The Ukraine-Russian tensions continued on for another day with the situation seemingly contained albeit frosty on the ground in the Crimea as US Secretary of State, Kerry and Russian Prime Minister, Lavrov met in Paris. There was still more than enough verbal jousting and political positioning from both sides with Italian Foreign Minister Mogherini telling reporters in Paris that both sides ‘want to prevent an escalation of the crisis’. The EU Commission is offering $1.6 billion in emergency aid to the Ukraine with the possibility of up to an additional $11 billion in aid and loans with an IMF delegation due in Kiev to conduct due diligence.
Meanwhile European and US Equity markets ended the day more or less flat amid mixed/modestly improving signals on the US economy. Ahead of tomorrow’s Non Farm Payrolls, the private sector ADP Employment Job count undershot expectations although not dramatically so. Perhaps of more consequence was the ISM Non Manufacturing Index which also undershot expectations with the employment component sub 50 for the first time since 2011. So was this another ‘blame the weather’ situation again? The market seemed to think so as does the Fed judging by the Beige Book. The severe weather was cited widely by reports across the country in the Beige Book released last evening as having an impact across various US sectors including retailing, autos, and manufacturing. Despite those weather disruptions there did not seem to be anything nasty on the negative side in the Book that would see the Fed pausing its QE tapering at the upcoming FOMC Meeting on March 19. The Biege Book described growth across the Fed Districts as still ‘modest/moderate’ which is now familiar language in their report.
This morning on the economic front we have German Factory Orders. This is followed at 12.00 pm by the Bank of England rate decision where no fundamental change in policy is expected. At 12.45 pm we have the ECB rate decision followed by the press conference with Dragi at 1.30 pm. It will be interesting to see Dragi’s latest take on the weaker inflation data from the Euro-Zone and also if he mentions the strength of the Euro since the last meeting. At 1.30 pm we have the US Weekly Jobless Claims and Factory Orders. Later this afternoon Fed hawk, Plosser speaks on Monetary Policy in London.
March S&P 500
After the fireworks over the last two weeks the market just went on hold yesterday with very little movement in either direction. It is still digesting the huge move up in the S&P on Tuesday and the large gap from 1844/1862 still remains open and this gap is looking more and more like a ‘breakaway gap’ to me especially if it cannot be filled after tomorrow’s Non Farm Payrolls. Tuesday’s up move in the S&P was the strongest internally since last October and the advance/decline ratio is also posting its highest reading in 5 months. To me this market is still a ‘buy on dips’ despite the high valuations and weak data that has been reported so far this year.
Today I will raise my buy level to 1865/1870 with a 1862 stop. I will still be a seller on any rally to 1885/1890 with a 1896 stop which is just above the Bollinger Band.
Euro/USD
The Euro continues to trade in a very quiet and narrow range ahead of the ECB rate announcement and the Dragi press conference this afternoon. I will still be a small buyer on any dip to 1.3660/1.3690 with a 1.3640 stop. My only interest in selling the Euro is on a rally to 1.3820/1.3850 with a 1.3870 stop. A break and close over 1.3850 will be very bullish and opens up a move to at least 1.4000.
US Dollar Index
No change as I am still a buyer on any dip to 79.80/80.10 with the same 79.55 stop.
March DAX
The Dax plan worked well yesterday as the market traded down to my 9530 buy level before having a nice rally which enabled me to cover this position at 9570 and I am now flat. I still like the Dax as long as we stay over the 9480/9520 support zone and today I will again be a buyer on any dip to 9500/9530 with the same 9475 stop. I still do not want to be short the Dax at this time.
March FTSE
No change as I am still a small buyer on any dip to 6720/6750 with the same 6695 stop. The price action continues to tell me not to be short the FTSE at this time as I am looking for it to retest the key 6850 resistance level over the next few days.
Dow Rolling Contract
The Dow is still consolidating last Tuesday’s gains. It had a small sell off yesterday but unfortunately did not reach my 16310 buy level. I am reluctant to chase the market here and I will only raise my buy level slightly to 16300/16330 with a 16275 stop on any long position. I stil do not want to be short the Dow at this time.
June BUND
The Bund has now rolled from the March Contract to the June Contract at a discount of 190 points. Today I will be a buyer of the June Bund on any dip to 142.20/142.40 with a 141.95 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
As expected, Gold has continued to trade lower from the the 1356 highs made last Monday. I am reluctant to chase Gold in either direction from these levels and I will leave my sell level the same at 1348/1354 with a 1362 stop. I will also be a small buyer on any dip to 1310/1318 with a 1305 stop.
Silver Rolling Contract
No change as I am still long from 21.20 with the same 20.75 stop. I will give this trade just one more day to rally or I will look to exit my position.
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