The negative market sentiment that followed news of the ECB entering the Greek debate and turning the thumbscrews on Syriza by cutting short its access to cash has faded somewhat. Benchmark Bond Yields have reversed back up to recent highs and Oil has also bounced a sizeable $4. On the currency markets the Euro has reversed yesterday’s Asian slump that saw a low of 1.1305 to hit 1.15 again as the US Dollar eases moderately across the board. The Dollar was not helped by a blow-out in the US Trade Deficit for December, that all else being equal points to a downward revision to Q4 GDP. With no additional news on Oil and with the situation on Greece still highly uncertain, the takeaway appears to be increased market volatility and whipsawing of asset prices as we head into the big economic release of the week, the US Payroll Report. Denmark meanwhile has had to cut rates for a fourth time in three weeks as it seeks to defend the DKK peg to the EUR.
On Greece, we surmise that the market’s increased calm is because of the realisation that while the ECB has cut access to credit from using Greece’s own debt as collateral, Greece can still utilise Emergency Liquidity Assistance as did for much of 2012 when it tapped this facility for over EUR120bn. It may also still be able to raise short-term funds via T-Bill auctions. However, the fact the ECB decided on this action after Dragi’s face to face with Greek Finance Minister Varoufakis and before the ECB’s 18th February Governing Council Meeting speaks volumes about the pressure being applied to Prime Minister Tsipras and Varoufakis to re-enter some sort of relief programme. Yesterday’s meeting between Varoukfakis and German Finance Minister Schaeauble yielded no agreement.
This morning on the economic front we have already had the German Industrial Production which printed better than expected at +0.1%. At 9.30 am we have the UK Trade Balance and then all eyes will turn to the US when the US Non-Farm Payrolls are released at 1.30 pm. The market is expecting a rise of 231K versus last Month’s 252K rise. The Unemployment Rate is expected to remain unchanged at 5.6%.
March S&P 500
My fears that the S&P would rally hard into today’s key US Non-farm Payroll data certainly proved to be correct and instead of waiting to buy a dip in the S&P, I should have just bought the market instead. Very late in the trading session the S&P rallied to my 2058 sell level and as most members know at this stage the one economic data release that I have no position in is the Payroll Numbers and for that reason I have covered this short position at 2055 this morning and I am now flat.
Yesterday’s huge move higher has left a very large ‘Open Gap’ from Wednesday’s close at 2029.50 to yesterday’s low (after the US market opened) at 2043 and I would expect this gap to be filled over the coming days. I still expect the market to have difficulty initially breaking the key 2070/2075 resistance zone and if we get a stronger than expected Payroll Number I will be a seller from 2067/2073 with a 2078 stop. I will also be a buyer on any dip back into this’ Open Gap’ on a weak number from 2035/2040 with a wider 2027 stop. Again if I am taken long and subsequently stopped out of any long position I will use my ‘5 handle rule’ to re-buy with a stop below whatever new low is put in.
EUR/USD
Unfortunately the Euro just missed my 1.1350 buy level after I posted before trading back to a 1.1500 high and I am still flat. Today I will raise my buy level to 1.1370/1.1400 with a 1.1330 stop. My only interest in selling the Euro is still on a rally to 1.1550/1.1590 with a 1.1630 stop.
US Dollar Index
My short 94.60 position from Wednesday worked out very well yesterday as the Dollar had a nice sell-off after I posted which enabled me to cover this position at 93.90 and I am now flat. Today I will again be a seller on any rally back to 94.40/94.70 with a 95.10 stop. I still do not want to be long the Dollar at this time.
March DAX
The DAX plan again worked out very well yesterday as the DAX which has being trading heavy so far this week had a nice sell-off down to my 10830 buy level before rallying hard in the afternoon which enabled me to cover this position at 10900 and I am now flat. As I have mentioned over the last few days the key level to watch for the DAX is still at 10660 as a break and close below here will be short term bearish and opens up a move lower to at least 10330. Today my only interest in buying the DAX is on a dip to 10670/10720 with a 10630 stop. Given how heavy the DAX feels I will also lower my sell level to 10890/10920 with a 10950 stop which is just above yesterday’s high.
March FTSE
The FTSE continues to trade heavily. Yesterday after I posted the market was trading at my 6810 sell level. I am still short and I will leave my stop the same at 6845. If I am stopped out of this position I will be a more aggressive seller in front of 6870 with a 6905 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The Dow plan did not work out well yesterday as after the market reached my 17740 sell level, I was very quickly stopped out of this trade at 17810 and I am now flat. Incredibly the Dow has now rallied nearly 900 points off its last Monday low at 17035, while this move has only taken 4 days. Today I will again be a small seller on any further rally to 17970/18010 with a 18050 stop. Given the extent of the rally this week I do not want to be long the market at this time.
March BUND
My short 159.10 Bund position taken early yesterday morning worked out very well as the market had a nice sell-off after I posted which enabled me to cover this position at 158.60 and I am now flat. Today I will again be a small seller on any further rally back to 159.00/159.30 with the same 159.55 stop which has capped all rallies so far over the last 10 days.
Gold Rolling Contract
No change as I am still long in small size at 1261 with the same 1249 stop.
Silver Rolling Contract
After I posted yesterday morning Silver traded lower to my 17.00 buy level with a 16.90 low. I am still long and today I will raise my stop on this position to 16.70. If I am stopped out of this trade I will be a more aggressive buyer in front of 16.50 with a 15.90 stop.
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