Yesterday was another risk-on trading session albeit with little in the way of data releases and anything that did emerge had a positive bias. US data was good, China made its spending plans official and even Greece is considering re-entering the Bond market. The S&P ended the day with yet another record close with the 10 Year US Treasury Yields back above 2.8% for the first time since early January and the US Dollar is broadly stronger.
Whilst the US ADP Employment Report is becoming less credible by the day, it was a solid outcome (even if it seems to tell us what happened last month rather than this month), coming in at 191k with the previous month revised higher to 178k from 139k initially. Factory Orders were also solid at 1.6% versus 1.2% expected. Markets are beginning to actually believe the Fed when it says that policy is heading along the path to a mid-2015 interest rate hike. In the UK, House Prices missed their expected gain for March but are still rising solidly at 9.5% year on year.
This morning on the economic front we have UK and Euro-Zone PMI Services, followed by the ECB announcement at 12.45 pm where there is an expectation that the ECB might do something given the very low Inflation Rate reported last week. Following the announcement we have ECB President Dragi holding his press conference at 1.30 pm. At the same time the US will release its latest Weekly Jobless Claims and Trade Balance. At 3 pm we have the ISM Non Manufacturing Composite.
June S&P 500
The S&P closed at yet another new record high with the market trying to build a base over the now key support of 1869/1873. It was interesting that Tuesday’s push to a new high occurred with just 7.4% of the 500 stocks making a concurrent new 52 week high implying that it is an extraordinarily narrow push. It is interesting that Google which is one of the main components of the S&P made its high back on February 26 and is now lagging the market. As I mentioned over the last few days I still expect the S&P to challenge the key 1930/1950 resistance level before running into trouble in May/June.
Despite the market trading at the top of its Bollinger Band and Williams Index I am still a buyer on any dip to 1869/1873 with a 1864 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip into last Monday’s Open Gap at 1853/1857 with a 1848 stop. My only interest in selling the S&P is on a rally to 1893/1898 with a 1902 stop.
Euro/USD
Today is a crucial day for the Euro with the ECB announcement at 12.45 pm followed at 1.30 pm by Dragi’s press conference. After I posted yesterday morning the Euro started to drift lower on the expectation that the ECB might do something today. Personally I do not see them doing anything especially with US Growth starting to pick up. The Euro traded down to my 1.3760 buy level. I am still long in small size and I am going to lower my stop to 1.3715. If I am stopped out I will be a more aggressive buyer in front of 1.3660 with a 1.3630 stop. I still do not want to be short the market at this time.
US Dollar Index
Finally the the Dollar Index is starting to firm up as it tries to build momentum above the key 80.00 support. As I mentioned yesterday a break and close over 80.60 will be very constructive. Given the expected volatility surrounding the ECB later I will leave my stop the same at 79.80.
June DAX
The Dax has been trading in a very narrow range over the last few days as it awaits the ECB announcement this afternoon. Today I will still be a buyer of the June contract on any dip to 9550/9580 with the same 9525 stop. Remember a break and close over 9650/9670 for 2/3 days will very constructive and I will then look to set up a long position as I will then look for the market to test 10200 over the next few weeks.
June FTSE
The FTSE just missed my 6575 buy level before trading higher as it tries to build a base at the 6560 key support level. Today I will raise my buy level to 6570/6590 with a 6550 stop as I still look for the FTSE to trade back 6660/6680 and then 6765 over the next few weeks.
Dow Rolling Contract
The Dow again tested its December 31 high at 16589 before backing off slightly into the close and I am still flat. As I mentioned yesterday, a break of 16610 will see me set up a long position in small size with a 16560 stop as I am looking for the Dow to trade as high as 17200/17400 before the market runs into trouble in May/June as it has done for the last three years. I will also be a small buyer on any dip to 16470/16500 with a 16440 stop.
June BUND
After I posted yesterday morning the Bund was trading below the key 143.00 support level and quickly stopped me out of my long 143.10 position for a small loss at 142.75 and I am now flat. I have to respect the fact that the Bund has now broken 143.00 and today I will be a small seller on any rally to 142.90/143.10 with a 143.25 stop. I do not want to be long the Bund at this time.
Gold Rolling Contract
Gold has had a small rally since I posted yesterday morning as the market tries to stabilise having closed down for 11 of the previous 12 trading sessions. Today I will raise my buy level slightly to 1277/1284 with a 1272 stop.
Silver Rolling Contract
Finally Silver is trying to break the key 20.00 resistance level having traded in a very narrow range over the past 10 days. Sliver is trading stronger than Gold at this time and I am still looking for a decent rally over the next few weeks. I am still long the market since last Monday week at 19.90 and today I will raise my stop slightly to 19.55 which is just below last week’s low. Again if I am stopped out I will be a more aggressive buyer on any move lower to 18.80/19.20 with a 18.50 stop.
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