US Stock markets again closed at a new all time high as the Dow and S&P500 were both 0.5% higher after the US Labour Department reported on Friday that the US Economy had created 217k new jobs for May on top of the revised 282k Jobs created in April. The Unemployment rate remain unchanged at 6.3%. It marked the fourth straight month that Payrolls have increased by at least 200K which is the first time this has happened since the period September 1999 to January 2000.
Consumer Borrowing also rose more than expected in April as Americans boosted Credit Card use by the largest amount since November 2007.The $26.8 billion surge in total Credit exceeded the highest estimate in a Bloomberg Survey whilst March was also revised higher to $19.5bn. Revolving Credit which includes Credit Cards jumped $8.8 billion. It seems that job gains and increases in stock and house prices are giving consumers the confidence to borrow after years of paying down debt.
Yesterday the IMF reported that it had underestimated the strength of the UK Economy when warning against the Government’s austerity programme. MD Christine Lagarde told the BBC ‘that the economic policies adopted by the Government has surprised many of us as we said clearly that we have underestimated growth for the UK and our forecasts have been proven wrong by the recent economic developments.’
In other news China reported yesterday that its exports had risen more than analysts had estimated in May which helped cushion a slowdown by the world’s second largest economy as an unexpected slump in imports highlights the risk to growth.
Today we have no economic news in either the Euro-Zone or the US as the markets look to absorb last week’s key events from the ECB and the US Labour Department.
June S&P 500
Last Friday was one of the quietest reactions to a Non Farm Payroll that I can remember as the market again closed at another new high on yet ever decreasing volume, with the VIX also closing at a new 7 year low near 11. In my estimation the S&P is at its most overbought in recent memory as the market has now been trading at the top of the Williams Index for the last three weeks. We can stay overbought and we will probably need a sell extreme first before having the confidence to put on a macro short position. After the Payrolls were released the market, having gapped higher, just traded at this elevated level for the rest of the session. I finally went short at the top of my sell range at 1948. I am still short and I will leave my stop the same at 1954. If I am stopped out of this position I will look to go short one more time but only if the market subsequently falls 5 handles (points) and I will leave my stop just above whatever subsequent high is put in.
Euro/USD
The Euro plan worked well on Friday as after I posted it traded down to my 1.3630 buy level and after a nice rally I was able to cover this position at 1.3660 and I am now flat. The ECB’s actions last Thursday have so far failed to get the Euro lower and the price action continues to tell us that it is still a buy on dips. I will hold to this view as long as we can stay over 1.3500. Today I will again be a small buyer from 1.3600/1.3630 with a 1.3580 stop. I still do not want to be short the Euro at this time.
US Dollar Index
No change as I am still a buyer on any dip to 79.60/79.90 with a 79.35 stop.
June DAX
No change as I am still a small seller from 10030/10070 with a 10095 stop. My target area for going short is from 10215/10300 with a 10450 stop. I still do not want to be long the Dax at this time.
I am still short the DAX/FTSE spread at 3120 with the same 3190 stop. Again if I am stopped out of this spread I will be a more aggressive seller from 3205/3245 with a 3295 stop
June FTSE
The FTSE finally rallied on Friday with the market finally closing over the key 6850 resistance level. This 6830/6850 should now act as good support and today I will be a buyer in this area with a 6795 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Just like the S&P, the Dow opened higher in New York and spent the rest of the trading session in a very narrow range before finally hitting the top of my sell level near the close at 16920. The next key resistance level for the Dow runs from 17000/17070. As I am only short in small size and given how volatile the Dow is trading I am going to raise my stop on this position to 17080 so I can give this trade some room.
September BUND
No change as I do not want to chase the Bund higher at these levels and I will leave my buy level the same at 144.80/145.05 with a tighter 144.60 stop.
Gold Rolling Contract
The key level for Gold is still last week’s low at 1240 and today I will leave my buy level the same at 1245/1250 with the same 1235 stop.
Silver Rolling Contract
No change as I am still long from 18.80 with the same 18.45 stop. For a change Silver continues to act stronger than Gold and I am still looking for it to put in a long term bottom in front of 17.00.
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