The US Dollar strengthened against all G10 Currencies on Friday with the Euro closing down 0.7% to 1.2832 before recovering some ground this morning whilst Sterling gave back all of its immediate post Scottish Referendum outcome gains. On Friday morning Sterling was trading at 1.6460 versus the US Dollar and fell under 1.6300 in late trading before, like the Euro, recovering some ground this morning.
Equity markets closed mixed with the Dow closing up 0.1% whilst the S&P and NASDAQ both closed lowed despite the successful launch of the Alibaba IPO, the largest IPO in history. However Equity markets are opening lower this morning after China’s Finance Minister damped speculation that his Government will boost economic stimulus.
The G20 Finance Ministers and Central Bank Governors meeting in Cairns, Australia over the weekend provided a few highlights. Ministers have agreed on a set of measures that will lift the collective G20 growth by an additional 1.8% over the next four years and there was some progress on encouraging free trade, infrastructure initiatives and also on improving global tax rules and closing loopholes for tax evasion.
This morning on the economic front we have no data of note due from the UK or the Euro-Zone whilst at 1.30 pm we have the US Chicago Fed National Activity Index. This is followed at 3 pm by Existing Home Sales and at 3.10 pm the Fed’s, Dudley will speak in New York.
December S&P 500
The big question this morning is whether the quadruple contract expiration last Friday signalled at least a temporary top in the market. This morning the December Futures are down 10 handles from Friday’s close after the Chinese Finance Minister damped speculation with regard to further stimulus. The other development of note on Friday was the confirmed official ‘Hindenburg Omen’ as we got a second consecutive reading on Friday for this well watched market phenomenon. There are four conditions associated with a H.O., namely:
- New Highs must be greater than New Lows.
- New Highs are not more than twice New Lows.
- The McClellan Oscillator is Negative.
- The 50 Day Moving Average is higher than it was 10 weeks ago.
All conditions were met and this is a sign that the market is very fragile at this time. The other very interesting development on Friday was the fact that whilst the S&P closed basically flat and near all time highs the Russel 2000 closed down 1.0% and is now at a 22 month low.
The open S&P trade worked well on Friday as the market topped soon after the US markets opened which enabled me to cover my short 2011 position at 2003 and I am now flat. As mentioned above I believe that we are on or very near the start of at least a 4/5 week correction and today I will be a seller on any rally back to 2000/2006 with a 2011 stop. Given how over extended this market is trading coupled with the confirmed Hindenburg Omen conditions I do not want to be long at this time.
Euro/USD
The Euro continued its recent sell-off on Friday with the market eventually trading down to my 1.2855 buy level. I am still long and despite how oversold the market is trading I will leave my stop the same at 1.2825. If I am stopped out of this position I will be a more aggressive buyer from 1.2750/1.2775 with a 1.2730. stop.
US Dollar Index
No change as I am still short at 84.80 with the same 85.20 stop.
December DAX
After I posted on Friday the Dax just missed my 9910 sell level before trading lower and I am still flat. As I mentioned last week that I do not want to chase this market higher and I will leave my buy level the same at 9640/9680 with the same 9625 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer in front of 9530 with a 9455 stop.
September FTSE
After I posted on Friday, the FTSE traded down to my 6810 buy level and after a small rally I was able to cover this position at 6830 and I am now flat. The FTSE is trading between key levels this morning and a break and close over 6800 is bullish whilst a break and close below 6765 is very bearish and signals a possible 200 point move to the down side. As we are trading in the middle of this range I am going to stand aside and see which way this market breaks.
Dow Rolling Contract
By the time I posted on Friday the Dow was trading at my 17330 sell level. Having avoided being short over the past few weeks, now that the September contracts have expired I am back with my bearish hat on again. The fact we have a confirmed Hindenburg Omen I am going to stay short the Dow with a breakeven stop. The other interesting note on the Alibaba IPO from the Wall Street Journal is the absence of a ‘lock-up period’ for insiders which Alibaba was able to arrange because demand for the deal was so strong. The Wall Street Journal notes that as of Friday’s offering ‘a swathe of early investors will be able to sell more than $8 billion worth of shares’ pretty much immediately.
December BUND
The Bund had a nice rally on Friday but I wasn’t on board and I am still flat. Today I will be a small seller on any further rally to 148.90/149.20 with a 149.45 stop. My only interest in buying the Bund is on a dip to 147.90/148.15 with a 147.65 stop.
Gold Rolling Contract
Gold finally traded down to my 1214 buy level overnight as the market tried to test the key 1185/1200 support zone. I am still long and I will leave my stop the same at 1207. If I am stopped out I will be a more aggressive buyer from 1185/1200 with a 1175 stop.
Silver Rolling Contract
Silver was hit hard on Friday with the market down nearly 5% since Thursday and in the process stopped me out of my long 18.60 position for a small loss at 1825 and I am now flat. It also broke and closed below the June 2013 low at 18.19 and this led to the acceleration lower. Despite the market been extremely oversold I am going to stand aside today and take another look tomorrow.
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