Neither a bigger than expected downward revision to Q1 US GDP(-1%), disappointing US Pending Home Sales (+0.4%) or news that US regulators are now seeking $10 billion of restitution from BNP Paribas to settle its money-laundering accusations have managed to derail the US equity market train. US Bond Yields remain close to the new 2013 range floors established last Wednesday.
The good news yesterday was arguably the reason Bond Yields are at least a little higher. I was the drop in US Initial Claims to just 300K and well below the 318K expected. This has pulled the four week Moving Average down to 311K which is its lowest since 2007. Crucially current Jobless Claims are more consistent with monthly payroll gains at nearer 250K than 200K. The May Payroll report due this day week and together with next Thursday’s ECB Meeting will determine next week’s event risk landscape.
US stocks closed with gains of 0.4/0.5% whilst European stocks closed mixed with the BNP Paribas news not happening until after the European markets closed, whilst the US Dollar Index was steady at 80.50 as Gold closed flat after Wednesday’s big drop.
This morning on the economic front we have UK GIK Consumer Confidence at 9.30 am. We Have no data of note due from the Euro-Zone while at 1.30 pm we have US Personal Income/Spending . This is followed at 2.45 pm by the Chicago Purchasing Managers Survey ahead of the University of Michigan Consumer Confidence at 2.55 pm.
June S&P 500
The S&P continues its relentless march forward since it broke the key 1880 resistance level last week as it focuses on its long term objective at 1935/1950 and has now closed up for 5 of the past 6 trading sessions. As long term members know, the top of the Bollinger Band and Williams Index technical indicators do not work as well as the bottom apart from in ‘hit and run’ short term exposure situations. The S&P is very overbought on both a Daily and Weekly basis and this trend can continue until we get a sell extreme which drives this market lower for more than just a few hours. Very late in the trading session the S&P traded up to my 1918 sell level and I am now short with the same 1926 stop. I only have a small position on board as today is month-end coupled with Monday been the start of a new month which can see money managers put more monies to work. In other words we may need to see next week’s ECB Meeting and Non Farm Payrolls Report first before markets start to decline. Given how overbought the S&P is trading I will leave my buy level the same at 1898/1903 with a 1895 stop.It was noticeable again today as to how light trading volumes were for this extended market.
Euro/USD
No change as I am still long at 1.3615 with the same 1.3580 stop. Again if I am stopped out I will be a small buyer in front of 1.3550 with a 1.3530 stop. My only interest in selling the Euro is on a rally to 1.3660/1.3690 with the same 1.3710 stop.
US Dollar Index
No change as I am still long at 80.20 with a breakeven stop. A break over 81.00 will see me raise my stop to 80.70.
June DAX
It is noticeable over the last two days that the Dax has started to struggle as it approaches the key 10000 resistance level. Today I will be a seller from 9980/10020 with a 10050 stop. The true level that I want to put on a more macro position is from 10190/10300 with a 10450 stop. The Dax is too near the 10000 level for the market not to at least test this key number. Given how overbought this market looks and the fact that it is finally beginning to look tired I do not want to be long the Dax at this time.
I am still short the DAX/FTSE spread at 3120 and I will increase my stop slightly to 3190 on this position especially given the expected volatility surround this key 10000 round number resistance level.
June FTSE
The FTSE opened higher yesterday morning and continued to trade higher for the rest of the day as the market finally managed to close over the key 6850 resistance level. The next big resistance comes in at 7000/7050 which is the high going all the way back to 2000. Today I will raise my buy level to 6830/6855 with a 6810 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow just missed my buy level before trading higher for the rest of the day and I am still flat. Given how overbought the market is trading I do not want to chase my buy level higher from here and I will leave it 16570/16610 with a 16540 stop. For the first time in weeks I will be a small seller on any rally to 16750/16780 with a 16820 stop.
June BUND
No change as I am still a small buyer from 146.40/146.65 with a 146.20 stop.
Gold Rolling Contract
Gold traded in a very narrow range yesterday and I am still long from 1256 with the same 1243 stop. Gold is very oversold here and I am hoping we will get a rally to correct this oversold condition.
Silver Rolling Contract
Unfortunately I was stopped out of my small 19.40 position at 18.90 and I am now flat. The Daily Sentiment Index for Silver is now near single digits and generally when we get such a low reading a rally is just around the corner. For this reason I will be a small buyer again from 18.70/1900 with a 18.45 stop.
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