The last 24 hours has seen volatility increase across the board. There were a lot of country-specific events that impact various aspects of the market. The ECB’s TLTRO tender was no blockbuster, not that anyone expected it with the outcome in line with already low expectations, a stark contrast to the rip-roaring US economy that posted a strong Retail Sales Report for November.
Meanwhile Oil prices continued to slide with WTI closing below $60 for the first time in over five years. In the ‘Oil currency world’, Russia increased rates again by 100 bps to protect the Ruble. The Norwegian Central Bank cut rates by 25bps amid negative flow-on effects from lower Oil on the Norwegian economy. However both currencies fell as a result of these Central Bank actions with the Norwegian Krone having the larger move as the cut from its Central Bank was virtually unexpected.
The strong US Retail Sales Report for November, which came in at +0.7% versus +0.4% expected, lifted US Equities and the US Dollar as the market reflected on the boost to the US consumer’s purchasing power on the back of the lower Oil prices. European Stocks struggled all day, led by another 7.4% fall in the Greek stock market which means it has fallen nearly 20% this week. Greek Bond Yields rose again, this time by 51bps.
This morning on the economic front we have Euro-Zone Industrial Production at 10.00 am. This is followed at 1.30 pm by US PPI. Finally on what has been one of the most volatile week’s of the year so far we have the University of Michigan Consumer Confidence at 2.55 pm.
December S&P 500
The S&P had another wild trading session yesterday. The market rallied hard on the excellent Retail Sales Report to a high of 2056 before literally turning on a dime in the last two hours of trading to finish on its lows as it lost over 25 handles in that time-frame. Technically this was a very bad close and as I mentioned yesterday the dynamics of the market have changed for the worst this week. However traditionally whatever low is put in yesterday/today in the week before a Contract Expiration, which we have next Friday, tends to be the low. When you also factor in an FOMC Meeting into the equation next week it makes it very difficult to be short. Against that we have an unprecedented 7 Hindenburg Omen’s in the last 8 trading session which is something I do not ever remember happening before. This is an extremely bearish development going forward. All in all this not an easy market to trade especially as we are in the seasonally strong time of the year which we also have to factor into the equation. Today I will be a reasonably aggressive buyer on any dip to 2005/2014 with a 1998 stop. I do not want to be short the market today for all of the above reasons.
Euro/USD
After the US released its latest Retail Sales which came in a lot stronger than expected the Euro trading lower to my 1.2400 buy level. I am still long and I will leave my stop the same at 1.2365.
US Dollar Index
After I posted yesterday the Dollar rallied to my 88.65 sell level. I am still short and I will leave my stop the same at a tight 89.05.
December DAX
The Dax plan worked well yesterday as after I posted it rallied to my 9880 sell level. It subsequently had a nasty fall which enabled me to cover this position at 9790 and I am now flat. I still believe that the Dax is an accident waiting to happen especially when you see how high its is trading in comparison to the FTSE. The DAX/FTSE spread is now trading at 3400 points. Today I will again be a seller on any rally back to 9820/9860 with a 9905 stop. I still do not want to be short the Dax at this time.
December FTSE
In contrast to the Dax, the Ftse plan did not work out yesterday. Just after I posted the it was trading at my 6480 buy level. Thankfully I had a tight stop on this trade as I was very quickly stopped out of this position at 6445. It is trading much lower this morning and is outside its Bollinger Band and at the bottom of its Williams Index. For this reason I have bought the market at 6372 and I will leave a 6330 stop on this trade. If I am stopped out of this position I will be a more aggressive buyer in front of 6280 with a 6240 stop. Given how oversold the FTSE is trading I do not want to be short the market at this time
Dow Rolling Contract
No change as I am still short half my position from last Friday at 17970. Given how much the Dow has moved this week I will lower my stop to 17650.
March BUND
Unfortunately I have just been stopped out of my 154.00 short position at 154.30 and I am now flat. The Bund is extremely overbought at these levels and today I will again be a seller on any rally to 154.45/154.70 with a 155.05 stop.
Gold Rolling Contract
Gold continues to trade in a very narrow range since it broke the key 1204/1210 major resistance level. I am still long at 1215 and I will continue to leave my stop the same at 1205.
Silver Rolling Contract
Just like Gold, Silver is trading in a very narrow range above $17. I am still long at 15.10 and I will also continue to leave my stop the same at 16.50. If Silver breaks 17.70 I will then raise my stop to 17.25.
January NYMEX Crude
No change as I am still an aggressive buyer on any further dip to 58.20/58.70 with the same 56.80 stop.
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