Last Friday was a poor day for global equity markets. Europe especially, after a weaker than expected German IFO Survey and amid signs the EU was moving towards stronger sanctions against Russia. The German DAX lost 1.5%, France’s CAC 40 lost 1.8% and the Euro Stoxx 50 was down 2.12%. US Indices, taking their lead from Europe and Amazon’s bigger than expected Q2 loss, reported after Thursday’s close, finished with losses ranging from 0.5% to 0.75%. The VIX rose 0.85 to 12.69.
The US Dollar was stronger across most of the G10 spectrum, led by the USD/CAD which gained 0.62% to 1.0812 with a lot of stop-loss buying especially on the break of 1.08. The Euro continued its recent sell-off with the move lower on Friday assisted by a disappointing IFO Survey where the Business Climate Indicator dropped to 108.0 from 109.4 expected, and 109.7 previously. The Current Assessment reading fell to 103.4 from 104.8 and the Expectations Index was also down to 112.9 from 114.8.
US Bond Yields initially received a boost from the stronger headline readings for the June Durables Goods Orders Report, which rose 0.7% versus 0.5% expected. However after the initial reaction, weakness in the Capital Goods Shipments (-1.0% versus +1.3% expected) saw some analysts downgrading their Q2 GDP forecasts and this helped 10 Year Bonds to fall 4 basis points back to 2.46%. Somewhat unexpectedly the Russian Central Bank lifted its key 1-Week Rate by 0.5% to 8.0% on Friday morning citing geopolitical tensions that have weakened the RUB by 4.5% in the past month thus adding to inflation risk.
This morning on the economic front we have no data of note due from the UK or the Euro-Zone. At 2.45 pm we have the US Services PMI and this is followed at 3 pm by Pending Home Sales. At 3.30 pm we have the Dallas Fed Manufacturing Activity Index.
September S&P 500
After I posted on Friday the S&P started to follow the European markets lower. It traded down to my 1973 buy level before having a small rally which enabled me to cover this position at 1977 and I am now flat. This is a very big week for US economic data as we have Pending Home Sales today, Retail Sales tomorrow and the latest Fed Meeting on Wednesday. As I have mentioned over the last few weeks the S&P really needs to break and close below 1945/1950 for me to turn bearish.
Today I will lower my buy level to 1963/1968 with a 1959 stop. My only interest in selling the market is on a rally back to 1979/1983 with a 1987 stop. I am reluctant to go short ahead of the FOMC Meeting on Wednesday.
Euro/USD
After I posted on Friday the Euro traded down to my 1.3430 buy level helped by the weaker than expected German IFO Survey. I am still long and today I will raise my stop on this position to 1.3395. I will also look to short the Euro on any rally back to 1.3480/1.3510 with a 1.3530 stop.
US Dollar Index
Unfortunately the Dollar continues to rally without me been able to get a long position on board. As it is overbought I am reluctant to chase this market too much higher. For this reason I will only raise my buy level to 80.65/80.85 with a 80.45 stop.
September DAX
It was very unfortunate that I got stopped out of my short Dax position last Thursday at 9805 with the market trading 170 points lower this morning. Thankfully I was not long on Friday for this aggressive sell-off which has now broken some big levels to the downside especially with the close below 9700/9720. Today I will lower my sell level to 9680/9710 with a 9735 stop. My only interest in buying the Dax today is on a dip to 9550/9575 with a 9530 stop.
September FTSE
After I posted on Friday the FTSE traded down to my 6750 buy level. I am still long and I will leave my stop the same at 6725 as it continues to outperform the other major Indices at this time. If I am stopped out of this long position I will be a more aggressive buyer in front of 6690 with a 6665 stop.
Dow Rolling Contract
The Dow continues to trade the heaviest of the US major Indices and Friday was no exception as the market lost another 0.75%. The next big support for the Dow comes in at 16750/16800 and a break and close below here could possibly mean we have finally put in at least a temporary top in the market at last week’s high at 17138. Today I will be a buyer on any dip to 16810/16840 with a 16740 stop. My only interest in selling the Dow today, especially with Wednesday’s FOMC Meeting approaching, is on a rally back to 17010/17040 with a 17070 stop.
September BUND
After I posted on Friday the Bund started to rally and eventually traded up to my 148.20 sell level. I am still short and I will leave my stop tight at 148.55 which is just above recent contract highs.
Gold Rolling Contract
Finally my long 1297 Gold position worked out on Friday as after the Equities started to sell-off Gold had a nice rally which enabled me to cover my long position at 1307 and I am now flat. Today I will again be a small buyer on any further dip to 1292/1298 with a 1287 stop.
Silver Rolling Contract
No change as I am still long from last week at 20.40 with the same 19.90 stop as I look for Silver to regain its strength after last week’s sell-off.
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