Equity markets closed little changed yesterday in the absence of any key data. US Equities made small gains, the Dow was up 0.13% and the S&P was up 0.03% whilst European markets were mostly lower, averaging a 0.2% fall. Europe was again weighed down by Middle East and Russian concerns, in particular the anticipation of further sanctions on Russia. The 28 EU States are expected to reach a final decision today on capital market restrictions, an arms embargo and energy sanctions against Russia.
Weak US Housing data also hurt sentiment early in the US session. Pending Home Sales fell 1.1% in June versus +0.5% expected, continuing the run of poor housing indicators. Sales are down 4.5% over the past year. In contrast the markets mostly ignored the ‘good’ US releases – the Services PMI beat expectations at 61.0 in July versus 59.8 expected, whilst the Dallas Fed Manufacturing Index was in line with expectations at 12.7 in July, up from 11.4 in June.. However later in the trading session some merger activity (Trulia/Zillow and Dollar Tree/ Family Dollar) helped push the US Indices back into positive territory.
The IMF’s article on the UK was mostly positive and concluded that higher interest rates will be needed if macroprudential tools do not curb the housing market risks. The IMF estimated that the real exchange rate is overvalued by anywhere between 5-10%.
This morning on the economic front we have UK Consumer Credit and Mortgage Approvals at 9.30 am. For the second consecutive day we have no Euro-Zone data of note whilst at 3 pm we have the US Consumer Confidence Index as the market awaits the latest FOMC announcement at 7 pm tomorrow.
September S&P 500
The strategy of buying the dip on the week of an FOMC Meeting again worked well yesterday. Shortly after the US Markets opened the S&P traded down to my 1965 buy level, with a 1960.75 low, before having a nice rally into the close which enabled me to cover this position at 1972 and I am now flat. Today I will again be a small buyer on any dip to 1966/1970 with a tight 1962 stop. My only interest in selling this market is on a rally to 1980/1985 with a 1988 stop which is just above contract highs made late last week.
Euro/USD
No change as I am still long the Euro from last Friday at 1.3430 with the same 1.3395 stop. If it rallies back to 1.3455/1.3465 I will look to exit this position as I want to be flat ahead of the FOMC tomorrow evening.
US Dollar Index
Yesterday was such a quiet trading session for currencies as we hardly saw any movement of note. I am still a buyer of the Index on any drop to 80.65/80.85 with a 80.45 stop.
September DAX
The DAX plan also worked well yesterday as shortly after I posted it traded down to my 9565 buy level. I was very lucky not to be stopped out of this position as the futures low was at 9531 however after a nice rally I was able to cover this position near the close at 9605 and I am now flat. Today I will again be a small buyer on any dip to 9550/9580 with a 9525 stop. My only interest in selling the Dax is still on a rally back to 9680/9710 with the same 9735 stop.
September FTSE
I was not so lucky with my FTSE trade as the market stopped me out of my long 6750 position for a small loss at 6725 before it regrouped and is back trading at 6770 this morning. The FTSE also left a buy extreme from yesterday’s low and as a result of this I will again be a small buyer from 6735/6755 with a 6695 stop which is just below yesterday’s low.
Dow Rolling Contract
The Dow just missed my 16840 buy level yesterday before the market regrouped and is back trading near 17000 again this morning. Today I will raise my buy level to 16910/16950 with a 16860 stop which is just below yesterday’s low. I do not want to be short the Dow today especially with the FOMC announcement tomorrow.
September BUND
No change as I am still short from last week at 148.20. The Bund has traded in a very narrow range over the last few days and I will leave my stop the same at 148.55.
Gold Rolling Contract
Gold is still struggling to push higher and the market is making lower highs which technically is not good. For this reason I will lower my buy level today to 1289/1295 with a 1283 stop which is just below the recent low made two weeks ago.
Silver Rolling Contract
No change as I am still long from last week at 20.40. Given how weak Gold is trading at this time I am going to raise my stop on this position to 20.25. If I am stopped out of this trade I will be a more aggressive buyer in front of 19.90 with a 19.45 stop.
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