It was a very sweet combination of US data that drove stocks and the US Dollar higher yesterday but without dislodging the US Bond Market. Housing activity has rebounded strongly in July whilst CPI has remained tame. Following on the heels of a positive report from US Homebuilders on Monday, it was the turn of the supply side to respond in the form of a larger than expected rebound in Housing Starts and Permits in July. Starts jumped a startling 15.7% in the month albeit flattered somewhat by a 28.9% jump in Multi-Family Starts however Single Family Starts still rose a tidy 8.3%. These stronger July figures were sweetened by some upward revisions to history. Whilst Housing activity was stronger inflation remained tame as shown by headline CPI which rose 0.1%, as expected, as did the core leading annual CPI which was down one tenth to 2.0% from 21% and core a steady 1.9%.
This was all the stock markets were looking for with positive sentiment evident throughout the session with the main indices up 0.5% and US Home-Builder stocks gaining 1.7%. The US Dollar rose on the back of the data with the Dollar Index touching 82.00. Sterling fell again yesterday after softer than expected UK CPI for July which fell to 1.8% from 2.0% last month.
This morning on the economic front we have the Bank of England Minutes at 9.30 am. We have no data of note due from the Euro-Zone however at 3 pm we have the UK CBI Total Trends Orders. At 7 pm the Fed will release its Minutes from the July 29/30 Meeting and this will be a market mover.
September S&P 500
It is easy to see why August is one of the most difficult trading months of the year with very few traders at their desks and the main players still on summer vacation. The S&P has almost retraced its whole August sell-off, helped by the much better than expected US Housing data over the last few days. Tonight’s FOMC Minutes will very interesting as the market started to sell off aggressively following the latest meeting only to bottom on August 7 and rally since.
Yesterday after I posted I was stopped out of my 1967 short position at 1973. The market proceeded to trade up to my 1979 sell level and I am now still short at this level with the same 1985 stop. Today I will also raise my buy level to 1959/1964 with a 1955 stop.
Euro/USD
No change as I am still long from last Monday at 1.3360 with the same 1.3325 stop. Again if I am stopped out I will be a more aggressive buyer from 1.3280/1.3300 with a 1.3255 stop.
US Dollar Index
My long Dollar 81.45 position from last week finally worked out yesterday as the market had a nice rally which enabled me to cover this position at 81.90 and I am now flat. I still like the Dollar and today I will again be a buyer on any dip to 81.50/91.70 with a 81.25 stop.
September DAX
The DAX started to rally after I posted yesterday and finally traded up to my 9335 sell level. Despite the US markets rallying the Dax just stayed basically at my short level for the rest of the trading session. I am still short and I will leave my stop level the same at 9385. I will also be a small buyer on any dip to 9230/9270 with a 9175 stop.
September FTSE
No change as I am still a buyer on any dip to 6675/6700 with the same 6645 stop. As I have mentioned over the last two weeks I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow finally closed its ‘Open Gap’ from July 30 at 16880 yesterday and the market eventually traded up to my 16915 sell level. I am still short and I will leave my stop the same at 16950. Given how overbought the Dow is trading especially after the 700 point rally over the last 10 days I do not want to be long at this time.
September BUND
The Bund finally traded up to my 150.20 sell level after I posted yesterday. I am only short in small size and I will leave my stop the same at 150.75. For me to turn more bearish of the Bund I will need to see a sell extreme first.
Gold Rolling Contract
With equity markets continuing their recent rally Gold finally sold off yesterday and eventually traded down to my 1294 buy level. I am still long and I will not risk to much on this trade by leaving my stop the same at 1283.
Silver Rolling Contract
My long Silver position finally got stopped out at 19.45 and I am now flat. I am very surprised at how weak Silver is trading especially with the US Economy performing so well. Today I will look to rest my long position on any dip to 19.00/19.25 with a 18.75 stop.
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