The past 24 hours has seen the US in the ascendancy with the Euro back trading just above the key 1.2350 support level ahead of tomorrow’s ECB Meeting where more stimulus is expected to be announced. Oil is again under pressure with Brent closing down 3% after rising the day before. US Treasury Yields rose 3-4bps across the curve, encouraged by comments from Fed Members Dudley and Fisher suggesting the Fed remains on course to raise rates next year.
New York Fed President, Bill Dudley, in a speech yesterday afternoon repeated the line that a rate rise in mid-2015 ‘seems reasonable’, but noted right now is too early to raise rates. Fed Governor, Stanley Fisher, gave strong hints that there may be some modification of the ‘considerable time pledge’ at either the upcoming Dec 16-17 FOMC Meeting or early 2015. He spoke about how it had been discussed and minuted at the last FOMC Meeting and that they are closer to dropping the pledge. In the end it will be data dependent and he did not want to be drawn into what they might do at this month’s meeting. Fisher also said that he was not worried about the lower inflation from lower Oil prices which he reckons will be temporary as the Oil slump will likely spur US consumption.
This morning on the economic front we have German, Euro-Zone and UK Services PMI at 8.55 am,9.00 am and 9.30am respectively. This is followed at 10.00 am by Euro-Zone GDP and Retail Sales. At 1.15 pm we have the latest US ADP Employment change which will closely watched ahead of Friday’s Non Farm Payroll data. Then at 3 pm we have US Non Manufacturing Composite. Finally at 7 pm the Fed will release its Beige Book.This afternoon the Fed’s Plosser is due to speak on the Economic Outlook.
December S&P 500
Yesterday’s close in the Stock Market produced a confirmed Hindenburg Omen with the first one occurring on Monday. The most important criteria for a HO is for the McClellan Oscillator to be in negative territory. It is amazing to see the MO negative when the stock market is near all time highs. The last confirmed HO was on September 19 which led to a 1300 point fall in the Dow.
Yesterday after I posted I was stopped out of the rest of my 2073 position from last Friday at 2062. The market then rallied to my 2067 sell level. I am still short and today I will lower my stop on this position to a tight 2074. If I am stopped out of this trade I will be a more aggressive seller in front of 2080 with a 2086 stop. I will also be a small buyer on any dip to 2056/2060 with a 2052 stop as I am expecting some volatility to happen after the Beige Book is released at 7 pm.
Euro/USD
After I posted yesterday morning the Euro was hit hard on comments from Fed Members Dudley and Fisher that rates will start to rise in Mid-2015. Following these comments the Euro traded lower to my 1.2390 buy level and as I am write I have just been stopped out of this trade for a small loss at 1.2345 and I am now flat. I am going to stay flat today especially with tomorrow’s key ECB Meeting which will be really interesting as I cannot see the Bundesbank just agreeing to a programme of Sovereign Bond buying. My overall view is the Euro will trade a lot lower over the coming months but I still believe we will get a decent bounce first, given the extreme bearish sentiment towards the Euro Currency.
US Dollar Index
Similar to the Euro, my good run in the Dollar Index came to an end this morning as I have just been stopped out of my latest 88.40 short position at 88.75 and I am now flat. The Dollar is very overbought as shown by the Bollinger Band and Williams Index. Today given how overbought the Dollar is trading I will again be a small seller from 88.95/89.25 with a 89.50 stop.
December DAX
These markets can be very frustrating at times, as having been stopped out of the rest of my 9995 short position yesterday morning at 10020 the Dax then proceeded to fall 110 points. After it fell the market traded lower to my 9940 buy level and after a nice rally on the open this morning I have been able to cover this trade at 9980 and I am now flat. The Dax is struggling to stay above 10000 and today I will lower my sell level to 9990/10030 with a 10045 stop which is just above yesterday morning’s high. If I am taken short and subsequently stopped out I will be a more aggressive seller in front of 10090 with a 10150 stop. I will also be a small buyer on any dip to 9850/9880 with a 9820 stop as the market should mount a rally ahead of tomorrow’s ECB Meeting.
December FTSE
The FTSE had a nice rally after I posted yesterday morning and in the process traded higher to my 6760 sell level. As I am already short both the S&P and the Dow I have decided to cover this short position at 6730 this morning and I am now flat. Today I will again be a small seller on any rally back to 6765/6795 with the same 6810 stop.
Dow Rolling Contract
The strategy of being patient and only selling spikes continues to work at this time. Overnight the Dow traded higher to my 17880 sell level. I am still short and hopefully this position might turn into a more macro short position especially given the fact that we now have a confirmed second Hindenburg Omen in the last 10 weeks. I will lower my stop on this trade to 17920 and if I am stopped out I will be a more aggressive seller in front of 17970 with a 18050 stop.
December BUND
No change as I am still a seller from 152.50/152.80 with a 153.10 stop.
Gold Rolling Contract
My long 1194 Gold position taken yesterday morning has worked out well overnight as it has had a nice rally which has enabled me to cover this position at 1207 and I am now flat. Today if Gold breaks and closes over 1212 I will go long again with a 1199 stop.
Silver Rolling Contract
No change as I am still long Silver form last Monday at 15.10. Today I will raise my stop on this position to 16.10.
January NYMEX Crude
The Crude plan worked out well yesterday as shortly before lunch it traded lower to my 67.20 buy level before having a nice rally after the US Markets opened, which enabled me to cover this trade at 68.30 and I am now flat. Today I will again be a small buyer on any dip to 66.50/66.80 with the same 65.95 stop.
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