Afternoon gains in stocks, aided by Yahoo’s strong earnings, higher Bond Yields and across the board US Dollar gains gave way to a late session sell-off in the US and brought Treasury Yields back from their highs. Moves in FX have again been led by further weakness in Euro/USD as the ECB Corporate buying story refuses to die.
Canada was in the news for the wrong reasons namely a shooting near the Canadian Parliament. One consequence of this was that the Bank of Canada’s post meeting press conference was cancelled. In the post-meeting statement the BoC retained its 1% policy rate but dropped its forward guidance as they now say that the economy will not be running at full capacity until the second half of 2016 whilst still seeing underlying inflation pressures as muted.
This is a refrain we may well be hearing from other Central Banks in the coming weeks. Indeed the Minutes from the Bank of England’s October 7 Meeting, published yesterday, showed an unchanged 7/2 vote but there were signs that the Committee see some slowdown in the economy from a weak Euro-Zone economy in particular.
The main US event, September CPI, passed without much incident. Headline CPI at 0.1% was 0.1% higher than forecast with the gasoline component not falling as much as generally expected.
This morning on the economic front we have German Manufacturing and Services PMI at 8.30 am. This is followed at 9.00 am by the rest of the Euro-Zone PMI data. At 9.30 am we have UK Retail Sales. The US will release its Weekly Jobless Claims at 1.30 pm and at 2 pm we have the FHFA House Price Index. At 2.45 pm we have US Manufacturing PMI which is expected to print 57.3 from last month’s 57.5. Finally at 3 pm we have the Euro-Zone Consumer Confidence.
December S&P 500
Finally the S&P sold off late yesterday after its 130 handle rally since last Thursday. It is amazing when you look back at this move and it was the McClellan Oscillator which showed you that the internals were improving even as the market sold off aggressively last week. The MO closed at a high +210 on Tuesday so the market was due a pull back with yesterday’s small reversal to the downside having traded just shy of my 1945 sell level with a 1943.5 high. Yesterday morning the S&P traded down to my 1931 buy level and following a nice rally I was able to cover this position at 1940 and I am now flat. The S&P closed last night at my 1925 support level and it will be interesting to see if it can hold this level or are we going to accelerate back to the downside. Today I will be a small seller on any rally back to 1931/1936 with a 1944 stop which is just above yesterday’s high. Given the huge move that we have had over the last few days I do not want to long the market at this time.
Euro/USD
The Euro plan did not work out so well yesterday as after I posted it was trading at my 1.2680 buy level before stopping me out of this position at 1.2645 and I am now flat. Technically the Euro looks very weak and today I will be a small seller on any rally back to 1.2670/1.2700 with a 1.2730 stop. I do not want to be long the Euro at this time.
US Dollar Index
The Dollar just missed my 85.10 buy level before trading higher and I am still flat. I still like the Dollar and today I will move my buy level higher to 85.20/85.50 with a 84.85 stop.
December DAX
I am glad that I was cautious with my Dax strategy yesterday morning as the market, whilst officially closing over the key 8920 support level, quickly sold off from this area as soon as the S&P started to turn lower and I am still flat. Today I will be a small seller from 8930/8960 with a 8990 stop which is just above yesterday’s high. I still do not want to be long the market at this time.
December FTSE
The FTSE just missed my 6420 sell level before trading lower and I am still flat. I still do not want to be long the market at this time and I will lower my sell level to 6370/6400 with a 6420 stop.
Dow Rolling Contract
My Dow 16600 short plan worked out well in the end yesterday as the market just missed my 16680 stop before reversing sharply lower into the close. I covered half my position at 16480 and I will leave a break-even stop on the other half. The reason I am keeping half this position open is the fact that the Dow has retraced 65% of its recent sell-off from the September 19 highs on lower volume. Key Dow stocks like Coca-Cola which fell 6% on Monday on top of IBM’S and Amazon’s recent woes lead me to believe that the recent stock market rally is only a blip before this market turns nasty again. It is interesting that everytime the Dow breaks last year’s 16580 closing level it has trouble following through and with yesterday’s sell-off the Dow is now down for the year. As a result of all the above I do not want to be long the market at this time.
December BUND
The Bund again missed my 150.10 buy level before trading higher and I am still flat. Today I will raise my buy level to 150.20/150.50 with a 149.95 stop. I still do not want to be short the Bund until we break and close below 149.80.
Gold Rolling Contract
Thankfully I have stayed out of the Gold market over the past week as this market is having so little movement. I am going to stay flat as Gold is having real trouble trying to break the key 1240/1250 very strong resistance level.
Silver Rolling Contract
I am very disappointed with the price action in Silver. I will give this market one more day to rally or else I will cover my existing 17.10 long position. My stop is still the same at 16.60.
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