After the shock of the US Equity markets being hit hard on Monday things looked a little better today with the Dow and S&P rebounding 0.75% and 1.1% respectively. The US data was more optimistic, the Fed speakers are comfortable with a 3% US GDP growth outlook, earnings were okay and European Production was solid. This allowed for a relief rally in US stocks, a move higher in US Bond Yields and the US Dollar whilst Gold ended the day a touch weaker. The Aussi Dollar and the Japanese Yen reversed recent gains and are the under-performing currencies in the G10.
The US earnings season started modestly positive with JP Morgan beating headline expectations. That followed US Retail Sales delivering a somewhat mixed bag of good headline numbers but revisions lower to the prior month. Overall though the control group which feeds into US GDP was, on average, a little better than expected and US Small Businesses were more optimistic about the outlook with sentiment rising to 93.9 from 92.5 last month.
FOMC members, Plosser and Fisher, were speaking and with both being noted hawks they did not disappoint. They both advocated greater and faster tapering which is not a surprise but the new Board are likely to have some interesting conversations ahead starting at the FOMC Meeting on January 28th. The markets were also helped by US Budget Committee agreeing a spending plan through until September 30th which alleviates concerns about the US Fiscal situation.
Today is another busy day for economic data. This morning we have German GDP and Euro-Zone Trade Balance at 10.00 am. This is followed at 1.30 pm by US PPI and Empire Manufacturing. At 7 pm the Fed will release its latest Beige Book Report which will definitely have an impact on the markets. Finally, the Fed’s Evans will speak on the economy in Iowa.
March S&P 500
Well all changed yesterday as the market almost took back all the losses that it incurred on Monday with a 22 handle rally from the low into the close. Unfortunately the market did not trade as low as my 1807 buy level and I honestly thought that it would have difficulty breaking the 1824 level. However having gone short the S&P at 1820 I was quickly stopped out of the position at 1825 and I am now flat. I am not happy that I have been whipsawed twice in the last two days but at least I had tight stops on my positions. Despite what Goldman Sachs said about the S&P been overvalued I still believe the market is okay as we are in the wrong time of the year to be bearish stocks. I still believe that we will make new highs ahead of the next Fed Meeting and today I will be a small buyer from 1828/1832 with a 1825 stop. I do not want to be short the market at this time.
Euro/USD
Yesterday was a very quiet trading session for the Euro. I am still a buyer on any dip to 1.3610/1.3630 with a 1.3590 stop. My only interest in selling the Euro is still on a rally to 1.3725/1.3750 with a 1.3770 stop.
Today I will raise my buy level on the US Dollar Index to 80.40/80.60 with a 80.15 stop.
March DAX
I am glad that I decided to stand aside and observe the Dax yesterday. The market had opened below the key 9450 level and then turned around after the production numbers and traded a lot higher into the close. I am very impressed at how easily the Dax was able to regain the 9450/9500 resistance zone and this will now become key support going forward. Today I will be a buyer from 9510/9540 with a 9475 stop. I still do not want to be short the Dax at this time.
March FTSE
I am very frustrated with the FTSE as after I posted yesterday the rally that I have been looking for finally happened. It traded up to my 6680 sell level before quickly stopping me out of this position for a small loss at 6710 and I am now flat. Today I will be a buyer from 6700/6720 with a 6770 stop.
Dow Rolling Contract
Just like the S&P the Bollinger Bands and Williams Index really worked for the Dow yesterday. After I posted, the Dow just missed my 16240 level before trading higher for the rest of the session. I am not going to chase the Dow here but I will be a buyer from 16290/16320 with a 16240 low which is just below the low made early yesterday morning. I do not want to be short the Dow today as it is still underperforming the other major US Indices.
March BUND
The Bund plan worked well as after stocks started to rally the market sold off and I was able to cover my short 140.85 position from Monday at 140.55 and I am now flat. The Bund will have strong resistance getting through the key 141.00/141.40 resistance zone and today I will be a seller in this area with a 141.50 stop. Remember a break and close over 141.40 will very bullish and could possibly target the 143.00 next resistance level.
Gold Rolling Contract
No change as I am still long Gold at 1225 with the same 1235 stop. It really needs to break and close over the 1250/1255 resistance zone for the market to really start to move higher.
Silver Rolling Contract
Shortly after I posted yesterday morning Silver traded down to my 20.20 buy level. I am still long and I will leave my stop the same at 19.80. If I am stopped out of this position I will be a more aggressive buyer on any dip to 19.30/19.60 with a 19.10 stop.
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