The US Dollar ended last week on a strong note and started this week with more momentum aided by further Euro weakness. The Greek election has come and gone with anti-austerity Syriza Party winning the largest number of seats with its young leader Alexis Tsipras the winner. The Athens Stock market closed down 3.2% yesterday while unsurprisingly Greek Bond Yields have spiked higher putting pressure on Greek liquidity. The Euro, having opened lower yesterday morning, reversed course after the release of the German IFO Survey for January which revealed some improvement in business activity in Europe’s largest economy. This helped the German Dax to record another 1.4% gain, a new all time high, and coming on the back of the improving PMI’s which printed higher last Friday thus showing some European economic improvement at the start of the year.
Markets now wait for details on Tsipras’s policies and how much compromise he is willing to embrace in his dealings with international creditors. With equity markets also rising in Madrid, Milan and Portugal perhaps the market rightly or wrongly is pinning some hopes on Mr Tsipras being more conciliatory. In any case, the market will be paying close attention to news that could well see more Euro volatility, for now at least.
There has been no data of special market sensitivity out of the US yesterday but a massive snow storm that is currently hitting the North American seaboard is getting a lot of airplay. Of course it was a run of especially cold severe weather that deflected the US economy off course for a time in the first part of last year. This may also be playing on the nerves of some Dollar bulls in the lead up to the FOMC Meeting tomorrow.
This morning on the economic front we have UK GDP at 9.30 am. At 1.30 pm we have US Durable Goods Orders, followed by Markit Services PMI at 2.45 pm. Finally at 3.00 pm we have New Home Sales, Consumer Confidence Index and the Richmond Fed Manufacturing Index.
March S&P 500
The S&P, as expected, followed the other European Indices higher after the US markets opened yesterday, but unfortunately the S&P just missed my 2032 buy level with a 2034.50 low before having an 18 handle rally and I am still flat. Today the market could be more volatile especially with most traders staying at home due to the snow storm which is currently hitting North America. As a result liquidity may be a problem. Today I will raise my sell level slightly to 2059/2064 with a 2069 stop. I will also raise my buy level to 2037/2043 with a 2033 stop which is just below yesterday’s low.
EUR/USD
After I posted yesterday morning the Euro started to rally on the better than expected German IFO Survey. As a result of this move higher I covered half of my long 1.1150 position at 1.1280. Given that sentiment is so extreme against the Euro, I still believe we will get a massive short squeeze to correct this one way sentiment and we could easily see the Euro trade higher to at least 1.20. I will raise my stop on the other half of my long position to 1.1180. If I am stopped out of this trade I will be a more aggressive buyer in front of 1.1150 with a 1.1075 stop.
US Dollar Index
No change as I am still short at 95.40 from last Friday with the same 95.80 stop. I am more confident with this short position given the record extreme sentiment towards the US Dollar which currently stands at historic proportions.
March DAX
The incredible rally in the Dax continues with the market now up almost 15% of its January 6 low. After I posted yesterday the Dax finally traded higher to my 10820 sell level. Given the fact that the Dax is so overbought and trading outside its Bollinger Band and at the top of its Williams Index, the market is due a correction. I am still short and as I am going against the trend I will lower my stop to 10860 on this position which is just above yesterday’s high. If I am stopped out of the trade I will be a more aggressive seller on any further rally to 10890/10930 with a 10960 stop. My only interest in buying the Dax is still on a dip to 10470/10520 with a 10430 stop.
March FTSE
My long 6690 FTSE position worked out well yesterday as the market again continued its relentless move higher since it finally closed above the key 6480 pivot earlier this month. However the FTSE is very overbought and for this reason I have decided to cover my long position at 6800 this morning and I am now flat. Today I will again be a buyer on any dip lower to 6690/6720 with a 6660 stop. I will also be a small seller on any further rally to 6880/6910 with a 6930 stop.
Dow Rolling Contract
The Dow was the heavier of the US Indices yesterday with the market unfortunately just missing my 17720 sell level with a 17695 high before trading lower and I am still flat. Today I will lower my sell level slightly to 17670/17710 with a 17740 stop. I still do not want to be long the Dow at this time unless we trade lower to 17300/17360 where I will be a small buyer with a 17270 stop.
March BUND
No change as I am still a small seller from 158.85/159.25 with a 159.45 stop.
Gold Rolling Contract
Gold continues to stair step lower and I am still a small buyer from 1260/1268 with a 1249 stop.
Silver Rolling Contract
The Silver plan worked out well as overnight it traded lower to my 17.60 buy level with a 17.40 low. However as both Gold and Silver are very overbought I have decided to cover my long Silver position this morning at 17.95 and I am now flat. Today I will again be a buyer on any dip to 17.10/17.50 with a 16.70 stop.
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