The ECB’s heightened cautious tone was the main news yesterday but with the US Payrolls now featuring as such an important guide markets were relatively tightly bound ahead of today’s release. Equities were lower more so in Europe, Bond Yields in the US were lower but modestly higher in Europe and the US Dollar was relatively flat. The under-performing assets were the commodities as copper and oil got hit again. Oil is nearly 10% lower in the last 10 days.
The ECB’s Dragi emphasised the ECB’s potential to ease policy further at his press conference yesterday pointing out two outcomes that could prompt such action – higher short term rates and lower medium term inflation. This easing bias took the Euro lower in the first instance but it subsequently recovered but with the US Payrolls expected to do better, the contrast between the ECB and the Fed is increasing. Thus I still expect the Euro to underperform. The Bank of England kept policy unchanged and we will have to wait until the Inflation Report for more detailed guidance on the policy outlook.
This morning on the economic front we have UK Industrial Production and Construction Output at 9.30 am. This is followed at 1.30pm by the key US Non Farm Payroll Report where the consensus is for an increase of 197K but may be stronger given the better than expected ADP Report that came out last Wednesday. Later this afternoon the Fed’s Bullard will speak on the US Economy.
March S&P 500
Non Farm Payroll Day and the FOMC Meeting Day are the two occasions every month that I will go into these announcements with no position as the risk is too great in trying to predict how the markets will react after the data is released. Yesterday, after I posted, the S&P traded higher but just missed my 1840 sell level before trading down to my 1828 buy level and after a small rally into the close I covered this position at 1832 and I am now flat. If we get a good number after the announcement at 1.30 pm I will be a small seller on any rally to 1842/1846 with a 1849 stop which is just above the 1846.50 contract high made on New Year’s Eve. If we get a weaker than expected number I will be a small buyer on any dip to 1821/1825 with a 1817 stop which is just below last week’s low. Again if I am taken long and subsequently stopped out I will be a more aggressive buyer on any dip to 1802/1807 with a 1797 stop.
Euro/USD
The Euro plan worked out well yesterday as we had a nice rally ahead of the ECB announcement and I was able to cover my 1.3560 long position at 1.3605 and I am now flat. The Euro is still trading at the bottom of the Bollinger Band but interestingly the Williams Index has started to turn up. I am going to stay flat ahead of 1.30 pm and if we get a subsequent dip I will be a small buyer from 1.3525/1.3550 with a 1.3510 stop. I will also be a small seller on any rally to 1.3690/1.3720 with a 1.3735 stop.
March DAX
Unfortunately after the ECB rate announcement the Dax was hit pretty hard and after buying the Dax at 9450 I was subsequently stopped out for a small loss at 9425 and I am now flat. It was doubly frustrating that the Dax subsequently rallied after I was stopped out. The key level for the Dax going forward is 9435 and as long as we can stay over this level the market is ok but a break and close below 9420 this evening will bearish. Today I will be a small buyer on any dip to 9420/9435 with a 9395 stop. I still do not want to be short the Dax at this time.
March FTSE
Shortly after I posted yesterday morning the FTSE rallied and I was able to cover my long 6660 position at 6690 and I am now flat. It closed again at the key 6660 level and if it can break and close below 6640 I will look to set up a short position whilst if we break and close over 6690 this evening I will look to reset my long position with a 6655 stop.
Dow Rolling Contract
The Dow worked well yesterday as the market had a nice rally after I posted and I was able to cover my long 16460 long position at 16500 and I am now flat. I am going to stay flat ahead of 1.30 pm and if we get a strong Payroll number I will be a seller on any rally to 16540/16570 with a 16595 stop. If we get a weaker number I will be a buyer on any dip to 14360/14390 with a tight 14340 stop.
March BUND
No change as I am still a seller on any rally to 139.95/140.20 with a 140.35 stop. I will also be a small buyer on any dip to 138.90/13915 with a 138.70 stop.
Gold Rolling Contract
No change as I am still long at 1225 with the same 1217 stop. Again if I am stopped out I will be a more aggressive buyer on any dip to 1195/1205 with a 1189 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip to 19.00/119.30 with a 18.80 stop. I am still convinced that Silver is trying to put in a major bottom between here and 17.00.
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