A combination of some disappointing US data but more especially ‘newswire’ headlines, during early Friday afternoon, claiming that Ukraine troops had destroyed part of a Russian convoy ensured a down day for European stocks, a mixed day for US Equities and new post-June 2013 lows for US 10-Year Treasuries. The latter hit 2.31% before closing at 2.34%, down 6 basis points on the day whilst 10-Year German Bunds closed at another all time low at 0.95%. The VIX added 0.75 to close at 13.15.
A few hours after the Ukrainian headlines, the Russian Ministry claimed that there had not been any Russian Army crossing into Eastern Ukraine and that the report of an attack was just ‘some kind of fantasy’. The Russian Defense Secretary was also reported as giving assurances to his US counterpart that there were no military personnel in its aid convoy destined for Ukraine. In any event, all of the rumours and claims succeeded in putting a damper on markets throughout the day.
In other news, Sterling has started the new week higher following a Sunday Times interview with Bank of England Governor, Carney in which he said that a rise in real wages is not a prerequisite for a rate rise and that Sterling’s 17% rise since March is not a deterrent to higher rates.
This morning on the economic front we have the Euro-Zone Trade balance at 10.00 am. This is followed at 3 pm by the US NAHB Housing Market Index. Also at 3 pm the UK will release its Hometrack Housing Survey.
September S&P 500
The S&P had a wild end to its August Nominal Expiration as the market had a 20 handle sell-off on the Ukraine news before it rallied hard and then sold off aggressively to reach a new 1937 low, before spending the rest of the day trading higher. Shortly after I posted on Friday I was stopped out of my short 1953 position near the highs of the day at 1958 before the market traded down to my 1942 buy level and after a nice spike higher I was able to cover this position at 1950 and I am now flat.
The market was higher again overnight and I still believe that it is an accident waiting to happen but so far every sell-off is being bought aggressively, as shown by the 70 handle rally last week. Today I will be a small seller on any further rally to 1963/1968 with a 1972 stop. I will also raise my buy level slightly to 1941/1946 with a 1936 stop which is just below last Friday’s low.
Euro/USD
Unfortunately the Euro just missed my 1.3350 buy level by a few points on Friday before trading higher and I am still flat. As I mentioned in Friday’s update as long as the Euro can stay over 1.3280/1.3310 then it is still fine but a break and close below here will be very bearish. Given how low the Bund Yields are trading it is amazing that the Euro is still bid and this must be giving Dragi and the ECB some sleepless nights. Today I will raise my buy level slightly to 1.3340/1.3370 with a 1.3325 stop I still do not want to be short the Euro at this time.
US Dollar Index
No change as I am still long the Dollar from last week at 81.45 with the same 80.95 stop.
September Dax
It is very rare that I will get whipsawed in a particular market but unfortunately that is exactly what happened on Friday as shortly after I posted I was stopped out of my 9260 position near the highs of the day at 9310 before the Dax fell nearly 300 points on Ukraine early in afternoon trading. After the market initially dropped to my 9190 buy level I was quickly stopped out of this position at 9145 and I am now flat. I am going to stay flat today as I want to see how the market performs given the extreme volatility on Friday.
It is very difficult to trade a market that is moving so much on a single external event, such as Ukraine, as one headline at the wrong time can take all your money and for this reason I will stand aside and take another look tomorrow.
September FTSE
The FTSE just missed my buy level before having a nice rally into the close and I am still flat. I still like trading the FTSE as it is the one market that did not get carried away to the upside. Today I will raise my buy level to 6650/6675 with a tight 6635 stop which is just below last Friday’s low.
Dow Rolling Contract
The Dow plan worked well on Friday as shortly after the US Markets opened it traded down to my 16630 buy level before having a nice rally into the close which enabled me to cover this position at 16690 and I am now flat. Today I will be a small seller on any further rally to 16750/16790 with a 16820 stop. I will still be a small buyer on any dip to 16590/16640 with a 16560 stop.
September BUND
I must say I am amazed that how the 10-Year German Bund is trading with a Yield of just 0.95 basis points. This record low yield is implying an economic depression is coming which is in contrast to what the Dax and Euro are saying. After I posted on Friday I was stopped out of my 150.05 short position for a small loss at 150.35 and I am now flat. The Bund is very overbought here and today I will again be a seller on any rally to 150.45/150.75 with a 151.15 stop.
Gold Rolling Contract
Gold continues to trade better than Silver at this time and it had a nice reversal into the New York close last Friday but not before stopping me out of my long 1306 position for a small loss at 1299 and I am now flat. Today I will be a small buyer on any dip to 1288/1295 with a 1283 stop.
Silver Rolling Contract
No change as I am still long from earlier in the month at 19.90 with the same 19.45 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 19.25 with a 18.75 stop.
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