Yesterday was a very poor day for global equities with the NASDAQ being hit hard and closing down 2.0%. The continued software woes for Apple was a large factor in the NASDAQ sell-off. In Europe the DAX had a significant Key Day Reversal to the downside having traded higher in the early part of the session but was then hit hard and fell 250 points from high to low and also closed on its lows which suggests significant weakness ahead as long as we stay below yesterday’s 9720 high.
The sharply lower stocks together with lower treasury yields have evidently done little to derail the US Dollar freight train, with the Euro at one stage trading below 1.2700 versus the US Dollar but we are now back at 1.2750. Incoming US economic data did not have too much of a hand in yesterday’s moves. The headline US Durable Goods Orders drop of 18.2% was in line with consensus as a prior surge in aircraft orders dropped out. The core measures at 0.7% confirm ongoing economic strength in investment.
Another sub 300k print for the Weekly US Jobless Claims is consistent with ongoing strong US Payrolls gains and a declining Unemployment Rate. We also had the Markit Services and Composite PMI’s falling slightly, which was not expected, whilst the Kansas Fed’s Manufacturing Survey printed at 6, up from 3. Earlier the latest Euro-Zone Money Supply and Credit Data confirmed a lack of progress in spurring stronger bank lending with the M3 Money Supply showing stable 1.8% annual growth.
This morning, the only data of note due from the Euro-Zone is German GIK Consumer Confidence at 9.00 am. This is followed at 1.30 pm by the very important US GDP which is expected to rise 4.6%. Finally at 2.55 pm we have the US University of Michigan Consumer Confidence Index.
December S&P 500
The S&P had a very bad day yesterday with the market closing down 1.6%. It also broke and closed below its 50 Day Moving Average by 9 handles and this led to the acceleration lower before the market tried to stabilise. As I mentioned on September 17 both the S&P and Dow had large rallies in the weeks and even days leading up to the 1987, 2001 and 2007 market crashes. This week after three nasty down-days the S&P rallied nearly 1.0% on Wednesday before being hit hard yesterday. As I have been saying for the last three months this market is in serious trouble but so far every nasty shock is been bought. Yesterday the McClellan Oscillator closed at -246 which is very near the -275/-325 level where I will again look to buy the market aggressively for a short spike.
The S&P plan had worked very well initially as after we had the first sell-off I was able to cover my short 1987 position from late Wednesday at 1976. Unfortunately I went long at 1974 and I was stopped out of this position at 1967 and I am now flat. The S&P has now left the ‘Open Gap’ at 1999/2003 for nearly a week which is also another reason to be bearish. Today I will be a seller on any rally back to 1968/1973 with a 1977 stop. The next key support is from 1945/1951 and today I will be a buyer in this area with a 1939 stop.
Euro/USD
No change as I am still long the Euro from yesterday morning at 1.2743 with the same 1.2690 stop. I am slightly encouraged that despite the huge equity market sell-off yesterday that the Euro is unchanged from where I marked prices 24 hours ago.
US Dollar Index
I am still flat as the Dollar did not break my 84.90 trigger level to go short. Today I am going to raise this sell level to 85.10 with a tight 85.45 stop.
December DAX
As I mentioned yesterday, the Dax t difficult market to get an edge on at this time especially with the ECB starting their own form of QE. The market had a significant Key Day Reversal to the downside (bearish) as it had been up strongly at the open before falling 250 points. In the process I bought the Dax at 9590 and thankfully I had a very tight stop at 9565 and I am now flat.
As I have said over the last two week the 9465 is key support for the Dax as a break and close below here opens up the possibility of a move back to 9160/9200. Today I will be a small buyer from 9435/9465 with a 9395 stop. Given how close we are to key support I do not want to be short the market at this time.
December FTSE
After Wednesday’s rally the FTSE is back trading on its recent lows again. The next key support is from 6520/6560 and I will be a buyer here with a 6505 stop. A break and close below 6520 will be very bearish and opens up the possibility of a move down to 5900.
Dow Rolling Contract
Unfortunately having been stopped out of my 17330 short from last Friday at 17180 on Wednesday I am still flat. The market can have these massive rallies within the overall down-trend which unfortunately can take you out of a nice position. The Dow had a horrid trading session yesterday and in the process closed below the key 16980 previous support level. Today I will be a small seller from 16990/17040 with a 17070 stop. Despite how oversold the Dow is currently trading I do not want to be long the market at this time.
December BUND
The Bund finally traded up to my 149.60 sell level this morning. I am still short and I will raise my stop slightly to 150.05 on this position.
Gold Rolling Contract
Gold is trying to find support near the 1200 level after the hammering it has had over the last two months. I am still flat and today I will raise my buy level to 1210/1216 with a 1199 stop which is just below this week’s low.
Silver Rolling Contract
No change as I am still long at 17.65 with the same 16.95 stop.
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