No news was not exactly good news yesterday where, despite little news flow, US Equities had their worst day since October. European markets closed with small gains but they had closed long before the US markets started to be hit hard. US Bond Yields eased again as they still reflected the weak Payrolls Report from last Friday as they traded down to 2.84%, well below the 3.05% made earlier last week. Meanwhile Gold closed over the key $1250 level whilst Oil was hit again. The US Dollar managed to gain against the Euro and Sterling, whilst the JPY and Aussi Dollar outperformed. Ahead of US Earnings season, which started last night, there were some reports that US Equities were expensive. Goldman Sachs issued a report saying that equities were extremely overvalued at these lofty levels and this report was suggested to be behind the selloff, but so too were suggestions by Fed speaker, Lockhart, that the tapering of QE should continue. As a result, the Dow and S&P closed down 1.1% and 1.25% respectively.
There was no data of note yesterday with most attention turning to the two day FOMC Meeting on January 28th which will have Janet Yellan in her first meeting as the new Fed Chair.
This morning on the economic front we have UK CPI and PPI at 9.30 am. This is followed at 10.00 am by Euro-Zone Industrial Production. At 1.30 pm we have US Retail Sales, which will be closely watched by the market, and Business Inventories. Later this afternoon the Fed’s Plosser and Fisher will speak on the economy.
March S&P 500
The S&P had its worst day since November after Goldman Sachs issued a report saying that the stock market was overvalued. Shortly after I posted yesterday morning the S&P was trading at my 1834 buy level and whilst this trade looked okay for a few hours the market just fell apart after the European markets closed and I was stopped out of this position for a small loss at 1829 and I am still flat. Yesterday was another great example of how important it is to have stops in the market as after I got stopped out of this trade the S&P traded down to a new low for the year at 1809.50 before having a small rally into the close, but significantly closed below last week’s low at 1817.50. After yesterday’s selloff the S&P is now trading at the bottom of the Bollinger Band however not yet at the bottom of the Williams Index. Today I will be a reasonably aggressive buyer on any dip to 1800/1807 with a 1797 stop. I will also be a small seller from 1818/1822 with a 1825 stop.
Euro/USD
The Euro worked well yesterday as the market traded down to my 1.3740 buy level and with a nice rally into the close I was able to cover this position at 1.3670 and I am now flat. I still believe as long as the Euro can stay over 1.3600 that it is a buy on dips and today I will again be a small buyer on any dip to 1.3600/1.3625 with a 1.3580 stop. As I have mentioned over the last week my only interest in selling the Euro is from 1.3725/1.3750 with a 1.3770 stop.
I will also be a buyer of the US Dollar Index on any dip to 80.00/80.20 with a 79.80 stop.
March DAX
Shortly after I posted yesterday morning the Dax traded down to my 9490 buy level. At this stage I was already long both the S&P and FTSE and fortunately I decided to cover my long Dax position before the close at 9520 and I am now flat. The key level for the Dax is 9450 and a close below here this evening will be bearish and could lead to a test of the very important 9130/9160 support zone. If the market breaks and trades down to this level over the next few days I will be an aggressive buyer in this range. Today I am going to stand aside and see how the Dax trades at this key 9450 level before making my next trading decision.
March FTSE
My long 6698 position looked good for most of the day until the market was hit hard in after hours trading as the Dow traded lower and I was stopped out of my position for a small loss at 6655 and I am now flat. If the FTSE cannot get back over the now key 6660/6690 resistance level this market could be in trouble. Today I will be a small seller from 6665/6695 with a tight 6710 stop. In contrast to the last few weeks I do not want to be long the FTSE at this time.
Dow Rolling Contract
Shortly after I posted yesterday morning the Dow was trading at my 16405 buy level and after a nice rally after the open in New York I was fortunate to cover my position at 16440 and I am now flat. The only reason that I covered this position was because I was already long the S&P, FTSE and the Dax and I had too many positions in the same direction. Yesterday, in contrast to the other major US Indices, saw the Dow close down for the sixth trading day of the eight trading days that we have had so far this year. The Dow is trading near the bottom of both its Bollinger Band and Williams Index and today I will be a small buyer on any dip to 16205/16240 with a 16170 stop. Given how oversold the Dow is trading I do not want to be short the market at this time.
March BUND
The Bund had a very impressive rally off the 138.70 low made last week and yesterday the market traded up to my 140.85 sell level. The Bund is now overbought and faces very strong resistance at 141.00/141.20 and for this reason I am going to widen my stop to 141.30.
Gold Rolling Contract
Gold continues to trade higher and tested the key 1255 resistance level yesterday. The market closed below this level and I still believe that Gold will retest the key 1300/1350 resistance area over the next couple of weeks. I am still long from 1225 and today I will raise my stop to 1235 on this position.
Silver Rolling Contract
Silver worked well yesterday as the market traded down to my 20.00 buy level before having a nice rally into the close. As I am long Gold I decided to cover my Silver position at 20.40 and I am now flat. I still like Silver and today I will be a buyer on any dip to 20.00/20.30 with a tight 19.80 stop.
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