Yesterday’s price action had a distinctly adverse feel to it with Equity Markets lower and Treasury Yields back to their year to date lows. In addition, the VIX was slightly higher and the US Dollar held on to its recent gains whilst the US Dollar/Yen continued to strengthen with the the Yen again testing the 102 level. Russia and the Ukraine remain at the core of geopolitical concerns with reports of the downing of a Ukrainian jet the latest flash point. The situation is also now at the centre of economic concerns as Euro-Zone data illustrates the hit already being felt on the world’s largest economic region. ECB President Dragi identified Russia/Ukraine as representing fresh downside risks to an economic recovery now officially described as ‘uneven’ from ‘moderate’ previously.
There were no hints of fresh policy easing at yesterday’s ECB Meeting with a lot of store being placed on the soon to start TLTRO’s but there was another spirited attempt to talk the Euro lower. In the US, the S&P closed down 0.6% despite the Weekly Jobless Claims data which came in better than expected at 289k which had initially lifted the markets only to fall apart again into the close. The S&P Futures market is trading a lot lower this morning after US President Obama authorised Air Strikes on Iraq, but he reiterated that American Marines will not be returning.
This morning on the economic front we have UK Trade Balance at 9.30 am. This is followed at 1.30 pm by US Non Farm Productivity and Canadian Unemployment.
September S&P 500
Yesterday after I posted the S&P just missed my 1828 sell level with a 1826 high before having a nasty sell-off into the European close which saw the market trade down to my 1906 buy level and after a quick rally I was able to cover this position at 1912 and thankfully I am now flat. With this volatility you have to take your profit when available and not be married to any particular position.
This morning the S&P is testing support at 1890/1895 ahead of the next main support area at 1869/1875. Given the large ‘GAP’ to the downside I will be a small buyer from 1889/1894 with a 1885 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 1875 with a wider 1865 stop. Next Friday we have the Options expiry and, as members know at this stage, whatever low is put in on the Thursday/Friday in the week before expiry is generally the low for the remaining days and this is why I am a buyer down at these levels. Given how oversold the S&P is trading I do not want to be short at this time.
Euro/USD
The Euro is holding in this morning despite the much weaker Equity markets and ECB President trying to talk the currency lower. Today I will raise my buy level slightly to 1.3290/1.3320 with a 1.3265 stop. My only interest in selling the Euro is on a rally back to 1.3420/1.3450 with a 1.3470 stop
US Dollar Index
The Dollar is struggling to forge ahead and for that reason I will leave my buy level the same at 81.10/81.30 with a 80.75 stop.
September Dax
I was very unlucky with my Dax sell level at 9185 yesterday as the market reached a high at 9172 before rolling over. It later traded down to my 9010 buy level and as I did not want to have a position overnight I covered this trade at 9025 before the New York close and I am now flat. The Dax is really feeling the brunt of the Russia/Ukraine crisis as one support after another is being broken. This morning we are approaching the 8907 ‘March 14 lows’ and the Dax has decent support from 8840/8910 which barring some other adverse news I would expect to hold in the short term. Today I will be a buyer from 8870/8920 in small size with a wider 8825 stop.
September FTSE
The FTSE continues to hold in better than the other major indices. Yesterday after I posted the market traded down to my 6550 buy level but unfortunately I was stopped out of this position overnight for a small loss at 6515 and I am now flat. It is also oversold and today I will again be a buyer from 6470/6500 with a 6455 stop.
Dow Rolling Contract
The Dow plan worked well yesterday as shortly after I posted it traded down to my 16360 buy level and after a nice rally I was able to cover this position at 16410 and I am now flat. The market is also being hit hard this morning on the Obama air strike news. The next major support comes in at 16200/16250 and I will be a buyer in this region with a 16150 stop. Given how oversold the Dow is trading and the fact that today is the Friday before an ‘Options Expiry’ next week I do not want to be short the market at this time.
September BUND
The Bund is testing my sell level this morning and I am still a seller between 149.70/150.00 with a 150.25 stop especially with the market extremely overbought on a Daily, Weekly and Monthly basis.
Gold Rolling Contract
Unfortunately Gold just missed my 1299 buy level before trading a lot higher and is now testing the key 1325 resistance level. I am not going to chase the market here but I will raise my buy level to 1307/1313 with a 1299 stop which is just below yesterday’s low.
Silver Rolling Contract
Silver continues to trade the heavier of the two metals. I am still long at 19.90 and I will leave my stop the same at 19.45 on this position.
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