With no key economic data due yesterday equity markets were driven by by earnings reports. US equities overall made solid gains with the S&P500 closing 0.9% higher and the NASDAQ up 1.4%. However the Dow only closed up 0.1%, dragged lower by a 7% fall in IBM shares after it reported weaker than expected earnings and guidance whilst also saying it would pay $1.5bn to divest its semiconductor business thus creating a $4.7bn earnings charge.
It was a different story in Europe where most equity markets closed lower. Poor earnings continued to sour the mood, adding to concerns over the region’s economic outlook. The EuroStoxx closed 0.5% lower. There were some data releases in Europe which showed the Euro-Zone Current Account falling to €18.9bn in August after an upward €21.6bn in July.
On Fed matters, an article in the London FT reported dovish Boston Fed President, Eric Rosengren, calling for the Fed to end its QE at next week’s FOMC Meeting, as planned, unless something dramatic happens. But he believes the ‘considerable time’ phrase should be retained. Meanwhile the Wall Street Journal quotes dovish San Francisco Fed Chief, John Williams, as also pushing back on extending QE.
This morning on the economic front we have UK Public Sector Net Borrowing at 9.30 am. This is followed at 10.00 am by Euro-Zone Debt/GDP Ratio. Finally at 3 pm we have US Existing Home Sales which are expected to rise 1.0%.
December S&P 500
The S&P plan worked well yesterday as after I posted and upon the release of the weaker than expected IBM earnings, the S&P spiked lower to my 1876 buy level with a 1871.5 low before spending the rest of the session trading higher which enabled me to cover this position at 1888. The S&P continued to rally into the close as the focus now switched to next week’s key FOMC Meeting when QE is expected to end. I went short last night at 1902 and I will leave my stop the same at 1908. If I am stopped out of this position I will use my 5 handle rule to reinstate my short position with a stop just above whatever new high is put in. I will also be a small buyer on any dip to 1880/1886 with a 1871 stop. It is amazing that the S&P has now retraced 90 handles from last Thursday’s low.
Euro/USD
The Euro plan also worked well yesterday as the market had a nice rally after I posted yesterday morning which enabled me to cover my long 1.2745 position at 1.2790 and I am now flat. Today I will again be a small buyer on any dip to 1.2740/1.2770 with a 1.2715 stop which is just below yesterday’s low. My only interest in selling the Euro is on a rally to 1.2900/1.2930 with the same 1.2960 stop.
US Dollar Index
No change as I am still a small buyer on any dip to 84.70/85.00 with a 84.45 stop.
December DAX
The DAX plan also worked well as it had a nice sell-off down to my 8720 buy level with a 8680 low before having a nice rally into the New York close which enabled me to cover this position at 8770 and I am now flat. Today I will again be a buyer on any dip to 8690/8730 with the same 8640 stop. If the Dax can break and close over 8920 I will look to go long with a 8860 stop as I will then look for it to trade higher to 9010/9030,9120 and possibly 9240.
December FTSE
No change as the FTSE just missed my 6190 buy level before trading higher. I am still a small buyer from 6180/6220 with a 6145 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
No change as I am still a small seller on any further rally to 16480/16600 with a 16660 stop. Given how overbought and over extended the Dow is trading on a monthly basis I do not want to be long the Dow at this time.
December BUND
The Bund just missed my buy level before trading higher. Today I will still be a small buyer from 149.90/150.20 with the same 149.65 stop. I will also be a small seller on any further rally to 151.25/151.55 with a 151.90 stop.
Gold Rolling Contract
No change as Gold continues to trade in a very narrow range in the middle of the key 1240/1250 strong resistance. If it can close over 1250 tonight I will move my buy level higher otherwise I am still a small buyer from 1229/1235 with the same 1219 stop.
Silver Rolling Contract
No change as I am still long from last week at 17.10 with the same 16.60 stop which is just below the recent 16.66 low from earlier in October.
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