Equity markets had a positive session yesterday supported by yesterday’s Chinese growth numbers and also a 15% jump in Time Warner shares after it rejected the takeover bid by 21st Century Fox. The Dow rose 0.5% to a new record close of 17,138 whilst the S&P closed 0.4% higher. Yesterday’s Chinese data reported a 2.0% gain for GDP in Q2 and 7.5% year on year versus 1.8% and 74% expected, respectively. Industrial Production also beat expectations at 9.2% year on year in June, up from 8.85 in May.
Meanwhile Fed Chair, Yellen’s, House address did not raise too many new issues after her Senate appearance the previous day, where her most notable comments were that some sectors of the market namely, Biotech and Social Media stocks were substantially stretched. The Fed’s Fisher maintained his hawkish stance, expressing his concern that policy may remain loose for too long and that the Fed may need to start raising rates in early 2015.
The Federal Reserve’s Beige Book was also largely as expected thus reaffirming that the economy continues to gradually improve. Economic growth was seen to be ‘moderate or modest’ across most of the Fed’s Districts from late May to early July, but all regions reported an improved labour market and better consumer spending, while price pressures remain contained.
In Portugal some further easing of fears regarding BES after the Portuguese Central Bank Governor said that shareholders in the bank were prepared to participate in a potential capital increase. Equity markets are opening slightly weaker this morning after Russia imposed more sanctions on Ukraine
This morning on the economic front we have Euro-Zone CPI at 10.00 am. This is followed at 1.30 pm by the Weekly Jobless Claims from the US and Housing Starts/Building Permits. At 3 pm we the Philadelphia Fed Business Outlook. Finally at 6.35 pm the Fed’s Bullard will speak on Monetary Policy.
September S&P 500
Despite the Dow closing at a new all time high, the S&P didn’t, thus opening up the possibility of negative divergence on what was another slow, low volume trading session. None of my planned entry points were met and I am still flat as the market just missed my 1982 sell level as we await for the Monthly Nominal Expiration tomorrow.
Today I will still be a buyer on any dip to 1958/1963 and I am loathe to chase the market higher here given how overbought we are trading on a Daily ,Weekly and Monthly basis. However until we see 3 decent down-days it is very hard to stay short for any length of time as the price action is still positive. My only interest in selling the S&P is still on a rally to 1982/1987 with a 1991 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 1998 with a 2003 stop.
Euro/USD
The Euro is trading at the bottom of its Bollinger Band this morning. The next key support is at 1.3480 and today I will still be a buyer on any dip to 1.3490/1.3520 with a 1.3465 stop. I will also lower my sell level slightly to 1.3570/1.3600 with a 1.3620 stop.
US Dollar Index
The US Dollar index is also trading at the top of its Bollinger Band and for this reason I have decided to cover my long 80.30 position at 80.60 this morning and I am now flat. I have had this position for nearly three weeks which is very unusual for me. Today I will again be a buyer on any dip to 80.00/80.25 with a 79.70 stop which is just below key support at 79.75/79.85.
September DAX
By the time I had posted yesterday the Dax had already traded through my entry levels and I am still flat. I have to respect the fact the Dax closed again over the key support level of 9800/9820 to trade as high as 9880. Last Thursday/Friday’s low at 9625 when the Dax was trading at the bottom of its Bollinger Band and Williams Index before having a 250 point rally again showing what an important technical tool these indicators are.
Today I will be a small buyer from 9750/9780 with a 9715 stop as I look for a move to 9920/9940. I do not want to be short the Dax at this time.
September FTSE
The FTSE built value and closed over key support at 6710 yesterday so today I will be a small buyer from 6700/6720 with a tight 6680 stop. I do not want to be short the FTSE at this time.
Dow Rolling Contract
After I posted yesterday the Dow traded up to my sell level at 17130. Despite the fact that the Dow is very overbought and trading at the top of its Bollinger Band I have decided to cover this short position at 17100 this morning. The main reason is because of the Nominal Expiration tomorrow and the fact that the Dow managed to close at a new high. If it rallies from here I will again be a small seller from 17160/17190 with a 17220 stop. I still do not want to be long the Dow at this time.
September BUND
No change as I am still a buyer from 147.10/147.30 with a 146.85 stop. If the Bund rallies from here I will still be an aggressive seller from 148.25/148.50 with a 148.75 stop.
Gold Rolling Contract
Thankfully Gold is back trading above 1300 this morning. I am still long at 1303 and I will leave my stop the same at 1289 as it is now trading at the bottom of its Bollinger Band and Williams Index.
Silver Rolling Contract
No change as I am still long at 20.70 with the same 20.25 stop which is just below key support at 20.50.
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