally and I was able to cover this position at 1831 and I am still flat. The S&P still has an open Gap from 1838/1842 from last week and if we get a decent Non Farm Payroll Report tomorrow I would expect this Gap to be filled. This is one reason why I have not lowered my sell level for the S&P. I still do not want to be short the market ahead of tomorrow and today I will raise my buy level to 1826/1830 with a 1824 stop which is just below yesterday’s low. If I am taken long and subsequently stopped out I will be a very aggressive buyer on any dip to 1800/1807 with a 1797 stop. My only interest in selling the market is on a rally to 1840/1844 with a 1847 stop.
Euro/USD
After the FOMC Minutes were released the Euro traded down to my 1.3560 buy level. The Euro is still trading at the bottom of the Bollinger Band but not the Williams Index and this is why I only have a small long position. I will raise my stop to 1.3520 on this position and if I am stopped out I will be a more aggressive buyer on any dip to 1.3470/1.3500 with a 1.3450 stop.
March DAX
The Dax just missed my buy level before having a nice rally and so with today being ECB day followed by Dragi’s press conference I do not want to chase the market higher. I will leave my buy level the same at 9440/9470 with a 9425 stop. I still do not want to be short the Dax at this time.
March FTSE
After I posted yesterday morning the FTSE traded back down to my 6670 buy level. I am still long and I will leave my stop the same at 6640. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow also traded down to my buy level at 16460 after the FOMC Minutes were released. This market underperformed versus other major US Indices yesterday and I will give this market one more day to rally. I will leave my stop the same at 16415.
March BUND
Shortly after I posted yesterday morning the Bund had a nice rally and I was able to cover my long 139.60 position at 139.90. Unfortunately it just missed my 139.95 sell level with a 139.93 high and I am still flat. I will leave my sell level the same at 139.95/140.20 with a 140.35 stop. I will also be a small buyer on any dip to 139.00/139.25 with a tight 138.95 stop.
Gold Rolling Contract
No change as I am still long at 1225. My 1217 stop came close a couple of time in stopping me out but so far I am still long and I will leave my stop the same at 1217. If I am stopped out I will be a more aggressive buyer on any dip to 1195/1205 in small with a wider 1189 stop.
Silver Rolling Contract
Unfortunately I was stopped out of the other half of my 18.90 long position at 19.50 and I am now flat. I will still be a buyer today on any dip to 19.00/19.30 with a 18.80 stop.
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