In contrast to the previous two days when markets were extremely quiet, all changed yesterday as tensions in Ukraine escalated leading to extreme volatility in Equity and Commodity markets. US stock markets, having opened lower, ended the day higher with the S&P trading near record highs as technology companies rallied after Apple topped forecasts to beat off a slump in phone shares. Apple shares rose 8.2%, the biggest increase in two years, after selling more iPhones than analysts had predicted.
On the other hand the economic data released yesterday was mixed. The Weekly Jobless Claims rose 24k to 329K versus 315K expected. The markets were not helped initially by New Home Sales, which slowed again in March amid rising mortgage costs and home prices, thus causing growth in demand at furnishing stores to slow dramatically. Durable Goods Orders came in better than expected by rising 2.6% which is the biggest monthly gain since last November.
Ukrainian tensions increased after Russian President Putin warned Ukraine against continuing its anti-separatist crackdown after Government troops killed five rebels and prompted Russia’s military to begin new drills on the border between the two nation’s. The German Dax fell 250 points on this news before regaining half of this move into the close. Overnight the Ratings Agency, Standards & Poors, cut Russia to one step above junk status.
On the currency markets the Euro was weak earlier in the trading session after ECB President Dragi said that the ECB could cut rates and that the worsening inflation outlook may require asset buying. However he did say that the rise in the Euro also reflects a return of confidence to the Euro-Zone thus helping the Euro to rally back above 1.3830.
This morning on the economic front we have UK Retail Sales at 9.30 am. We have no data of note from the Euro-Zone whilst the US releases its latest Composite and Services PMI. At 2.55 pm we have the University of Michigan Consumer Confidence Index.
June S&P 500
The S&P plan worked well yesterday as shortly after I posted the market traded up to my 1881 sell level before having a dramatic sell-off on the escalation of tensions in Ukraine which enabled me to cover this position at 1873. The S&P then dropped to my 1866 buy level shortly after the US market opened before having a nice rebound and I was able to cover this long position at 1876 and I am now flat.
As long as the S&P can stay over 1850 the market is still bullish but a break and close below 1850 and especially if we close below 1810 the market will quickly accelerate to the downside. As I have mentioned over the last few months I still expect one more decent rally to new highs above 1920 and possibly as high as 1950 before this bull market ends. Today I will be again be a buyer from 1863/1869 with a 1859 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1850 with a 1845 stop. My only interest in selling the S&P is on a rally to 1885/1890 with a 1894 stop which is just above the contract highs made on April 4.
Euro/USD
The Euro plan also worked well as, shortly after Dragi spoke, the Euro traded down to my 1.3800 buy level before having a nice rally which enabled me to cover this position at 1.3830 and I am now flat. I still like the Euro until such time we see some action by the ECB to weaken the currency and fight deflation. Today I will again be a small buyer on any dip to 1.3780/1.3810 with the same 1.3755 stop. I still do not want to be short the market at this time.
US Dollar Index
No change as I am still a buyer on any dip to 79.30/79.60 with the same 78.80 stop which is just below the low made last November.
June DAX
The Dax plan also worked really well as the market rallied as expected after the IFO Survey was released and it traded up to my 9645 sell level before the market fell 250 points on the Ukraine tensions. After I went short I covered my position too early at 9530 and I am now flat. The Dax traded down to a low of 9420 before having a dramatic rally in the last hour of trading but is again on the defensive this morning. I am impressed how quickly the it was able to rally off the key 9400 support level and today I will be a buyer on any dip to 9420/9460 with a 9380 stop. Again if the Dax can break and close over key resistance from 9630/9660 for 2/3 days I will look to buy this market for a possible move to 10000/10200.
June FTSE
The FTSE also had a nice rally after I posted yesterday morning with the market eventually hitting my 6670 sell level. It followed the other indices lower which enabled me to cover this short position at 6630 and I am now flat. Today I will again be a seller on any rally to 6675/6700 with a tight 6715 stop I still do not want to be long the FTSE at this time.
Dow Rolling Contract
I was very unlucky with my Dow plan yesterday as shortly after I posted it made a high of 16580 which just missed my 16600 sell level before having a large sell-off shortly after the US markets opened and I am still flat. I still believe the Dow will break the key 16600/16640 resistance level and could possibly trade as high as 17200/17400 over the next few weeks before this bull market comes to an end. Today I will be a small buyer on any dip to 16320/16360 with a 16280 stop. I do not want to be short the Dow at this time.
June BUND
The Bund plan also worked well yesterday as the market traded down to my 143.65 buy level before having a nice rally which enabled me to cover this position at 144.10 and I am now flat. As long as the Bund can stay over 143.40 this market is still bullish and today I will again be a buyer on any dip to 143.50/143.85 with a 143.35 stop. I still do not want to be short the market at this time.
Gold Rolling Contract
I was unlucky with my Gold position yesterday as shortly after I posted I was stopped out of my long 1285 position at 1276 before the market made a low at 1268 before having a buy extreme from this level and is now trading comfortably back above its 100 Day Moving Average. I am still flat and today I will be a small buyer form 1282/1288 with a 1265 stop which is just below yesterday’s low.
Silver Rolling Contract
In contrast to Gold, the Silver plan worked well as shortly after Gold was hit to the downside Silver traded down to my 19.20 buy level before having a dramatic rally which enabled me to cover this position at 19.80 and I am now flat. I still like Silver and today I will again be a buyer on any dip to 19.20/19.50 with a 18.90 stop which is just below yesterday’s low.
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