Equity markets continued to fall yesterday as Alcoa kicked off the earnings season in the US. They beat analysts earnings per share (EPS) forecasts but downgraded the outlook for aluminium demand growth to 6% from 7%. The weighted average change in EPS for the 31 companies reporting was -0.7% against expectations of -1.7% to -2%. This was a small positive but not enough to affect the overall negative bias.

The Fed Beige Book Report stuck to the script, saying activity was expanding modestly with little change in prices. In Europe, the IMF’s Financial Stability Report said European Banks might need to cut assets by €4.5 trillion if policy makers fall short in stemming the fiscal crisis, this was an 18% deterioration on the estimate in their last report.

The only news from Europe today is the Bond Auction from Italy, whereas it is a busy day for data in the US with Trade No’s due for August plus the Weekly Jobless No’s which will be even more scrutinized with less than 4 weeks to the Presidential Election on November 6th. Later this evening, we have a speech from the Fed’s, Plosser.

Dec S&P 500

After I posted yesterday morning the S&P had a small rally but just missed my 1438 sell level. The market sold off all day and had another bad close. It dropped down to my 1422 buy level late last night and I am now long. We are short term oversold at the bottom of the Bollinger Band and as a result I am going to leave my stop the same at 1417. As I said yesterday this 1420/1425 is key and I would expect the market to offer some support at this level. I will look to take profit from 1430/1433 and I will look to go short again on any rally to the 1435/1439 area with a 1441 stop. If I am stopped out the next support level is at 1390/1395.

Euro/USD

The Euro has also continued to sell off and it just missed my 1.2820 buy area with a 1.2825 low so far. I will leave my buy zone the same as yesterday from 1.2790/1.2820 and if I am taken long my stop will be at 1.2775.

Dec DAX

I was stopped out of my 7225 long at 7195 and, looking at the price action this morning plus given how weak the S&P and FTSE are, I am surprised the Dax is now lower. Just like the S&P, the Dax is at the bottom of it’s Bollinger Band and Williams Index and I will be a buyer from 7170/7190 with a 7150 stop, I do not want to go short unless we trade back to the 7300 which will now be strong resistance.

Dec BUND

The Bund is a lot higher this morning as expected but unfortunately I was stopped out of my 141.20 long for a break even and I am now flat. I still like the Bund and I will use any retracement to the 141.20/141.40 support zone to get long with a stop at 141.08 which is just below yesterday’s low.

Euro/YEN

I was lucky in this market as I managed to take profit at 101.15 on my 100.80 long just before lunch and I am still flat. I am very surprised how weak this currency pair is and I will look to reset my long position on any dip to 9960/9980 with a 9940 stop.