Yesterday was a very quiet trading day until the Fed Minutes were released where an apparent watering down of rate adjustment projections saw Equities rise sharply higher and the US Dollar drop lower. The Dow and S&P closed up over 1% each whilst the NASDAQ rose 1.72%. Commodities were happy with the dovish tone and closed higher.
The Fed Minutes showed a full discussion of the risks associated with low inflation and the labour market, with some members positive and others more dovish. However the biggest reaction was associated with comments regarding the central projections. In what appears to be a salvo to the market’s reaction post statement, the Minutes noted that the bringing forward of the central projection for an increase in interest rates ‘did not imply a change in the Committee’s policy intentions on the grounds that such an indication could help forestall misinterpretation of the new forward guidance’ – in other words, ‘ignore the dots, we are not less accommodative than before’. In my opinion, the only thing that is going to solve this debate and support the Dollar is the economic data releases going forward.
There was a similar dovish tone in Europe yesterday but that did not seem to bother the Euro which has heard it all before as the market waits to see some action rather than words. On a positive note Greece will enter the Bond Market today by issuing Euro 2.5billion of 5 Year Debt.
This morning on the economic front, the Euro-Zone will publish its Monthly Report. This is followed by the Bank of England Rate announcement and Asset Purchase Target at 12 pm. At 1.30 pm we have the US Weekly Jobless Claims and these numbers will take on even more significance after yesterday’s change to the Fed Minutes.
June S&P 500
It is quite clear that the Fed do not want the ‘Equities Party’ to end, as shown by the change in the Minutes released last night because if the stock market starts to sell off aggressively it will undo a lot of the work that they have done over the last six years. As expected yesterday, the market closed the small Open Gap from last Monday from 1857.50/1859.50 with the S&P now almost 40 handles higher from Tuesday’s low. I was flat going into the FOMC Minutes and after they were released I tried a small short position at 1862 only to be quickly stopped out for a small loss at 1866 and I am now flat. There is no doubt that this market has been particularly difficult to trade so far this year and this happens when the market is about to change direction. As I have mentioned over the last few weeks I still expect the S&P to trade as high as 1920/1950 before we start to turn lower and this call is still valid unless we break and close below the now significant support at 1830 which has been tested 3/4 times over the last month.
Today I have to respect that the S&P has closed over 1862 and today I will be a small buyer from 1861/1865 with a 1858 stop. My only interest in selling the market is on a rally to 1881/1885 with a 1888 stop.
Euro/USD
After I posted yesterday morning the Euro just missed my 1.3780 buy level with a 1.3785 low before breaking above my 1.3830 buy level after the Minutes were released. I bought the market at 1.3830 and as I am still long I will raise my stop on this position to 1.3820. As I mentioned yesterday I still expect the Euro to trade back to the key 1.3940/1.3980 resistance level.
US Dollar Index
I am still flat the Dollar Index as the market is trying to breach 79.50. Today I am going to lower my buy level to 79.00/79.30 with the same 78.80 stop which is just below last November’s low.
June DAX
The DAX plan worked well yesterday as the market traded up to my 9560 sell level before having a nice sell-off which enabled me to cover this position at 9520 and I am now flat. The key resistance level for the DAX comes in at 9615 and today I will be a small seller from 9600/9630 with a 9665 stop. I still do not want to be long the market at this time.
June FTSE
After I posted yesterday the FTSE took off to the upside but at least we were not short. It closed over key resistance at 6570/6600 and today I will be a buyer in the region with a 6550 stop I still do not want to be short the FTSE at this time especially with the Bank of England announcement today at 12.00 pm.
Dow Rolling Contract
The Dow had a big up-day yesterday as the market tries to build value over the key 16250 support level. It just missed my buy level before trading higher after the Fed Minutes were released. Today my only interest in buying the market is on a dip to 16350/16380 with a 16310 stop. I still do not want to be short the Dow at this time.
June BUND
The Bund plan worked well yesterday as shortly after I posted it traded down to my 143.25 buy level with a 143.16 low and after a nice rally this morning I have covered this position at 143.72 and I am now flat. I still like the Bund and today I will again be a buyer on any dip to 143.25/143.50 with a 143.10 stop which is just below yesterday’s low.
Gold Rolling Contract
The Gold plan worked well yesterday as shortly after I posted it traded down to my 1302 buy level. It stayed at this level until the Fed Minutes were released before trading higher. Gold has continued this move higher overnight enabling me to cover this position this morning at 1320 and I am now flat. I still like this market as long as we can stay over the key support at 1300 and today I will be a small buyer from 1305/1312 with a 1298 stop.
Silver Rolling Contract
The Silver plan also worked well as shortly after I posted it was trading at my 19.75 buy level. Silver has followed Gold higher this morning and is now trading over 20.20. I am still long and I am going to raise my stop to 19.95 on this position. If I am stopped out I will be a more aggressive buyer on any dip to 19.50/19.80 with a 19.30 stop. If Silver can break and close over 20.60 it will be very positive.
Recent Comments