After another rocky start yesterday equity markets have again overcome some disappointing economic data to close higher, with the Dow and S&P closing up 0.4% and 0.6% respectively. The US markets were buoyed by Comcast’s $45 billion deal for Time Warner and earnings results from CBS and Goodyear.
On the data front US Retail Sales fell 0.4% in January versus 0.0% expected with a large 2.1% fall in Auto Sales whilst the core measure fell 0.3% as it again appears that the bad weather has affected the data. Jobless Claims also took a weather hit unexpectedly rising to 339k from 331k last week. Continuing the weather theme, Fed Chair Janet Yellen’s Testimony to the Senate was postponed due to a snowstorm with a new date yet to be announced.
On the currency markets the big mover was the US Dollar which weakened again as the Euro/Dollar rose back above 1.3700 on rumours about a large purchase of Euro’s by a large asset management name.
This morning on the economic front we have UK Construction Output at 9.30 am followed at 10.00 am by Euro-Zone and German GDP. This is followed at 2.15 pm by US Industrial Production and the University of Michigan Survey at 2.55 pm which will be very important.
March S&P 500
The S&P continues to defy logic as every piece of weak economic data that comes out is now being explained by bad weather. What is making this market very difficult to sell is the fact that Janet Yellen said in her Testimony to the House last Tuesday that if the economy continues to show weak data the Fed will stop the tapering. Yesterday for the first time in a long while the S&P had a Key Upside Reversal Day as shortly after the market opened the S&P made a new low near 1804 before taking out the previous day’s high at 1823 to close near 1827. The key number for me going forward is yesterday’s low at 1802.5 and it will take the market to break this level for me to turn bearish. We still have an open Gap from three weeks ago at 1833/1840 which I would expect the market to close over the next few days.
Unfortunately the S&P just missed my 1800 buy level before trading up to my 1821 sell level. Thankfully I only had a small short position and I was stopped out of this position for a small loss at 1825 and I am now flat. The market is opening lower this morning and today I will be a small buyer from 1814/1819 with a 1811 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1808/1808 with a 1799 stop. I will also be a seller on any rally to 1839/1845 with a 1848 stop.
Euro/USD
Just as I posted yesterday morning the Euro started to rally hard just missing my 1.3610 buy level first and I am still flat. I am very frustrated that I got stopped out of my long position on Wednesday near the lows of the day at 1.3565 especially with the Euro trading over 1.3700 this morning. The market is telling you not to be short the Euro as every dip just gets bought and we will have to wait for the market to leave a sell extreme before looking to set up a short position. Today I will move my buy level higher to 1.3645/1.3675 with a 1.3620 stop.
US Dollar Index
My long Dollar Index position from last week at 80.70 got stopped out yesterday at 80.30 and I am now flat. I still believe that we will get a large rally in the Dollar this year and the key level to watch is last October’s low at 78.90. As long as the Index stays over this level I will look to buy dips in the Dollar but a break and close below 78.90 will be very bearish. Today I will be small buyer on any dip to 79.60/79.90 with a 79.30 stop.
March DAX
After I posted yesterday the Dax traded up to my 9555 sell level before stopping me out of the position near the European Close at 9605 and I am now flat. I am very surprised by the pace and how quickly the Dax has been able to regain its poise from the 9070 low made last week. It is also key that the Dax has been able to trade and close back above the key 9550 resistance level. This 9550 level should now act as good support and today I will be a small buyer on any dip to 9545/9575 with a 9530 stop. I do not want to be short the Dax at this time.
March FTSE
The FTSE is continuing to trade the heaviest of the major stock indices. The market finally traded up to my 6635 sell level last night and given how strong the other indices are this morning I have decided to cover this position at 6610 and I am now flat. Today my only interest in selling the FTSE is on a rally to 6660/6690 with a 6705 stop. I will also be a buyer on any dip to 6550/6580 with a 6530 stop.
Dow Rolling Contract
The Dow worked well yesterday as the market traded up to my 16030 sell level and after a nice move lower overnight I have been able to cover this position at 15970 and I am now flat. As I mentioned yesterday the key level for the Dow is 16205 where the 14 year trendline comes in and it will take a break of this resistance level for me to turn bullish. Today I will raise my sell level to 16120/16160 in small size with a 16210 stop. I will also be a small buyer on any dip to 15910/15940 with a 15885 stop.
March BUND
After I posted yesterday morning the Bund started to rally. The market traded up to my 143.70 sell level and I am still short with the same 144.05 stop.
Gold Rolling Contract
Gold finally broke the key 1295/1300 resistance level yesterday. I am still flat and today I will raise my buy level to 1294/1300 with a 1289 stop The next key level for Gold is at 1350 and if Gold can close over 1300 this evening it will very constructive.
Silver Rolling Contract
At last Silver has broken the key 20.65 resistance level. Today is a key day for Silver. If we can close over 20.65 and ideally 21.00 it will very bullish. I am still long at 20.10 from last week and today I will raise my stop to 20.50.
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