Markets adopted a slightly softer tone yesterday as the US Dollar rallied against the Euro. This has been an extremely quiet week compared to the fireworks we had last week. There are two key themes in the market at present. First, China’s data continues to show a bottoming in the slowdown with industrial production little changed for the last four months and inflation a low 1.8%. Secondly, the three big Central Banks, the ECB, the US Fed and the Peoples Bank of China, all look ready to ease policy. These two themes are feeding better investor sentiment.
In other news, the US trade deficit fell to its lowest levels since the end of 2010, thanks mainly to low oil prices. The Weekly Jobless No’s came in better than expected at 361K. In Europe, reports suggest that the Troika will spend September in Greece with a decision on whether to release the next tranche of of aid not likely until October. Today we have UK PPI and just the Monthly Budget Statement from the US.
Sept S&P 500
Another range bound session for the S&P as the market continues to sustain last week’s gains. The market traded up to my 1403 sell level with a 1404 high. I went short and took a small profit at 1398 and I am now flat again. As stated previously, as long as we stay above 1390 the market is bullish. Today I will look to go long from 1392/1396 with 1389 stop. I do not want to go short anymore unless we trade up to 1416/1420. Despite the low volatility the market has given us a nice trading opportunity each day so far this week.
EURO/USD
The Euro dropped down to my buy level at 1.2325 and I was quickly stopped out at 1.2310 and I am now flat. The reason the Euro fell is the fading interest rate support as EU-US 2 Year Bond differentials slumped from 15 basis points to 10 bps yesterday. US rate differentials around this level suggest some risk of the Euro/Usd falling back to 1.2100 over the coming weeks. If the Euro rallies back to the 1.2350/1.2380 I will be a seller with a 1.2410 stop. I do not want to be long at this time.
Silver
Silver traded down to my buy level and I am long from 27.90. I will raise my stop to 27.60 and if we break 28.40 I will raise my stop to 28.20 in order to protect some profit.
Sept FTSE
The FTSE rallied up to my sell level at 5855 and I will leave 5880 stop on this position. If we trade back down to 5800/5820 I will look to take profit in this area.
Sept BUND
No change here, I still want to buy from 142.20/142.40 with 142.10 stop. If I am taken long I will look to take profit again at the 142.80/143.00 area.
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