The volatility in stocks continued yesterday with the Dow falling 200 points to reverse Mondays explosive 300 point rally. There were 22 trading sessions in March and amazingly 16 of these resulted in the Dow having a triple digit movement. There is no doubt that with three official Hindenburg Omen’s on the clock that the US stock market is in for a rough ride over the next few months.
The Euro which fell after I posted, traded sideways all day before trying to rally overnight and is trading at 1.0780 this morning. Euro-Zone CPI came in exactly as expected at -0.1% y/y in March with German Retail Sales and Unemployment data somewhat better. The Greek ‘issue’ also continues to lurk in the wings as Germany’s Merkel suggests time is short for Greece to come up with an acceptable proposal. But Euro-Zone leaders also downplayed Greece’s plans to imminently visit Russia.
Sterling strengthened yesterday, benefiting from a surprise upward revision to Q4 GDP from 2.7% to 3.0%. Sterling had been pulling back into the number but this was more than reversed as Sterling which was trading at 1.4760 ahead of the GDP release is trading higher at 1.4870 this morning.
Data out of the US was again mixed with a still soggy Chicago PMI, still below 50 ahead of the ISM data this afternoon, but a nice bounce back in Consumer Confidence suggesting the US consumer remains in solid shape. House prices also rose through January. However US stocks closed lower with the market weighed down by lower Oil prices hitting Energy stocks.
This morning on the economic front we have German and Euro-Zone Manufacturing PMI at 8.55 am and 9.00 am respectively. This is followed by UK Manufacturing PMI at 9.30 am. At 1.15 pm the US will release its latest ADP Employment Change and this number will be closely watched by the market ahead of Friday’s Non-Farm Payrolls. At 2.45 pm we have the US Manufacturing PMI and this is followed at 3.00 pm by the very important ISM Manufacturing where the consensus is for a 52.8 print versus last month’s 52.9. This afternoon the Fed’s Williams and Lockhart are due to speak at 2.00 pm and 3.30 pm respectively.
June S&P 500
What a 24 hours it has been for the S&P with the market trading in a 43 handle range since I posted yesterday morning. I am getting more and more convinced that this market is heading for big trouble as technically the set-up is very weak for the US stock market. Shortly after lunch the S&P traded higher to my 2076 sell level before literally getting slammed in the last two hours if trading which enabled me to cover this position at 2062. Overnight the S&P traded lower to a low of 2034 before reversing higher so far this morning. The drop lower led to me going long at 2055 before been stopped out of this trade a few minutes later at 2049 and I am now flat. As I mentioned yesterday all ‘Open Gap’s get filled in the S&P but I must confess with Quarter and Month End yesterday I did not expect this huge 2052/2070 Gap to be filled after I posted. The S&P has significant support from 2035/2040 and a break and close below here will be very bearish. Remember on the Quarterly chart the S&P can trade as low as 1620 and still be in an uptrend so the downside potential from here is huge. Today I will be a very small buyer from 2030/2036 with a 2025 stop. I will also be a small seller on any rally higher to 2057/2064 with a 2069 stop.
EUR/USD
The Euro plan worked out very well yesterday as just as I posted the Euro was falling hard which enabled me to go long at 1.0730. After a nice rally overnight I have been able to cover this position at 1.0780 and I am now flat. Today I will again be a small buyer on an y dip lower to 1.0690/1.0730 with a 1.0660 stop. I still do not want to be short the Euro at this time.
June US Dollar Index
Just after I posted yesterday morning I was very quickly stopped out of my 98.50 short position for a small loss at 98.80. Subsequently after the Dollar continued to rise I went short again at 99.00. I am still short and I will leave a 99.40 stop on this position.
June DAX
Just like the US stock markets the DAX had traded all over the map in the past 24 hours. Unfortunately the DAX plan did not work out so well yesterday as shortly before lunch the DAX got hit hard which saw me buy the market at 12060 before very quickly getting stopped out of this position at 11990 and I am now flat. This morning the DAX is trading below 11940, but so far is holding the major the 11800 support level. If the DAX breaks and closes below 11800 it will be short term bearish and opens up the possibility of a move lower to 11460/11500 initially. Today I am going to stay flat the DAX as I want to see which way this market is going to break before I decide my next trade as a break of either of these levels will lead to a substantial move.
June FTSE
Yesterday was another great example of how important it is to have stops in the market as shortly after I posted the FTSE just got slammed as worries over the UK election loom over the horizon with both main parties deadlocked in the latest Polls. The FTSE traded lower to my 6790 buy level before literally stopping me out of this trade a few minutes later at 6755 and I am now flat. Overnight the FTSE made a new low at 6622. Today my only interest in buying the market is on a dip to 6640/6670 with a 6595 stop. I will be a small seller on any rally higher to 6760/6790 with a 6810 stop.
Dow Rolling Contract
Unfortunately the Dow just missed my 17990 sell level with a 17965 high before having a huge 400 point sell-off to a 17560 low overnight. Today I will lower my sell level to 17790/17850 with a 17910 stop. Given the fact that we have three official Hindenburg Omen’s on the clock I do not want to be long the Dow at this time. It is scary to think that in 1981 the Dow was only trading at 800 and even if we got a 38% retracement of the whole up-move it would knock 8000 points off the Dow. I am not saying that this is going to happen but it gives you an idea of how over extended this market is.
June BUND
The Bund which traded higher to my 158.85 sell level after I posted yesterday is opening lower this morning. Given my concern for the Equity markets I have decided to cover this position at 158.60 and I am now flat. Today I will again look to go short on any rally higher to 159.10/159.35 with a 159.60 stop.
Gold Rolling Contract
Surprisingly Gold is not getting much of a bid to it despite the lower Equity Indices. I am still flat Gold and today I will raise my buy level slightly to 1166/1175 with an 1159 stop.
Silver Rolling Contract
No change as I am still long at 16.90 with the same 16.40 stop. Again if I am stopped out of this trade I will be a more aggressive buyer in front of 16.10 with a 15.70 stop.
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