The markets seem to have embraced the idea of more Fed tapering as they have more confidence that the Global recovery is on track. US Equities ended the day mixed with European markets higher. Oil and Gold prices were stronger and Bond yields broadly higher. The US Dollar, having strengthened yesterday, is back on the defensive this morning. The big surprise yesterday was the Bank of England Inflation Report with the BoE moving away from from its formal unemployment threshold and being much more optimistic on the future outlook than had been generally expected. They kept the inflation outlook relatively unchanged but raised their growth outlook. They say they will not raise interest rates until late next year and any hikes will be gradual and to a level below historical norms. Markets responded to the better outlook with Sterling a lot stronger.
In Europe the Industrial Production data came in weaker than expected. The Euro weakened after comments from ECB Board Member, Coeure, who said he was supportive of a negative interest rate on funds held at the ECB.
This morning on the economic front we have the UK RICS House Price Balance followed at 10.00 am by German CPI. At 1.30 pm we have US Retail Sales, Weekly Jobless Claims and the New Housing Price Index. It will be interesting to see how much the recent bad weather in the States will have affected Retail Sales.
At 3 pm new Fed Chair Janet Yellen will deliver her Senate Report to the Senate.
March S&P 500
The four day winning streak came to an end yesterday but not before the S&P completely closed the open Gap from two weeks ago at 1823. Thankfully I had my stop at 1824 on my 1816 short position from Tuesday evening and this stop did not get hit. The S&P has followed the Nikkei lower overnight and I have covered my short position this morning at 1809 and I am now flat. I will still be a reasonable buyer on any dip to 1795/1800 with a 1789 stop. I will also be a small seller on any rally to 1819/1823 with a 1825 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller on any rally to 1839/1845 with a 1848 stop.
Euro/USD
I was unlucky with my Euro plan yesterday as, just after I posted, the market started to trade lower on comments from ECB Board Member Coeure and having gone long myself at 1.3590 I was stopped out near the lows of the day at 1.3565. The Euro is a lot higher this morning as the theme of buying the dip continues. Today I will again be a small buyer on any dip to 1.3580/1.3610 with a 1.3555 stop which is just below yesterday’s low. I still do not want to be short the Euro at this time.
March Dax
Unfortunately having gone short the Dax at 9550 yesterday morning I was stopped out of this position near the high of the day at 9585 after the US markets opened and I am now flat. I really believe that the Dax will have a lot of trouble breaking the 9600/9700 resistance level and today I will again be a small seller on any rally to 9540/9570 with a 9605 stop which is just above yesterday’s high. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 9660 with a 9705 stop. My only interest in buying the Dax is on a dip to 9375/9400 with a 9355 stop.
March FTSE
My short 6650 position from last Tuesday worked well as the market is a lot lower this morning. I have covered this position at 6610 and I am now flat. Today I will still be a seller on any rally to 6630/6650 with the same 6675 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow was the heavier of the US equity markets yesterday as the market fell short of my 16060 sell level in the afternoon by 15 points before trading a lot lower last night and this morning. There is a 14 year trendline in the Dow which comes in at 16205 and I believe that it will take a lot for the market to break this key resistance level. Today I am not going to chase the market lower and I will only be a seller on any rally to 16010/16060 with a 16080 stop. I do not want to be long the Dow at this time.
March BUND
I was stopped out of my long 143.50 position at 143.20 and I am now flat. I was very surprised by the price action yesterday as I did not expect the Bund to close below 143.50. Today I will be a small seller from 143.55/143.75 with a 144.05 stop. I do not want to be long the Bund at this time.
Gold Rolling Contract
Gold tried to rally yesterday but kept meeting strong resistance at the 1295/1300 area. I do not want to chase the market higher even though I expect Gold to rally back to 1350 before major selling returns to the market. I will leave my buy level the same at 1271/1277 with a 1265 stop.
Silver Rolling Contract
No change as I am still long from last week at 20.10. The key level still remains at 20.65 and we need a break of this level to propel this market higher.
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