Ukrainian tensions persisted yesterday as the US imposed more sanctions on 7 Russian officials and 17 companies. Even so, the market initially took its gaze off geopolitics to re-focus on the economy. Not that is was a huge day data-wise, although US Pending Home Sales and the Dallas Fed Manufacturing Index both pointed to some acceleration in US growth, in line with other recent US economic reports.
Treasury Yields reversed last Friday’s decline whilst the Dow and S&P 500 both closed 0.5% and 0.3% higher having been down hard earlier in the trading session before again having another last hour rally. The announcement by US pharmaceutical company, Pfizer, that it was pursuing a $98.7 billion takeover bid for UK based group, Astra Zeneca, also lifted the market’s mood.
Today is a very busy day for economic data as the Fed begins its two day FOMC Meeting with rate and QE tapering announcements due at 7 pm tomorrow evening. This morning at 9.30 am we have UK GDP followed by the Euro-Zone Business Climate Index and German GIK Consumer Confidence. Later this afternoon we have the US Case-Shiller House Price Report and the Conference Board Consumer Confidence reading for April.
June S&P 500
Yesterday was another wild session for the S&P culminating in a huge rally again in the last hour of trading as the market again left a buy extreme and in the process was able to close comfortably over the key 1850 support level. The plan worked well as shortly after the US markets opened the market dropped to my 1859 buy level before having a nice rally to 1871 which enabled me to cover this position at 1867 and I am now flat. The S&P has been up on 15 of the last 17 Tuesday trading sessions making it very difficult to go short the market today plus we have the FOMC Meeting getting under way this afternoon. Given the volatility at the moment I am trading in smaller size with a larger stop and today I will be a buyer on any dip to 1861/1866 with a 1857 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer from 1846/1851 with a 1842 stop which is just below yesterday’s low. I still believe that we will have one test of the key 1920/1950 resistance area before this market rolls over to the downside and I do not want to be short the S&P at this time.
Euro/USD
As expected, the Euro continues to defy logic and trade higher but unfortunately just missed my 1.3825 buy level before starting this latest rally and I am still flat. Today I will raise my buy level to 1.3830/1.3860 with a 1.3810 stop which is just below yesterday’s low.
US Dollar Index
No change as I am still a small buyer on any dip to 79.20/79.45 with the same 78.80 stop which is just below last November’s low.
June DAX
The Dax plan also worked well yesterday as after the US market started to fall, it finally traded down to my 9410 buy level and after a nice rally this morning I was able to cover my position on the open at 9505 and I am now flat. I still like the Dax as the price action is telling you that despite the tensions in the Ukraine the market is acting quite well. Today I will raise my buy level to 9460/9490 with a 9430 stop. Note, a break and close over 9660 for 2/3 days opens up the possibility of a move to 10000/10200.
June FTSE
The FTSE is also behaving better today especially after the Pfizer announcement to buy Astra Zeneca. Yesterday evening after the US market started to fall I was finally able to cover my short 6675 position at 6640 and I am now flat. This morning, the FTSE is testing the key 6700 resistance level and today I will be a small buyer from 6655/6680 with a 6630 stop. My only interest in selling the FTSE is on a rally to 6770/6800 with a 6840 stop.
Dow Rolling Contract
The Dow plan also worked well yesterday as the market finally traded down to my 16360 buy level before having a nice rally into the close which enabled me to cover this position at 16425 and I am now flat. Just like the S&P, I believe the Dow will eventually break this key 16600/16640 resistance level before testing the 17200/17400 resistance level where I expect it to run out of steam. Today I will raise my buy level to 16390/16440 with a 16350 stop on any long position. I still do not want to be short the Dow at this time especially with the FOMC Meeting starting this afternoon.
June BUND
The Bund is opening lower this morning on the back of the stronger equity markets. My buy level was not hit yesterday and today I will lower it to 143.50/143.80 with a 143.35 stop. A break and close below 143.40 will put me on the defensive and I will then start to possibly look to go short the market.
Gold Rolling Contract
After I posted yesterday morning Gold traded down to my 1293 buy level. I do not like the price action this morning and I have decided to cut this position for a small loss at 1291 and I am now flat. I am going to stay flat today as I want to see how the market behaves over the next 24 hours.
Silver Rolling Contract
One of the reasons that I have cut my Gold position is the fact that I am now long Silver at 19.40 as I do not want to be long both commodities at the same time. I will leave my stop the same at 18.90 which is just below last week’s low. If I am stopped out of this position I will be a more aggressive buyer in front of 18.50 with a 17.90 stop.
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