Whilst not as market sensitive as the Manufacturing ISM and indeed the Non Farm Payrolls, the Non Manufacturing ISM, released yesterday, was on the strong side, beating market expectations and with no reprints/revisions after last Monday’s mishap. The US Dollar and Bond Yields were both lifted in its wake when the Index printed at 56.3, up from 55.2, and firmly back in the pre-Global Financial Crisis 55-60 solid growth territory. The Business Activity, Prices Paid, New Orders and Employment segments all rose although the latter is lagging the others, albeit above the key 50 level and tracking somewhat higher.
The US Dollar closed 0.1% higher whilst the Euro is trading steadily ahead of today’s crucial ECB Meeting. The US Dollar had pulled back earlier in the session as had Bond Yields after the release of the ADP Employment Report that was softer than expected at 179K down from 215K and ahead of tomorrow’s Non Farm Payrolls. They are expected to show somewhat slower growth in the month, at 215K, after last month’s 288K increase.The ADP however has had a chequered history as a reliable heads up for Payrolls.
This morning on the economic front we have Euro-Zone Retail Sales at 10.00 am. This is followed by the Bank of England Rate announcement and Asset Purchase Target. At 12.45 pm we have the ECB Rate Cut and this is followed by the Dragi press conference at 1.30 pm which should generate a lot of volatility. At the same time the US will release its latest Weekly Jobless Claims whilst later in the afternoon the Fed’s Kocherlakota will speak on Interest Rates In Boston.
June S&P 500
The S&P closed at yet another record high as the market awaits the first of the two major announcements at 12.45 pm today, namely the ECB rate cut and Dragi Press conference that follows. The S&P rose yesterday on another day of waning volume and very little volatility. I read an interesting article in Investors Intelligence which has being keeping a tally of advisor sentiment for over 50 years (investorsintelligence.com). It showed that for the past week the percentage of bulls in their weekly advisor survey pushed to 62.2%, the second highest extreme since 1987. The only prior instance of greater bullish percentage over the past 27 years was in January 2005 at 62.9% bulls.
After I posted yesterday the market was weak until the US Markets opened with the S&P eventually trading up to my 1926 sell level. I am still short and I will leave my stop the same at 1931. If I am stopped out of this position I will look to reset my short position on any subsequent 5 handle sell-off with a stop just above whatever high is put in. I am looking to put on a more macro short position from 1935/1950 as this has been my target level on the upside all year. Today I will also be a small buyer on any dip to 1910/1915 with a 1907 stop.
Euro/USD
The Euro plan worked well yesterday as shortly after I posted it again traded down to my 1.3605 buy level before having a nice rally before lunch which enabled me to cover this position at 1.3630 and I am now flat. I am going to stay flat until we get the ECB and Dragi press conference out of the way before making my next trade. If the Euro drops on the announcements I will be a buyer from 1.3490/1.3520 with a 1.3470 stop. My only interest in selling the Euro is still on a rally to 1.3690/1.3720 with a 1.3740 stop.
US Dollar Index
No change as I am still long from last week at 80.20. I will still leave my stop the same at a break-even. I will also raise my stop to 80.50 on any break of 80.70. If I am stopped out of this position I will still look to buy a dip to 79.80/80.00 with a 79.45 stop.
June DAX
Finally the day of reckoning is here for ECB Policy which will be outlined later today. I am still flat the Dax and I am going to stay this way until we get the news is out of the way. Following these events I will be a seller on any rally to 9995/10040 with a 10060 stop. I still want to be a more long term seller on any rally to 10200/10300 with a 10450 stop. I still do not want to be long the Dax given how over valued the market is currently trading.
I am still short the DAX/FTSE spread at 3120 with the same 3190 stop.
June FTSE
The FTSE is back trading on the heavy side and I was finally stopped out of my small 6830 long position at 6795 and I am now flat. Today I will be a small buyer from 6460/6780 with a 6745 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
No change as I am still a seller on any rally to 16780/16820 with a 16860 stop. My only interest in buying the Dow is on a dip to 16570/16610 with the same 16540 stop.
June BUND
The Bund closed again below the key 146.00 support level. As it now rolls to the September contract with a very large discount of 140 points I am still going to stand aside as I want to see how the Bund reacts to its new pricing especially given the expected volatility later today.
Gold Rolling Contract
Gold is back trading in yet another narrow range. I am still long from last Monday at 1243 and I will keep my stop the same at 1229 esecially with the expected volatility later. Again if I am stopped out I will be a more aggressive buyer on any dip to 1215/1225 with a 1199 stop.
Silver Rolling Contract
No change as I am still long from last week at 18.80 with the same 18.45 stop. Silver to continues to trade stronger than Gold and I am getting a lot of comfort in my long position from the Daily Sentiment Index Reading which is still in single digits.
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