To quote from ECB President Dragi’s press conference yesterday lunch time, he said that ‘if the current policy initiatives do not address the threat of too prolonged a period of low inflation The Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate’. The opening statement noted that ‘this would imply altering early next year the size, pace and composition of our measures’. Downward revisions to the ECB’S inflation forecasts, to 0.7% from 1.1%, for 2015 with Oil conceivably dragging this down further resulted in Dragi saying ‘We will not tolerate prolonged deviations from price stability’.
This resulted in an up and down move for the Euro in the wake of the statement with the currency having a Key Day Reversal to the upside. It rose sharply as the market realised a ‘shock and awe’ QE Programme was not being announced but gave back some ground on open discussions of firm QE action, if needed, in the new year. Yet again Dragi is doing more talking than taking any actual action as there is no doubt that Germany is opposed to any Sovereign Bond Purchases. The German Dax also had a Key Day Reversal to the downside on the tame ECB outcome.
This morning the German Factory Orders were just released and came in better than expected thus giving the European Equity markets a small boost.
For the Currency markets today it is all about the US Non-Farm Payrolls which are due to be released at 1.30 pm. The expectation is for a 230K rise with Unemployment steady at 5.8%. At 3 pm we have US Factory Orders and at the later time of 8 pm we have Consumer Credit. Just before this at 7.45 pm the Fed’s Fisher is speaking at an IMF event in Washington.
December S&P 500
The US stock market again generated another Hindenburg Omen yesterday which is the third in four trading days this week. This is incredible given that stock markets are at an all time high as the McClellan Oscillator closed yet again in negative territory at -28. The main criteria for a Hindenburg Omen is to have a negative reading in the MO. Yesterday after I posted, the S&P just missed my 2079 sell level before having a 16 handle sell-off and I am still flat. I am going to stay flat until we get the Non-Farm Payrolls out of the way. If the market rallies after the data release I will still be a small seller from 2079/2085 with a 2091 stop. Given how over extended and overbought the S&P is on a Daily, Weekly and Monthly basis I do not want to be long the market at this time especially with three HO’s already this week.
Euro/USD
One key indicator that I continually watch is the Daily Sentiment Index especially when it posts a reading of over 90 or under 10. As I wrote yesterday, the Euro was due a decent rally before heading lower as the consensus is to be short the Euro but as we saw with yesterday’s Key Day Reversal this trade is too crowded. I was very unlucky with my buy level at 1.2260 which just missed by 20 points before the market rallied 200 points as yet again Dragi failed to follow through all of his talk with action. Thankfully I was at least short the Dollar Index.
Today given the extent of yesterday’s up move and the fact we closed back above the key 1.2350 level I will be a small buyer from 1.2330/1.2360 with a 1.2295 stop.
US Dollar Index
The open Dollar trade worked out well yesterday as the Dollar Index had a nice sell off after the non-action from the ECB which enabled me to cover my short 89.10 position at 88.40 and I am now flat. Today I will again be a seller on any rally back to 88.95/89.25 with a 89.55 stop.
December DAX
The Dax plan worked out well as both my sell level and buy level were triggered in what turned out to be an extremely volatile trading session. Following the ECB announcement, the Dax traded higher to my 10070 sell level with a 10090 high before having a 250 point sell-off on the Dragi press conference which enabled me to cover this short position at 9940. The market subsequently traded lower to my 9870 buy level and after a nice rally this morning I have covered this position at 9950 and I am now flat. I am going to stay flat until the Non-Farm Payrolls are released but following yesterday’s Key Day Reversal I will be looking to sell rallies. For this reason I will be a small seller from 9995/10030 with a 10060 stop. My only interest in buying the market is on a dip to 9810/9850 with a 9775 stop.
December FTSE
I am still flat the FTSE and given how heavy it continues to trade I will lower my sell level slightly to 6730/6770 with a 6790 stop.
Dow Rolling Contract
I was unlucky with my Dow level yesterday as just before I posted I was stopped out of my short 17880 position for a small loss at 17920 before the market topped shortly after and then fell over 120 points – very frustrating! I am going to stay flat until the Non-Farm Payrolls are released. Following the release I will look to sell any rally to 17970/18020 with a 18060 stop. I still do not want to be long the market at this time.
March BUND
I have now rolled to the March Contract which trades at a premium of 71 points versus the December Contract. Today I will be a seller in the March Contract from 153.20/153.50 with a 153.80 stop.
Gold Rolling Contract
After last Monday’s fireworks and Key Day Reversals for both Gold and Silver, so far we have seen no follow through with both markets trading in a very narrow range. I am still flat Gold as I wait patiently for the market to close over 1212 where I will be buyer with a 1199 stop. I will also be a buyer on any dip to 1185/1193 with a 1178 stop.
Silver Rolling Contract
No change as I am long from last Monday at 15.10 with the same 16.10 stop.
January NYMEX Crude
After I posted yesterday morning, Crude was back on the defensive and after a quick sell-off I went long at 67.10 only to be stopped out of this position at 66.50. It subsequently traded lower to my 66.20 buy level and after going long the market it had a quick rally back to 67.00 which enabled me to cover this trade at 66.90 and I am now flat. Given how oversold Crude is trading I will still look to buy the market on dips and today I will again be a buyer from 65.30/65.80 with a 64.25 stop.
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