As yesterday was a very quiet day on the economic front all attention turned to Brussels to see if the Euro-Zone Finance Ministers could reach an agreement on Greece. After many different rumours the European Finance Minister decided to put off any decision on the terms of any bail-out until next week. The latest news that I have is that Greece is prepared to accept 70% of the existing memorandum reforms, but wants to alter the remaining 30%. Crucially Greece does not want to extend its existing agreement that ends in February, but instead finance itself via T–Bill limits that will allow it to hold longer-term refinancing negotiations.
Greece’s creditors, particularly Germany, hold the opposite view and the next few days could be very volatile with more EU Leaders Meetings over the coming days, including the EU Leaders Summit this afternoon. This could have a huge negative impact on the Euro and Stock markets as shown by the incredible volatility in the last 20 minutes of trading on the S&P 500 after the Cash Markets closed.
In the broader currency sphere while the Euro is unchanged against the US Dollar, the Dollar Index has risen by 0.4% on little news with the Commodity currencies getting hit hard especially the Australian Dollar which has closed at new lows for the year.
Dallas Fed Member Richard Fisher, who is a non-voter and who retires in March said that the Fed’s reluctance to raise rates put it at risk of Monetary Alzheimer’s arguing wage inflation would pick up as unemployment declined.
As I am finishing the commentary it has just been announced that the Ukraine Summit has produced a draft Peace Agreement which is leading to a small rally in the markets.
This morning on the economic front we have already had German CPI which was again revised lower. At 10.00 am we have Euro-Zone Industrial Production. This is followed at 1.30 pm by the US Weekly Jobless Claims and Retail Sales. Finally at 3.00 pm we have Business Inventories.
March S&P 500
The S&P stands at a crucial juncture this morning as the market briefly broke the key 2070 resistance level only to get hit hard in the last 10 minutes of trading on some more Greek news hitting the wires. It is very difficult to trade markets that are so news sensitive particularly as they leading to huge emotional trading rather than fundamentals. Unfortunately I got caught up in this emotion as having gone short at 2069 I was very quickly stopped out of this trade at 2075 and I am now flat. This is very frustrating especially when you see that the S&P traded down to 2059 overnight.
I still believe Greece will be giving some sort of agreement as the ramifications of not getting a deal done is enormous, thus making it very difficult to go short the market at this time. I was very unlucky with my 2053 buy level yesterday as the market made a low at 2053.75 before reversing higher. Today I will move my buy level slightly higher to 2054/2060 with a 2049 stop. Again if I am taken long and subsequently stopped out of this trade I will be a more aggressive buyer in front of 2036 with a 2027 stop. I do not want to be short the market at this time as a break and close over 2070 will see the S&P trade higher to the 2090 contract highs made in late December.
EUR/USD
The Euro is having a nice rally on the Peace Agreement out of Ukraine and this has enabled me to cover my long 1.1290 position from Tuesday at 1.1340 and I am now flat. Today I will again be a small buyer on any dip lower to 1.1270/1.1310 with the same 1.1245 stop. Again if I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip lower to 1.1180/1.1220 with a 1.1140 stop.
US Dollar Index
Unfortunately I was stopped out of my short 94.70 position near the highs of the day yesterday at 95.10 and I am now flat. It was frustrating to be stopped out as the Euro had not moved since yesterday with all the movement taking place in the commodity currencies. Today I will still be a buyer on any dip to 93.70/94.00 with a 93.40 stop. I will also look to reset my short position on any rally back to 94.90/95.20 with a 95.40 stop.
March DAX
The DAX plan worked very well yesterday as shortly after I posted the DAX traded lower to my 10720 buy level before having a nice rally which enabled me to cover this trade at 10780 and I am now flat. As I have mentioned over the last 10 days as long as the DAX can stay over 10660 the market is fine, but a break and close below here will be short term bearish. This morning the DAX has already traded in a 120 point range. I still like the DAX and there is potential for this market to trade as high as 11150/11300 over the coming days. Today I will again be a small buyer on any dip lower to 10720/10780 with a 10685 stop which is just below yesterday’s low. The fact that we now have an agreement out of Ukraine I do not want to be short the market today.
March FTSE
The Ftse continues to underperform the other major Indices. I am still flat and today I will leave my sell level unchanged at 6800/6830 with a 6850 stop. In contrast to the DAX and S&P, I do not want to be long the market at this time.
Dow Rolling Contract
The Dow plan worked very well yesterday as late in the trading session the Dow spiked higher to my 17920 sell level with a 17975 high before trading lower overnight which enabled me to cover this position at 17840 and I am now flat. Today I will raise my sell level to 17970/18030. I will leave a tight stop at 18070 on any short position. I still do not want to be long the Dow at this time.
March BUND
This morning the Bund has opened higher which has allowed me to go short at 158.95. I am still short and I will leave my stop at 159.30 on this position.
Gold Rolling Contract
No change as I am still long at 1233 with the same 1217 stop.
Silver Rolling Contract
No change as I am still long at 16.70 with the same 16.30 stop. If I am stopped out of this trade I will be a more aggressive buyer in front of 16.10 with a 15.60 stop.
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