After Wednesday’s FOMC announcement it was Gold that was the out-performer yesterday as it rallied $47 to $1319.20, a gain of 3.6%, taking its lead from the prospect of an exceptionally accommodating US Dollar Monetary Policy for even longer. Gold very much likes the idea of Monetary spigots being left on a full tilt.
Whilst US Treasuries rallied after the FOMC it was something of a reversal of fortune in yesterday’s trading session as Bond Yields rose, giving back a good part of the gains of the night before, mostly at the longer end of the curve with near Zero Funds expected to anchor the front end for some time yet. US 10-Year Bond Yields rose 3 basis points to 2.62% whilst the 30-Year rose 6 basis points to 3.47%.
US data released yesterday was again positive thus halting the Bond market rally. Weekly Jobless Claims continued to trend downwards to 312k, another sign of continuing labour market improvement. Putting icing on the cake was the Philly Fed Index for June which rose to 17.8 from an already strong 15.4 in May. The May US Leading Index rose another 0.5% only slightly shy of the 0.6% expected.
On the currency front Sterling continues to trade strongly as the market is still trying to digest last week’s comments from Governor Carney that UK Rates will rise sooner than expected. UK Retail Sales released yesterday morning were broadly in line with expectations falling 0.5% after the huge 1.7% gain in April leaving sales up a solid 4.7% year on year.
This morning on the economic front we have UK Public Sector Net Borrowing at 9.30 am. This is followed at 10.00 am by German PPI and Euro-Zone Current Account. Today is Contract expiration for all the Futures and Options Contracts in the US and we have no economic data of note from the US today. At 3 pm we have Euro-Zone Consumer Confidence Index.
September S&P 500
Finally the June Futures Contracts will expire at 2.35 pm today whilst the Options Contracts do not expire until 9 pm this evening making today one of the most difficult trading days of the quarter to read. Sometimes after the Options expire and the Cash market has closed the last 15 minutes of Futures trading can be very volatile.
I was very unlucky with my S&P plan yesterday as I wanted to buy the Sept Contract at 1944 but this was the low before the market had a nice 6 handle rally into the close and I am still flat. I still believe the US Stock market is on borrowed time especially when you see how extreme the optimism has become in the US Stock market. These extreme measures do work but can take time as we have seen with Gold today which is now up an incredible $80 from its low point and single digit Daily Sentiment Index reading two weeks ago.
Today I will raise my buy level to 1941/1945 with a 1938 stop. The top of the Bollinger Band comes in at 1956 and today I will still look to sell the market on any rally to 1956/1961 with a 1964 stop.
Euro/USD
No change as I am still a small buyer on any dip to 1.3570/1.3595 with the same 13545 stop. I am surprised that the Dollar is not weaker given how strong Gold and Silver are trading this morning.
US Dollar Index
My buy level for the Dollar index was finally triggered yesterday at 80.25. I am still long and I will leave my stop the same at 7980.
September DAX
The Dax traded in a very narrow range yesterday as the market waits for the June Contract to expire later this morning and I am still flat. Today I will still be a small seller on any further rally to 10050/10110 with the same 10140 stop. Given the volatility I have to use wider stops with smaller size. Again I am looking to put on a more macro short position on any subsequent rally to 10200/10300 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 3110 in tiny size with the same 3200 stop. Again if I am stopped out of this position I will look to reset my short position in front of 3250 with a 3320 stop.
September FTSE
The Cash Market again closed below the key 6830 resistance level yesterday but this morning the market is again testing this level. For the September Contract the key level to watch is at 6790. Given that today is expiration for the June Contract and the fact that it is a 50/50 call as to which way this market is going to break I am going to stay flat and take another look on Monday.
Dow Rolling Contract
No change as I am still a small buyer on any dip to 16810/16840 with a 16780 stop. I still do not want to be short the Dow at this time as I still feel it is too near the 17000 resistance point for the market to at least test this level before attempting to trade lower.
September BUND
The Bund continues to trade higher but given how low yields are I do not want to chase this market higher and I will leave my buy level the same at 145.40/145.60 with a 145.25 stop on any long position.
Gold Rolling Contract
The big rally that I have been looking for in Gold and Silver finally kicked off yesterday with Gold rallying an incredible $47 to 1320 from just 1240 two weeks ago. Unfortunately I was taken out of my long 1250 position at 1270 earlier in the week and I missed this rally yesterday but at least I was long Silver which is basically the same position. Gold is back trading lower this morning at 1307 and today I will raise my buy level to 1295/1305 with a 1288 stop.
Silver Rolling Contract
Silver finally took out the key 20.20/20.50 resistance level which is very bullish and opens up the way to test the key 25.00 next resistance level over the coming weeks. I am still long at 19.58 and today I will raise my stop to 20.20 on this position.+
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