Despite a solid US Payrolls Report on Friday, where the headline number came in at just below expectations at 209k, there were upward revisions of 15k to both May and June. However Equity markets were looking to softer aspects of the report such as the rise in the Unemployment Rate to 6.2% from 6.1% and unchanged Average Hourly Earnings which together drove the market reaction. Other economic data was very solid. Personal Consumer Spending grew 0.4% as expected whilst the US ISM Manufacturing Index printed high at 57.1 up from 55.3 and the highest rate since April 2011. US Auto sales continued apace whilst the UoM Consumer Sentiment measure for July was revised up as expected.
The solid US reports did not save US Equities although they fared better than Europe, with Portugal and Germany leading the way lower, both closing down another 2.6% and 2.1% respectively. The US Dollar gave back some of its recent gains on Friday with Sterling the biggest loser falling 0.4% after the UK Manufacturing PMI fell to 55.4 from a downwardly revised 57.2 in June.
This morning on the economic front we have Euro-Zone Sentix Investor Confidence and UK Construction PMI both due to be released at 9.30 am. This is followed at 10.00 am by Euro-Zone PMI whilst later at 2.45 pm we have the US ISM for New York.
September S&P 500
By the time I posted on Friday the S&P was in free-fall and had already traded through my buy level. The move was driven by the escalating geo-political situation which had a knock on effect on the European Equity Markets with Portugal and Germany both closing down 9.0% and 7.0% respectively on the week. As I mentioned on Friday the 1900/1910 is very strong support for the S&P and given how oversold the market was trading I bought in at at 1912 and after a nice rally on the Payrolls Report I was able to cover this position at 1921 and I am now flat.
It was again hit into the close but interestingly the McClellan Oscillator closed with a very negative reading of -281. This indicator is an internal reading of the stock market and a reading below -250 is very oversold. The S&P is also trading at the bottom of its Bollinger Band but interestingly the Williams Index has given a buy signal this morning. Therefore today I will be a buyer on any dip to 1915/1920 with a 1909 stop which is just below last Friday’s low. If I am taken long and subsequently stopped out I will use my ‘five handle rule’ (please the education tab on the website) to re-buy the market with a stop below whatever low has been put in. The 1940/1950 level is going to provide very strong resistance and today I will lower my sell level to 1935/1940 with a 1946 stop.
Euro/USD
The Euro plan worked well on Friday as it had a nice rally which the Bollinger Band and Williams had been indicating and this allowed me to cover my long 13375 position at 1.3420 and I am now flat. Today I will again be a buyer on any dip to 1.3370/1.3395 with a 1.3350 stop which is just below last week’s low.
US Dollar Index
The Dollar Index is lower this morning however I will leave my buy level the same at 80.00/80.20 with the same 79.75 stop.
September DAX
Just like the S&P, the Dax had already traded through my buy level on Friday morning. It has been in free-fall since Wednesday lunch time and has now fallen nearly 600 points from Wednesday’s high. It is way outside the Bollinger Band and at the bottom of the Williams Index. The last time that it was this oversold was on March 14 this year when it bottomed at 8907 before having a massive rally back to 10,000. This morning I will be a small buyer from 9110/9170 with a 9070 stop. I have to respect the fact that the Dax found no support at the 9380/9400 level and today I will be a seller on any rally back to 9350/9400 with a 9430 stop.
September FTSE
The FTSE was also through my buy level on Friday by the time I posted before finding support at the 6580 level. It is holding in better than the other major Indices which is understandable as it never really participated in the stock market rally this year. Today I will again be a buyer on any dip to 6580/6600 with a 6560 stop. My only interest in selling the FTSE is on a rally back to 6675/6710 with a 6740 stop.
Dow Rolling Contract
By the time I posted on Friday the Dow was trading at the bottom of my buy range at 16500 but unfortunately just before the Non Farm Payrolls were released I was stopped out at 16450 and I am now flat. It found good support in the afternoon at the 16400 level and today I will again be a buyer on any dip to 16410/16460 with a 16370 stop. Given how oversold the Dow is trading I do not want to be short at this time.
September BUND
The Bund traded up to my 148.50 sell level after I posted on Friday. I am still short and I will leave my stop the same at 148.80 which is just above contract highs made last week.
Gold Rolling Contract
Gold finally got a ‘bid’ after the drubbing it took all last week but surprisingly is finding it very difficult to break the 1300 resistance level. Today I will be a small buyer from 1282/1288 with a 1275 stop which is just below last week’s low.
Silver Rolling Contract
No change as I am still long at 20.35 with the same 19.85 stop.
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