Yesterday was a good day for equity markets on the back of better earnings reports and economic data. Both the Dow and the S&P ended the day up 1.25% whilst European markets averaged a 1.6% gain. US Jobless Claims fell 20k last week, to 331k, thus adding to the expectation that today’s Non Farm Payrolls will be close to +200k. On the US corporate front, a solid result from Disney supported positive sentiment whilst European stocks were boosted by Vodafone and Daimler.
European stocks lost some ground after ECB President Dragi’s press conference which disappointed those looking for a dovish commentary but quickly recovered after the strong opening from US stocks. The ECB made no change to policy despite some speculation that they might cut rates. Dragi highlighted the need to wait for further information as the ECB’s forecasts for 2014 are likely to show growth of over 1% which is hardly consistent with an increase in deflationary pressures. The Euro jumped sharply from below 1.3500 to over 1.3620 on his comments but has since eased back to 1.3585 this morning.
The Bank of England also made no change to policy and we now await next week’s inflation report for updated growth and inflation projections.
This morning on the economic front we have UK Trade Balance and Industrial Production. This is followed at 1.30 pm by the key data of the month from the US, namely Non Farm Payrolls and the Unemployment Rate. The market will be anxious to see if last months shocking numbers will be revised upwards from the original +67k.
March S&P 500
It is amazing that almost every time we have a major data release or FOMC Meeting that the S&P rallies into the announcement as the traders with the short positions are forced to cover. Yesterday was no exception with the S&P rallying 40 handles from Tuesday’s low at 1732. I am very annoyed with myself as I should have bought the market instead of trying to be too clever and waiting for the market to hit my 1743 buy level. Instead the market traded down to a low of 1744 before rallying and I am still flat. Today, if it were not for the Non Farm Payrolls at 1.30 pm, I would be a seller here at 1772 as I would expect the market to have difficulty breaking the 1780/1885 key resistance. Today if we get a good number I will be a small seller from 1779/1784 with a 1789 stop. I will also be a small buyer on any dip to 1751/1756 with a 1749 stop.
Euro/USD
The Euro had a nice rally after Dragi started his press conference and traded up to my 1.3610 sell level. Given that today is Non Farm Payrolls I have decided to cover my short position this morning at 1.3585 and I am now flat. I will be a seller on any rally to 1.3660/1.3690 with a 1.3710 stop. I will also move my buy level higher to 1.3500/1.3530 with a 1.3475 stop.
US Dollar Index
I am glad that I covered my long Dollar Index position last Tuesday as it is back trading below the 81.00 level. As I have mentioned over the last two weeks the Dollar Index needs to break 81.50 for me to turn really bullish. Today I will leave my buy level the same at 80.55/80.80 with a 80.30 stop.
March DAX
I was very unlucky yesterday as the Dax just missed my 9120 buy level by 6 points before having a 160 point rally but at least I was not short and I am still flat. I am impressed how easily the Dax has been able to regain the key 9180/9200 previous resistance level and this zone should now act as good support. Today I will be a small buyer from 9160/9200 with a 9135 stop. Given the volatility I have to use wider stops and I still do not want to be short the Dax at this time.
March FTSE
The FTSE plan worked well yesterday but I had to be quick as the market traded up to my 6475 sell level before having a quick sell off and I was able to cover this position at 6445 and I am now flat. I am going to stay flat as the market is at a critical juncture. If we break 6530 I will buy the market with a 6495 stop. I will also be a buyer on any dip to 6430/6450 with a 6395 stop.
Dow Rolling Contract
The Dow rallied hard after the New York open yesterday and after trading up to my 15545 sell level I was quickly stopped out of this position for a small loss at 15585 and I am now flat. The Dow has now rallied over 300 points from its low last Tuesday and I am going to stay flat ahead of today’s Non Farm Payrolls. If we get a weak number I will be a small buyer on any dip to 15500/15530 with a 15480 stop. I do not want to be short the market at this time.
March BUND
The Bund plan worked well yesterday as the market traded down to my 143.50 buy level and after a nice rally this morning I have covered this position at 143.90 as I want to be flat ahead of 1.30 pm. Today I will still be a buyer on any dip to 143.35/143.550 with a 143.15 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
No change as I am still a buyer on any dip to 1240/1248 with the same 1235 stop. I do not want to chase the market here and this is why I am leaving my buy level the same. I still do not want to be short Gold at this time.
Silver Rolling Contract
When I saw Silver starting to struggle in afternoon trading after the US opened I decided to cover my long 19.25 position at 20.05 and I am now flat This 20.50 resistance level that I mentioned yesterday is key as the the top of the Bollinger Band comes in at this level also. Today I will be a buyer on any dip to 19.30/19.60 with a 19.05 stop.
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