Investor sentiment is on the mend after five down days on global equity markets. US stock indices closed virtually flat, after a strong opening, following a rise on European Bourses of 0.8% on average. The key factor leading to this more positive tone was a big drop in the Weekly US Jobless Claims which fell to 339K, well below forecasts of 370K. News out of Europe was also interpreted positively. Spain was downgraded by two notches to BBB- and placed on negative watch by Standard and Poors but making it more likely that it will apply for a bailout and gain access to the ECB’s bond buying program. Italy held a 3 Year Bond Auction yesterday and while they paid more, with the yield rising to 2.88% from 2.75%, demand for this issue was solid with the bid to cover ratio rising to 1.67 from 1.49. Adding to the buoyant sentiment were rate cuts from Bank of South Korea and the Central Bank of Brazil which is the 10th consecutive cut from Brazil. The US Trade Balance for August came in with a deficit of $44.2 billion, little changed from the previous month.
This morning we have Industrial Production from the Euro-Zone, followed later in the US by PPI and University of Michigan Confidence Index. The Fed’s, Locker is also due to speak on the Economy.
Dec S&P 500
The S&P followed my road map perfectly yesterday as I was able to take profit on my 1422 long at 1433 and the the market continued to rally to my sell zone enabling me to go short at 1437. The S&P had another bad close despite the much better than expected Jobless Claims and I was able to take profit at 1430 and I am now flat. As I keep saying the 1420/1425 support is crucial to the next big move in the S&P and the 1437/1442 is now big resistance and a break of either level should lead to a large move. I am going to keep playing this rang with tight stops as we await this breakout and I will look to go short from 1437/1441 with a 1443 stop and I will also look to go long from 1419/1423 with a wider 1417 stop.
Dec DAX
The Bollinger Band and Williams Index certainly worked very well for the Dax as we had a nice 120 point move from the low made yesterday morning before the market found strong resistance as expected at the 7300 level. I took profit on my 7190 long at 7260 and I went short at 7300 and I took profit at 7260 on this position before the close last night and I am now flat. Today I still like the Dax and I will look to go long on any dip to the 7220/7240 area with a 7195 stop. I am only interested in going short on a rally to 7310/7330 with a 7340 stop.
Euro/USD
As expected the Euro has found really good support at the 1.2800 area but unfortunately it missed my buy level early yesterday morning and we are now back to 1.2970. The next big resistance is from 1.3020/1.3050 and I will look to go short in small here with a wider 1.3070 stop. I will also look to go long on any retracement to the 1.2920/1.2920 area with a 1.2880 stop.
Dec BUND
The Bund is following the Equity markets as every time the Equities rally the Bund falls and vice versa. I still like the Bund and I was stopped out of my 141.25 long yesterday at 141.08 before the Bund rallied late on as Equities fell. Today I will be a buyer from 140.70/141.00 with a wider 140.50 stop as I still look for the Bund to finally test and break the 141.90/142.20 key resistance the next time the Equity markets run into selling pressure.
Dec FTSE
The FTSE had a nice rally off the the key 5720/5740 support. I still like the FTSE and I have gone long at 5792 this morning in small. I will leave a 5775 stop on this position and I will look to take profit on any move back to the 5830/5850 area.
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