The weak economic data that we have witnessed over the past few months finally spilled over into the labour market on Friday which showed the weakest Non-Farm Payrolls gain since December 2013. In March just 126,000 jobs were added against an expected increase of 253,000 and compared to 295,000 which were added in February. Almost all measures of the health of the labour market – the Unemployment Rate, the number of workers jobless for 27 or more weeks, the number involuntarily working short hours or too discouraged to continue looking for a job- remain more or less stuck at present levels.
Following the release of this data the US Dollar and the Equity Futures market both got hit hard but are trying to stabilise at higher levels this morning as we await the opening of the US markets this afternoon when traders will return to their desks. The Euro which was trading at just above 1.0820 ahead of the Payrolls spiked to over 1.10 and is currently trading at 1.0970. Gold has risen 2% to $1220, while Bond Yields have fallen by 7 bps.
Speculation will now increase that Fed Chair Yellen will not sanction the first rate ‘lift off’ until at least September as the perception towards tighter Monetary Policy will very slow and measured. This action could force investors to move out of the US Dollar and into other currencies.
Economic Reports have lagged analyst forecasts since early January, with the Bloomberg Eco US Surprise Index falling to its weakest reading since 2009. This is one of the reasons why I am very worried for the US Stock market and I will be outlining my reasons at tomorrow’s lecture as to why this market could be in for at least a serious correction.
This morning on the economic front we have the Euro-Zone Sentix Investor Confidence at 9.30 am. This is followed at 3.00 pm by US Services PMI and the Labour Market Conditions Index Change. Finally at 6.00 pm Larry Summers will speak on Economic Inequality.
June S&P 500
The S&P plan worked out really well on Friday as shortly after I posted on Thursday the market traded higher to my 2060 sell level and following the release of the much weaker than expected Non-Farm Payroll Report the S&P sold off aggressively which enabled me to cover this position at 2044 and I am now flat. As the Cash market was closed on Friday the market is opening with a large down gap this morning and I am hoping that we will close some of this ‘Open Gap’ before trading lower. The S&P has major support from 2035/2040 and a break and close below here could be very significant. Today I will look to go short on any move higher to 2049/2055 with a wider 2062 stop. I do not want to be long the market at this time as I really believe that this market is on the brink of a major move lower.
EUR/USD
Unfortunately the Euro just missed my 1.0790 buy level after I posted on Friday, especially with the market trading over 200 points higher. I am still flat but with sentiment towards the Euro still at extreme levels, in my opinion it is only a matter of time before the Euro starts to trade aggressively higher. Today I will raise my buy level to 1.0910/1.0960 with a wider 1.0870 stop.
June US Dollar Index
Thankfully I held on to my short Dollar position on Thursday especially with the Dollar trading a low lower this morning. The move lower in the Dollar has enabled me to cover my 99.00 short position from last week at 97.00 this morning and I am now flat. Today I will again look to go short on any move higher to 97.50/97.80 with a 98.20 stop. The Dollar has key support from 95.80/96.25 and I will be a small buyer in this area with a 95.30 stop.
June DAX
As the DAX is closed today for the Easter Holidays, I am still flat the market and I will take another look when the market re-open’s in the morning.
June FTSE
Shortly after I posted last Thursday the FTSE rallied to my 6790 sell level. I am still short as the market is still closed for the Easter Holidays and will not re-open until 1.30 am tomorrow morning.
Dow Rolling Contract
I was very unlucky with my Dow pricing on Thursday as the market just missed my 17820 sell level by 5 points before having a huge 200 point move lower and I am still flat. Today I will lower my sell level to 17740/17790 with a 17850 stop. I still do not want to be long the Dow at this time.
June Bund
The Bund is also closed today for the Easter Holidays. I am still short in small size from last Wednesday at 159.10. I will leave my stop the same at a tight 159.25. If I am stopped out of this position I will be a more aggressive seller in front of 159.50 with a 159.90 stop.
Gold Rolling Contract
Finally I got some luck in Gold as after I posted on Friday Gold traded lower to my 1196 buy level with an 1195 low. This morning Gold is testing the now key 1220/1230 resistance level and in my opinion it is only a matter of time before we take out this key level especially if the US Dollar continues to weaken. This morning I have covered half of my long position at 1221 and I will raise my stop to 1205 on the other half.
Silver Rolling Contract
No change as I am still long Silver from last week at 16.90. Given the fact that Silver is trying to follow Gold higher this morning I will raise my stop to 16.80 on this position. 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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