The big moves over the past 24 hours were in the FX market, with the US Dollar Index and Euro/USD now trading at 84.30 and 1.2880 respectively. The moves were somewhat extended over the session with the catalyst being a San Francisco Fed research letter which triggered the flare-up. This letter showed that the market expects a longer period of policy accommodation than the Fed have indicated with the market seemingly more certain. This prospect of an earlier than anticipated Fed movement weighed on Equities, lifted Bond Yields late in the day and lowered Commodity prices.
There was little data of note yesterday with Consumer Credit coming in much stronger than expected which only enhanced the earlier movement that we saw in the markets in the form of a stronger Dollar and higher Bond Yields.
This morning on the economic front we have UK Industrial Production and Trade Balance at 9.30 am. This is followed at 12.30 pm by the US NFIB Small Business Optimism and then at 3 pm we have the UK NIESR GDP Estimate.
September S&P 500
The S&P, which had been moving nicely ahead soon after the US markets opened, was hit hard after the San Francisco Research letter was released. The market just missed my 2008 sell level by a small margin before trading down to a low of 1993 before having yet another late rally back to 2001 before the close. After it traded down to my 1996 buy level I covered this position ahead of the close at 2000 and I am now flat. For me the market has had too many tests of this 1988/1994 support zone for it not to break through sooner rather than later.
Today I will lower my sell level to 2001/2005 with a 2012 stop which is just above last Thursday’s contract high. Given how over extended this market is trading I do not want to be long the S&P at this time especially with the anniversary of 9/11 this week and the fact we are right into September which traditionally is the weakest month of the year.
Euro/USD
Unfortunately I was stopped out of my long 1.2935 position from yesterday morning at 1.2880 and I am now flat. The Daily Sentiment Index is still posting record lows which makes it very difficult for me to short the Euro. I still believe that the Euro will trade a lot lower versus the Dollar but not on this run given how over extended the move is. The next big support comes in at 1.2750/1.2770 which is where the market rebounded from three tests of this level in early 2013. Today I will again be a buyer on any further dip to 1.2810/1.2840 with a wider 1.2740 stop.
US Dollar Index
Unfortunately the Dollar keeps missing my buy level which is very frustrating as I had been long the Dollar for the first seven months of the year but after I took profit at 82.10 I have not been able to re-establish my long position and I am still flat. Today I will raise my buy level slightly to 83.60/83.90 with a 83.25 stop. I still do not want to be short the Dollar Index at this time.
September Dax
As expected, after last week’s ECB move the Dax continues to play catch-up and out-perform the other major Indices. I am still flat as I do not want to chase the market higher preferring instead to buy a dip if it occurs whilst at the same time not wanting to be short at all. Given the potential negative reaction to the other major indices I am going to leave my buy level the same at 9565/9595 with the same 9535 stop.
September FTSE
The FTSE plan worked well yesterday as by the time I posted the market was trading at the lower end of my buy range at 6795. The market had a nice rally into the close which enabled me to cover this position at 6830 and I am now flat. Today I will again be a buyer on any dip to 6780/6805 with a 6755 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Yet again the Dow rejected a break of the July closing high at 17150 and I am still flat. Today I will leave my sell level the same at 17170/17210 with a 17240 stop. Given how over extended the Dow is trading I do not want to be long the market at this time.
December BUND
It was very frustrating yesterday as the Bund just missed my 149.50 sell level by a few pips before trading nearly 80 points lower and I am still flat. As I have mentioned over the last few weeks these Bond Yields are insane for an economic recovery that is nearly seven years old. Today I will lower my sell level to 148.90/149.20 with a 149.55 stop which is just above yesterday’s high.
Gold Rolling Contract
Gold started to sell-off as soon as I posted yesterday morning and quickly reached my 1260 buy level. I was stopped out of this position on the San Francisco newsletter release and I am now flat. Gold is trading at the bottom of its Bollinger Band and is very oversold at this time. The next big support is at 1241 which is the low from a few months back and today I will again be a buyer on any further dip to 1242/1248 with a 1234 stop.
Silver Rolling Contract
Thankfully I raised my stop on my long position at 19.40 to 19.05 which very quickly was hit yesterday morning and I am now flat. Silver continues to hold in better than Gold and I still believe the next meaningful move will be to the upside especially with the Daily Sentiment Index reading back in single digits. Today I will look to buy Silver from 18.50/18.80 with a 18.25 stop.
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