The big news story yesterday came just after I posted my update, when the news agency Dow Jones reported that unnamed Bundesbank Officials were amenable to both cutting interest rates, including taking the ECB’s Deposit Rate into negative territory, and unconventional policy measures including the purchase of of Bank Assets. This served to further depress EUR/USD, pulling the US Dollar Index above the psychologically important 80 level for the first time in 5 weeks.The Euro was earlier under pressure after the German ZEW Survey of financial analysts saw the Expectations Index falling to 33.1 from 43.2, trumping a modest increase in the Current Conditions Reading.
US Retail Sales disappointed by rising just 0.1% versus 0.4% expected with the various core measures similarly undershooting expectations. However March was revised upwards to 1.5% from 1.1% earlier which helped to soften the blow. The NFIB Small Business Optimism came in stronger than expected at 95.2 from 94.5 last month and this is a new post crisis high. Strength in both labour hiring and capex are seen to be highly dependent on the SME sector, represented by this survey.
This morning on the economic front at 9.30 am we have UK Unemployment and Average Earnings. This is followed at 10.00 am by the Euro-Zone Industrial Production whilst at 10.30 am we have the Bank of England Inflation Report. At 1.30 pm we have US PPI.
June S&P 500
The S&P had a very narrow trading range yesterday as the market looks to consolidate after breaking and closing over the previous contract high on April 4. It closed slightly higher as it registered its 16th ‘Up Tuesday’ out of the last 19 Tuesday trading sessions.
The S&P plan worked well as the market traded up to my 1898 sell level before having a small sell-off down to 1892 which enabled me to cover this position at 1894 and I am now flat. The market is determined to take out the key 1900 resistance level before attempting to trade lower even though we are overbought on a Daily basis and at the top of both the Bolllinger Band and Williams Index. Today I will raise my sell level sightly to 1900/1905 with a 1908 stop. My only interest in buying the market is on a dip to 1883/1888 with a 1877 stop.
Euro/USD
Shortly after I posted yesterday morning we had the leak to Dow Jones about the unnamed Bundesbank Officials stating that they were happy for the ECB to cut rates and increase stimulus. This news quickly stopped me out of my long 1.3785 position for a small loss at 1.3740 and I am now flat. I thought the Euro would have fallen more on this news but it is back trading over 1.3710 this morning as it is trading at the bottom of its Bollinger Band and Williams Index making it difficult for the market to accelerate lower. Today I will be a small buyer on any dip to 1.3665/1.3695 with a 1.3645 stop. Given how oversold the Euro is trading my only interest in selling is on a rally back to 1.3770/1.3800 with a 1.3830 stop.
US Dollar Index
No change as I am still long half my position at 79.20. This morning I will raise my stop to 79.75 on this position as the market is trying to stabilise over the key 80.00 level.
June DAX
After the big break out in the Dax on Monday over the key 9630/9660 resistance level, it consolidated these gains with a very narrow trading range yesterday and I am still flat. It is still overbought and today I will again be a seller on any rally to 9810/9840 with a 9860 stop. This previous resistance at 9630/9660 should now act as good support for the market and today I will be a small buyer on any dip to 9640/9670 with a 9620 stop.
June FTSE
No change as I am still short at 6830 with the same 6860 stop which I expect to be hit. If I am stopped out I will be a more aggressive seller on any further rally to 6880/6910 with a 6930 stop. As I mentioned yesterday I am surprised at how weak the FTSE is trading especially given how strong the UK Economy is performing. I will also be a small buyer on any dip to 6790/6820 with a 6775 stop.
Dow Rolling Contract
No change as I am still a small seller on any rally to 16750/16780 with the same 16820 stop. The Dow is very overbought on a Daily basis and is trading at the top of both its Bollinger Band and Williams Index. I will still be a small buyer on any dip to 16590/16630 with a 16560 stop.
June BUND
The Bund has extended its recent run after the Bundesbank officials said they they had no objection to cutting rates. It is very overbought at these levels and today I will be a small seller from 145.40/145.70 with a 146.05 stop. I do not want to be long the Bund at this time.
Gold Rolling Contract
Gold continues to trade in a very narrow range as the market waits for its next breakout. A break and close over 1310 will be very bullish while a closing break below 1270 will be bearish and opens up a move down to 1230/1250. Today I will still be a small buyer on any dip to 1279/1285 with a 1273 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip to 1905/1930 with a 18.70 stop.
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