If there was any surprise to last Friday’s stunning US Payrolls, it was perhaps that the US Dollar Index, although rallying over 1%, nevertheless closed below its YTD Feb 2 highs. Given the scale of the jump in US Money Market Rates and Bond Yields, this tends to bear out my view that FX and Money Markets have been marching to different drummers through this period of multiple Monetary Policy easing. In the case of the Fed, it would appear that Currency markets were ahead of Friday’s Payrolls, much more believing of the notion that the Fed might start raising rates in Mid-Year, than US Money Markets. The post Payrolls price action strengthens my view that while I remain constructive on the Dollar. I am not a raging bull. A fresh extension of already extreme speculative long US Dollar positioning evident in Friday’s CFTC Futures data is one of the reasons for this view.
In stocks, the heightened prospect of a Mid-Year first Fed tightening took its toll, with the Dow and S&P 500 both closing down nearly 0.5%. The VIX added 0.44 to 17.29 but is still well off the 21% level that it was trading the previous Friday. Earlier European stocks fell across the board, not hearing anything consoling on Friday from Greek Ministers returning to Athens from their recent days in European Capitals. The headlines this morning look even more inflammatory with Prime Minister Tsipris saying Greece will not take orders anymore by email and repeating a demand for €1bn of WW2 reparations from Germany – a matter Germany has long made clear it considers closed.
This morning on the economic front we have Euro-Zone Sentix Investor Confidence at 9.30 am. The only other data of note is the US Labour Market Conditions Index which will be released at 3.00 pm.
March S&P 500
The S&P plan worked perfectly on Friday as shortly after the Payroll data was released the S&P traded higher to my 2067 sell level with a 2068.50 high before spending the rest of session trading lower. This enabled me to cover my short position at 2054 and I am now flat, despite the fact that the S&P is getting hit hard again this morning on the weaker DAX. As I mentioned on Friday it would only be a matter of time before we close the very large ‘Open Gap’ from last Wednesday with the market trying to do this presently. Today I will be a small buyer in this ‘Gap’ from 2031/2036 with a 2026 stop. If I am taken long and subsequently stopped out I will use my 5 Handle Rule to re-buy with a stop below whatever new low is put in. My only interest in going short today is on a rally back to 2055/2062 with a 2069 stop which is just above last Friday’s high.
EUR/USD
I still believe that the Euro is a buy on dips especially after seeing the extreme speculative long Dollar positioning after Friday’s CFTC Futures data was released. Sentiment towards the Dollar remains at unprecedented extremes and in my opinion it is only a matter of time before the Dollar has a large sell-off. After I posted on Friday I went long the Euro at 1.1380, only to be very quickly stopped out of this trade at 1.1330. With the Euro opening lower last night I went long again at 1.1320. I am still long and I will leave a 1.1280 stop on this position which is just below last Friday’s low print.
US Dollar Index
Following the release of the better than expected Payroll data on Friday the Dollar traded higher to my 94.70 sell level. I am still short and I will leave my stop the same at 95.10.
March DAX
Greece and Ukraine are finally taking their toll on the DAX this morning with the market testing the key 10660 support level that I have mentioned over the past two weeks. The DAX never hit my buy or sell levels on Friday and I am still flat. As I mentioned on Friday that the DAX was trading heavy after its huge move higher since the first week in January when the market was trading at 9500. Today I will lower my sell level to 10730/10780 with a 10810 stop. With Greece and Ukraine becoming much more of a distraction I do not want to be long the DAX at this time unless we trade lower over the coming days to 10280/10330 where I will be a reasonably aggressive buyer with a 10230 stop. A break and close below 10660 today will see me look to go short the market.
March FTSE
My short 6810 position from last Thursday has worked out well with the Ftse trading at 6740 this morning. I have covered my position here and today I will look to go short again on any rally higher to 6785/6820 with a tight 6835 stop. As I have mentioned over the last week I do not want to be long the Ftse at this time.
Dow Rolling Contract
After I posted on Friday the Dow unfortunately just missed my 17970 sell level before trading over 200 points lower and I am still flat. Today I will lower my sell level slightly to17850/17910 with a 17940 stop. I still do not want to be long the Dow at this time especially with the number Hindenburg Omen’s already recorded so far in 2015.
March BUND
No change as I am still a small seller on any rally higher to 159.00/159.30 with the same 159.55 stop.
Gold Rolling Contract
My long 1261 Gold position from last week did not work out so well on Friday as after the Non-farm Payroll data was released I was very quickly stopped out of this position at 1249 and I am now flat. Gold has now fallen over $80 since it made its $1310 high 10 days ago. Gold is back approaching the key 1220/1230 support zone and today I will be a small buyer from 1228/1235 with a wider 1217 stop.
Silver Rolling Contract
Silver continues to trade better than Gold at this time. After I posted on Friday I was very quickly stopped out of my long 17.00 position for a small loss at 16.70. Subsequently after the market traded lower I went long the market again at 16.60. I am still long and today I will raise my stop on this position to 16.30.
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