Today is a holiday in much of Asia and Europe (Happy May Day) but that doesn’t stop the dataflow. Yields are broadly rising, which is having a downward effect on US equities and rate differentials are driving the currency markets: the USD is lower against the EUR on the move higher in German rates and a narrowing of the gap to US rates.
This isn’t necessarily equating to the forecast path of economies of course, with the US expected to outperform Europe after its weather induced Q1 slump. The Chicago PMI was a key example of that yesterday – rising sharply in April (52.3A, 46.3E, 50P). US jobless claims were also very good, dropping to their lowest level since April 2000! That bodes well for the employment numbers released next Friday.
But positive news on Greece (despite the late pension payments today due to ‘technical reasons’) and core inflation holding steady, meant that Core European yields are higher again. This equated to modest gains in European equity markets and outperformance in the Euro. Eurozone core CPI held at 0.6%yoy as expected and allayed concerns of further softness. Meanwhile, amid concerns that Greece cannot meet its cashflow obligations, the ECB’s Coeure said that perhaps Greece might be able to issue more T Bills if they were close to agreement with the Troika – more carrot and stick, but markets liked it. Greek yields have fallen sharply in recent days.
Interestingly, given that there is a waft of positive news last night, the indicator of market risk- the VIX – is higher. That is a partial factor in the AUD underperforming. Add to that lower iron ore prices and newspaper reports of the RBA easing next week – which is seeing that event being priced back into markets – means that there is likely to remain pressure on the AUD.
This morning on the economic front we have no data due of note from the Euro-Zone or the UK with most European Markets closed for the May Day Holiday. This afternoon we have Construction Spending. University of Michigan Survey and the ISM Manufacturing which are all released at 3.00 pm. Also this afternoon the Fed’s Mester speaks at the Philadelphia FRB Conference. Finally the Fed’s Williams will speak just before the New York close at 2.45 pm.
June S&P 500
The S&P plan did not work so well yesterday but thankfully by the time that I posted yesterday morning the S&P was trading near the bottom of my buy range at 2094 before eventually stopping me out of this position at 2087 and I am now flat. Subsequently the S&P bottomed at 2072 before having a nice rally into the close and is now trading at the key 2082 pivot. If the S&P closes below here tonight I will then look to set up a bearish trade. Today I will also be a small seller on any rally higher to 2087/2092 with a tight 2095 stop. If I am taken short and subsequently stopped out of this position I will use my ‘5 Handle Rule’ to go short again with a stop above whatever new high is printed. Given how weak the market is trading I do not want to be long the S&P at this time.
EUR/USD
Thankfully after I posted yesterday morning the Euro was trading at my 1.1085 buy level before having the expected rally having closed above the major 1.1050 resistance level on Wednesday which enabled me to cover this position at 1.1180 and I am now flat. The move yesterday as taken the Euro above its Bollinger Band and for this reason I do not want to be long at this time especially after the 600 point rally that has ensued over the previous week. For this reason I will be a small seller on any rally back to 1.1240.1.1280 with a 1.1330 stop. My only interest in buying the Euro is on a dip to 1.1080/1.1120 with a 1.1045 stop.
June Dollar Index
The Dollar just missed my 95.60 sell level by 10 points after I posted yesterday before having a nasty 100 point sell-off. After the huge sell-off in the Dollar over the last week the market is now oversold and today I will look to buy the Dollar on any dip to 94.30/94.70 with a 93.90 stop.
June DAX
The DAX is closed today for the MAY Day Holiday and as a result I am going to stay flat until the market reopens again on Monday. The DAX is very oversold at current levels and with the Euro due to sell-off after its huge move up over the past seven days I would not be surprised to see the DAX consolidate at current prices and move higher.
June FTSE
With the UK General Election next week the FTSE is having its expected sell-off but unfortunately I covered my short position too early during the week and I am still flat. Today I will lower my sell level to 6970/7010 with a 7030 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
I am still flat the Dow as the market is finally beginning to roll-over. Remember the fact that we still have three confirmed Hindenburg Omen’s on the clock is very bearish and the Dow has the potential to trade substantially lower over the coming months. Today I will lower my sell level to 17920/17970 with a 18020 stop.
June Bund
I am still flat the Bund and with the market closed today for the May Bank Holiday I will stand aside and take another look on Monday when the market reopens.
Gold Rolling Contract
Unfortunately Gold decided to resume its move to the downside which surprised me when you consider how weak the US Dollar is. This move lower stopped me out of my long 1202 position at 1189 and I am now flat. Today my only interest in buying Gold is on a dip to 1170/1176 with a 1162 stop.
Silver Rolling Contract
No change as I am still long at 16.45 with the same 15.75 stop
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