Despite a fair amount of choppiness across markets on Friday we ended the week with US equities down less than 0.2%, US Bond Yields closed slightly higher whilst most currencies closed more or less unchanged from where they were trading last Thursday. European Equity markets are opening weaker this morning after the Thai Baht got hit overnight whilst Chinese stocks dropped as property shares have had their biggest fall in almost 8 months.
The G20 met over the weekend with the main public achievement of this meeting being that Australian Treasurer, Jo Hockey, successfully brokering an agreement that G20 members would aim to lift growth by 2% more than previously planned over the next five years. G20 language on Central Bank policies – specifically the Fed’s retreat from current policy settings – was the familiar one of being ‘carefully calibrated and clearly communicated’.
Last Friday’s US economic data again disappointed expectations, this time for Existing Home Sales, which fell by 5.1% to 4.62m versus expectations for -4.1% and 4.67m. Whilst largely dismissed as weather related issues, falling affordability and lack of supply also appear to be factors that are contributing to a softer housing market beyond the impact of weather.
This morning on the economic front we have the German IFO Survey and Euro-Zone CPI. The IFO data will be closely watched by the markets and later this afternoon we have the US Dallas Fed Manufacturing Index.
March S&P 500
Last Friday was one of the quietest trading day’s of the year as the February Options Expiration came to a close. The S&P traded down to my 1835 buy level before a small rally ensued enabling me to cover this position at 1839 and I am now flat. The S&P has now almost retraced 100% of its losses that occurred in late January and early February and it would be very unusual if the S&P did not go on to make a new high. Today I will be a buyer on any dip to 1827/1832 with a 1824 stop. My only interest in selling the market is at the top of the Bollinger Band from 1851/1855 with a 1857 stop.
Euro/USD
The Euro continues make higher highs with each trading session seemingly having a very little trading range making it difficult to make money. The price action is telling you not to be short the Euro and today I will raise my buy level to 1.3680/1.3710 with a 1.3660 stop. My only interest in selling the Euro is on a rally to 1.3810/1.3840 with a 1.3860 stop.
US Dollar Index
No change as I am still long from last week at 80.20 with the same 79.70 stop. As I have been saying for the last few weeks the Dollar needs to break and close over 81.30/81.50 for me to turn really bullish.
March DAX
The Dax just missed my buy 9600 buy level before trading higher on Friday and I am still flat. As long as the Dax can stay over the key support at 9550 I will look for higher prices but a break and close below 9550 will be the first warning sign that lower prices lie ahead. Today I will be a small buyer from 9560/9590 with a 9535 stop. I still do not want to be short the Dax at this time.
March FTSE
The FTSE worked well on Friday as, after I posted, the market traded down to my 6790 buy level before having a small rally near the close enabling me to cover this position at 6810 and I am now flat. Today I will be a small buyer on any dip to 6760/6780 with a 6745 stop. My only interest in selling the FTSE will be on a rally to 6870/6900 where I will be an aggressive seller with a 6930 stop.
Dow Rolling Contract
The Dow again rejected the key 16210 resistance level on Friday. As I still expect the S&P to make new highs the Dow should break this key level and if it does I would expect the Dow not to break the December 31st high at 16589. If this road map happens and the S&P does make a new high but the Dow does not it will become a negative market divergence which is potentially very bearish. Today I will be a small buyer of the Dow on any dip to 16020/16060 with a 15980 stop. I do not want to be short the Dow at this time.
March BUND
The Bund, having unfortunately stopped me out of my long position on Thursday at 143.50, is now trading near the key 144.00 resistance level again. The price action so far for 2014 is telling you to buy dips and not to be short the market and today I will be a small buyer from 143.40/143.60 with a 143.25 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
After I posted on Friday, Gold traded lower but unfortunately just missed my 1310 buy level before trading higher. Gold has key resistance from 1345/1350 and now good support at the 1300/1310 area. Today I will be a small seller on any further rally to 1342/1350 with a 1354 stop. I will also raise my buy level to 1315/1322 with a 1309 stop.
Silver Rolling Contract
Silver has now spent enough time over the key 20.65/21.10 support area that I believe the market is ready to test the key 22.60/23.00 resistance area from last year. Today I will raise my buy level to 21.40/21.75 with a 21.15 stop on any long position.
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