Acknowledgement of the economic realities seeped into Fed Chair, Yellen’s, vocabulary yesterday. Meanwhile the tangled tentacles of Portugal’s troubled bank, BES, are keeping things subdued there. European equities were down sharply whilst US stocks, other than Techs, managed to pick up towards the end of the session and closed only slightly lower in general. Bond Yields were higher in the US but lower in Europe after a see-saw in reaction to the initial testimony. Commodities were lower with Oil and Gold down whilst the US Dollar rose.
On the face of it, Yellen’s Semi-Annual Testimony was the event of the day but there was a lot of other news that added to the market moves. The Fed Chair was initially her usual downbeat self however she noted that if the labour market continued to improve more quickly than expected then the Fed will have to hike earlier and more rapidly than they were predicting.
The US data has been better recently and this was re-iterated in the Q&A by noting that rate hikes were expected in 2015 and that the median Fed Funds Rate by end 2015 was projected to be 1%. It may be time that the markets start to price in the economic reality now that there has been the most incremental of nods in that direction from the Fed. The moves yesterday were fairly muted for this speech but as long as the data continues to show form then these moves will likely build. Indeed yesterday’s Retail Sales and Empire Survey were encouraging. Chair Yellen also noted in discussing asset price valuations that while most were within historical norms, Biotech and Social Media Stocks were expensive, hence the sell-off in those sectors.
Elsewhere German’s ZEW Survey was soft whilst, on the currency front, Sterling out-performed after a stronger than expected UK Inflation Report.
This morning on the economic front we have UK Unemployment and Average Earnings at 9.30 am. This is followed at 10.00 am by the Euro-Zone Trade Balance. At 3 pm we have the US NAHB Housing Market Index whilst at the same time Fed Chair Yellen gives her Semi-Annual Testimony to the House Committee. At 5 pm Fed Member, Fisher, will speak on Monetary Policy in Los Angeles whilst at 7 pm the Fed will release it’s Beige Book.
September S&P 500
Finally we are seeing some two-way volatility return to the equity markets and today promises much of the same given the number of data releases due on both sides of the Atlantic. Yesterday the S&P plan worked well as the markets sold off sharply on Yellen’s comments in relation to the overvaluation of Biotech and Social Media stocks. They then mounted a late day rally ahead of her next testimony to the House of Representatives at 3 pm this afternoon.
The S&P traded down to my 1962 buy level with a 1958.50 low before having a nice rally which enabled me to cover this position at 1968 and I am now flat. Today I will again be a small buyer on any dip to 1958/1963 with the same 1952 stop which is just below last Friday’s low at 1953. My only interest in selling the market is still on a rally to 1982/1987 with a 1991 stop.
Euro/USD
The Euro plan also worked well yesterday as shortly after I posted it traded down to my 1.3590 buy level before having a nice spike which enabled me to cover this position at 1.3620 and I am now flat. Technically, with the Euro closing below 1.3600 I have to respect this price action and it may be finally time to start to look to short the market. Today I will be a small seller from 1.3595/1.3615 with a tight 1.3640 stop. My only interest in buying it today is on a dip to 1.3495/1.3520 with a 1.3475 stop.
US Dollar Index
The Dollar is finally beginning to move higher. I am still long from earlier in the month at 80.30 and today I will raise my stop on this position to 80.15. If I am stopped out of this position I will be a more aggressive buyer in front of 79.75 with a 79.45 stop.
September DAX
The Dax plan worked well as shortly after I posted the German ZEW Survey was released which again disappointed. The market sold off on this news and this enabled me to cover my short 9780 position at 9730. It then traded down to my 9725 buy level and after a nice rally after the US markets opened I was able to cover this position at 9775 and I am now flat.
Today I will again be a seller on any rally back to 9780/9800 with a 9830 stop. The 9800/9820 is very strong resistance for the Dax and break and close over this level will be short term bullish. I will also be a small buyer on any dip to 9660/9685 with a 9640 stop.
September FTSE
No change as I am still flat the FTSE as the market has not yet made up its mind which way it is going to break from here. A break and close over 6710 is bullish whilst a closing break below 6660 will see me look to set up a short position again.
Dow Rolling Contract
My short 17080 Dow position from Monday worked out well yesterday as the market had a nice sell-off on Fed Chair Yellen’s Testimony which enabled me to cover this position at 17030 and I am now flat. Today my only interest in selling the Dow is on a rally to 17120/17150 with a 17185 stop. I still do not want to be long at this time despite the stronger price action.
September BUND
No change as I am still a buyer on any dip to 147.10/147.30 with a 146.85 stop. I will also still look to sell the Bund on any rally to 148.20/148.50 with a 148.75 stop.
Gold Rolling Contract
Gold was hit hard again yesterday but the market is trying to stabilise this morning over the key 1290 support level. I am still long at 1303 and I will leave my stop the same at 1289. Unfortunately Gold just missed my 1314 sell level by less than 1$ yesterday morning.
Silver Rolling Contract
Silver also closed weaker yesterday but is still trading stronger than Gold at this time. Shortly after I posted it traded down to my 20.70 buy level. I am still long and I will leave my stop at 20.25 which is just below key support at 20.50.
Recent Comments