Yesterday, US Equities recouped half of Tuesday’s losses whilst dragging European Equities back into the black, as a result. US Bond Yields closed down 5 basis points from their intra-day highs to stand slightly lower on the day as the US Dollar continues to sell-off and the Dollar Index closing down 0.16% to 80.02.
These market moves have come despite the FOMC’s June Meeting Minutes indicating that on current economic trends the Fed expects to end its QE Bond buying programme with a $15 billion flourish in October rather than continue to cut the pace of buying by $10 billion per meeting and leave a $5 billion final taper until December. The Fed Minutes were at pains to stress however that this was regarded as ‘a technical issue with no substantive macroeconomic consequences’. Other things that we learned were 1) Rather than fearing, the Fed is hoping that we will see evidence of rising wages which are deemed necessary to support household consumption 2) That the current FOMC consensus view is that balance sheet shrinkage (from non re-investment of maturing Bonds) will not begin until there is ‘lift off’ in the Fed Funds Rate, and 3) That when the Fed does start to lift rates it may retain a target range for the Funds Rate rather than revert to a single point target.
Elsewhere yesterday ECB President, Dragi, in a speech in London, said that threats to Euro-Zone price stability are real and that ECB Officials are unanimous in being willing to act further if necessary and that exchange rate behaviour is one amongst the multiple threats to price stability. No matter, the Euro went up not down after Dragi spoke, the message perhaps drowned out by market reaction to the FOMC Minutes.
This morning on the economic front we have the Monthly ECB Report at 9.00 am. This is followed at 12 pm by the Bank of England Rate decision. At 1.30 pm we have the US Weekly Jobless Claims whilst at 6.15 pm the Fed’s, George, speaks on the Economy in New York. Just after the markets close the evening at 9.30 pm the Fed’s, Fisher, will speak on Finance Sector Reform.
September S&P 500
As expected, the S&P could not manage to close lower for a third consecutive day as the markets, after an initial sell-off after the FOMC Minutes were released, managed to close 0.5% higher. One interesting article that I read last night about Wednesday’s Investors Intelligence Advisors Survey said that the percentage of Bulls is at 60.6%, a level that smells real danger as this reading is the second greatest extreme since 1987. This is the second such extreme in four weeks which denotes a complete belief in the sustainability of the advance which ironically suggests, in my opinion, that this advance is over or nearly over.
Yesterday the S&P plan worked well as shortly after the US markets opened it traded up to my 1965 sell level and after a nice sell-off I was able to cover this position at 1960 and I am now flat. Today I will raise my sell level to 1971/1976 with a 1981 stop which is just above both contract and all time highs last week. I will still be a buyer on any dip to 1950/1954 with a 1945 stop.
Euro/USD
The Euro just missed my buy level before trading higher and I am still flat. I do not like to be short the Euro until we finally see some real action to weaken the Euro by the ECB which to date has not happened. Today I will raise my buy level to 1.3590/1.3620 with a tight 1.3570 stop. I will still be a small seller on any further rally to 1.3690/1.3715 with a 1.3730 stop.
US Dollar Index
So far the Dollar Index is holding the key 80.00 support level. I am still long at 80.30 and I will leave my stop the same at 79.70 which is just below the 79.74 recent low.
September DAX
No change as the Dax traded in a narrow range yesterday. I am still a buyer on any dip to 9695/9720 with a 9670 stop My only interest in selling the Dax is on a rally back to 9850/9880 with a 9905 stop.
September FTSE
After I posted yesterday the FTSE continued to sell-off and is now trading at the bottom of its Bollinger Band but not the Williams Index. Today I will be a small buyer on any further dip to 6620/6640 with a 6595 stop. I will leave my sell level the same at 6715/6745 with a 6760 stop.
Dow Rolling Contract
Just before the close last night the Dow finally traded up to my 16990 sell level and after a nice sell-off this morning I have covered this position at 16950 and I am now flat. The Dow still has left an ‘Open Gap’ from July 7 at 17024 and this is one of the reasons that I have covered this position. Today I will raise my sell level to 17010/17040 with a 17070 stop. Given the extent of the bullishness to the US stock market I do not want to be long the market at this time.
September BUND
The Bund just missed my 147.15 buy level yesterday before trading higher and I am still flat. The Bund is now trading at all time highs which is incredible given that we are 3 years into an economic recovery. The next big resistance for the Bund comes in at 148.50 and I will be a very aggressive seller in front of this level with a 148.80 stop. I am not going to chase this market higher and I will leave my buy level the same at 146.90/147.15 with a 146.70 stop.
Gold Rolling Contract
Yesterday’s planned Gold Trade turned out very frustrating as itjust missed my 1313 buy level before trading a lot higher – this morning it is trading at 1330. I do not want to chase this market higher as I prefer instead to buy Silver. Today I will raise my buy level slightly to 1314/1320 with a 1309 stop.
Silver Rolling Contract
Silver also just missed my 21.00 buy level yesterday. This morning, given the fact that I feel naked without a long Silver position I have bought at 21.15. I will leave a 20.75 stop on this position.
Recent Comments