Equity markets ended the day slightly lower having rallied strongly from their morning carnage when they plunged on growing concern over the Euro-Zone’s economy. Although the Euro-Zone CPI was confirmed at 0.3% yoy as expected, fears of a deflationary spiral linger. The DAX fell 200 points early on whilst the FTSE was down over 100 points. A poor Spanish Bond Auction only added to the negative sentiment as did renewed political instability in Greece where new elections are a possibility. Greek 10-Year Bond Yields have risen 110 bps to 88%, which is now well up on the 6.5% level last week.
Markets gradually fought their way back helped by comments from St Louis Federal Reserve President Bullard who said the Fed should consider delaying the end of its QE programme to stop the delay in inflation expectations. Bullard is a hawk who expects the first Fed Rate rise in Q1 2015 so his comments were significant. Markets were also supported by better US data, with Industrial Production rising 1.05 in September versus 0.4% expected, whilst Jobless Claims fell 23K to a 14-year low of 264K. Oil prices also finally closed 1.0% higher after the hammering it received over the last 10 days.
This morning on the economic front we have Euro-Zone Construction Output at 10.00 am followed by GDP at 11.00 am. At 1.30 pm we have US Housing Starts and Building Permits. At the same time Fed Chair Janet Yellen will speak as the Boston Fed Conference. Finally at 2.55 pm we have the University of Michigan Consumer Confidence Index.
December S&P 500
The S&P had another wild trading session with the market getting hit hard to the downside. By the time that I posted the S&P was in free-fall as it followed the German Dax lower. The Dax fell 250 points in 30 minutes as nervousness returned in relation to the state of the German economy. The S&P plan worked very well as just after I posted the S&P was trading at my 1822 buy level with a 1816 low before mounting a huge rally which enabled me to cover this position to early at 1840 and I am now flat. Today is nominal expiration for the options markets in the US meaning more volatility. The one signal that has been very helpful this week has been the McClellan Oscillator which measures the internal strength of the market. The MO again improved substantially yesterday closing with a reading of just -21.
Today I will again be a small seller on any rally to 1883/1898 with a 1910 stop. I have to give wider levels given the volatility especially with VIX trading at such a high level. With Yellen due to speak at the earlier time of 1.30pm I would expect the market to stay strong ahead of her speech. If the market sells off I will be a buyer from 1830/1838 with a 1823 stop. If I am taken long and subsequently stopped out I will use my 5 handle rule to reinstate my long position with a stop below whatever low is put in.
Euro/USD
The Euro plan also worked well as by the time I posted the Euro was selling off aggressively down to my 1.2750 buy level and after a nice rally in the afternoon I was able to cover this position at 1.2800 and I am now flat. I still believe the Euro will have one more rally above 1.2900 before sellers return and today I will again be a small buyer on any dip to 1.2730/1.2760 with a 1.2695 stop. I will also be a seller on any rally to 1.2910/1.2940 with a 1.2970 stop.
US Dollar Index
No change as I am still a buyer on any dip to 84.40/84.70 with a 83.95 stop.
December DAX
I was very unlucky with my Dax trade yesterday as shortly after I posted the Dax was in free-fall with the market finally trading down to my 8460 buy level before literally stopping me out of this trade at 8420 two minutes later and I am now flat. The Dax subsequently traded down to 8350 before reversing all of its losses to trade 300 points higher which is very frustrating. I am impressed how well the Dax has closed over the last two days despite the huge sell-off over the last week. Today I will again look to buy the Dax on any dip to 8520/8560 with a 8490 stop. If the Dax can break and close over 8700 it will be very positive and I will then look to set up a long position.
December FTSE
Just like the Dax above I was also stopped out of my long 6150 position near the lows of the day at 6095 and I am now flat. The Ftse having looked really heavy all day yesterday also had a nice rally into the close. The Ftse is extremely oversold having been down a huge 800 points since the Scottish Referendum result last month. Today I will again be a small buyer on any dip to 6110/6145 with a 6080 stop. I still do not want to be short the Ftse at this time.
Dow Rolling Contract
For the second consecutive trading session the Dow had a nice rally into the close as predicted by the improving McClellan Oscillator. The Dow has fallen a massive 1500 points since the high on September 19 and is due a few days of consolidation before more selling is attempted. Today I will be a small buyer on any dip to 16040/16070 with a 15960 stop. Given how oversold the Dow is trading I do not want to be short the market at this time.
December Bund
The Bund plan worked very well yesterday as shortly after I posted the Bund was trading at my 152.32 sell level before having a huge move lower which enabled me to cover this position at 151.60 and I am now flat. Today I will again be a seller on any rally back to 151.60/152.00 with a 152.30 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
No change as I am still a small buyer from 1225/1232 with the same 1219 stop as I am still looking for Gold to eventually take out this key 1240/1250 strong resistance.
Silver Rolling Contract
No change as I am still long at 17.10 with the same 16.60 stop.
Recent Comments